-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E1ZnECE7RIzqQCepCjnKum8ZxQHh5ID+1TZOAl78/mchBaVDhCejFbhXH+OleouY 2WVS7Q9nXRq1rXqBbFzlQA== 0000950112-96-000945.txt : 19960329 0000950112-96-000945.hdr.sgml : 19960329 ACCESSION NUMBER: 0000950112-96-000945 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEET FINANCIAL GROUP INC CENTRAL INDEX KEY: 0000050341 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 050341324 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-06366 FILM NUMBER: 96540211 BUSINESS ADDRESS: STREET 1: ONE FEDERAL STREET CITY: BOSTON STATE: MA ZIP: 02211 BUSINESS PHONE: 6172922000 MAIL ADDRESS: STREET 1: ONE FEDERAL STREET CITY: BOSTON STATE: MA ZIP: 02211 FORMER COMPANY: FORMER CONFORMED NAME: FLEET FINANCIAL GROUP INC DATE OF NAME CHANGE: 19880110 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL NATIONAL CORP DATE OF NAME CHANGE: 19820512 10-K405 1 FLEET FINANCIAL GROUP ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 - Commission file number 1-6366 -------------------------------------------------------- Fleet Financial Group, Inc. (Exact name of Registrant as specified in its charter) Rhode Island 05-0341324 (State of incorporation) (I.R.S. Employer Identification No.) One Federal Street, Boston, Massachusetts 02110 (Address of principal executive office) (Zip Code) 617 / 292-2000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of each exchange on which registered ------------------- ------------------------ Common Stock, $.01 Par Value New York Stock Exchange Depositary Shares each representing a one-fourth interest in a share of Series III 10.12% Perpetual Preferred Stock, $1 Par Value New York Stock Exchange Depositary Shares each representing a one-fourth interest in a share of Series IV 9.375% Perpetual Preferred Stock, $1 Par Value New York Stock Exchange Depositary Shares each representing a one-tenth interest in a share of 9.30% Cumulative Preferred Stock, $1 Par Value New York Stock Exchange Depositary Shares each representing a one-tenth interest in a share of 9.35% Cumulative Preferred Stock, $1 Par Value New York Stock Exchange Depositary Shares each representing a one-tenth interest in a share of Series V 7.25% Perpetual Preferred Stock, $1 Par Value New York Stock Exchange Depositary Shares each representing a one-tenth interest in a share of Series VI 6.75% Perpetual Preferred Stock, $1 Par Value New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Warrants to purchase common stock New York Stock Exchange ------------------------------------------------------------ Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES XX NO -- -- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of February 29, 1996, (the latest practicable date) the aggregate market value of the voting stock held by nonaffiliates of the Registrant was $10.6 billion, which excludes $234 million held by directors, executive officers, and banking subsidiaries of the Registrant under trust agreements and other instruments. The number of shares of common stock of the Registrant outstanding as of March 4, 1996 was 262,443,757. DOCUMENTS INCORPORATED BY REFERENCE 1. Pertinent extracts from Registrant's 1995 Annual Report to Shareholders (Parts I, II, and IV). 2. Pertinent extracts from Registrant's Proxy Statement filed with the Commission are incorporated into Part III. Such information incorporated by reference shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K. ================================================================================ Table of Contents Description Page Number ----------- ----------- Part I. Item 1 -- Business ........................................... 3 Item 2 -- Properties ......................................... 9 Item 3 -- Legal Proceedings .................................. 9 Item 4 -- Submission of Matters to a Vote of Security Holders .......................................... 9 Part II. Item 5 -- Market for the Registrant's Common Stock and Related Stockholder Matters ...................... 9 Item 6 -- Selected Financial Data ............................ 9 Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations..... 9 Item 8 -- Financial Statements and Supplementary Data ........ 9 Item 9 -- Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 10 Part III. Item 10 -- Directors and Executive Officers of the Registrant ....................................... 10 Item 11 -- Executive Compensation ............................. 12 Item 12 -- Security Ownership of Certain Beneficial Owners and Management ................................... 12 Item 13 -- Certain Relationships and Related Transactions ..... 12 Part IV. Item 14 -- Exhibits, Financial Statement Schedules and Reports on Form 8-K .............................. 13 Signatures ...................................................... 16 PART I. Item 1. Business General Fleet Financial Group, Inc. (the "Registrant", "Corporation" or "Fleet") is a diversified financial services company organized under the laws of the State of Rhode Island. Fleet is a legal entity separate and distinct from its subsidiaries, assisting such subsidiaries by providing financial resources and management. By most measures, Fleet is among the 11 largest bank holding companies in the United States, with total assets of $84 billion at December 31, 1995. Fleet has approximately 30,800 employees. Fleet reported net income for 1995 of $610 million, or $1.57 per share, after a number of special charges primarily related to its merger with Shawmut National Corporation and the sale of Fleet Finance. This compared to net income of $849 million, or $3.09 per share, in 1994. For a more detailed discussion of the Corporation's financial results, see "Management's Discussion and Analysis" (pages 15-32) of the Corporation's 1995 Annual Report to Shareholders, which is incorporated by reference herein. Fleet is engaged in 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 New York"); Fleet Bank of New York, National Association ("FBNY"); Fleet Bank, National Association ("Fleet-CT"); Fleet National Bank of Connecticut ("FNB-CT"); Fleet Bank of Massachusetts, National Association ("Fleet-MA"); Fleet National Bank of Massachusetts ("FNB-MA"); Fleet Bank of Maine ("Fleet-Maine"); and Fleet Bank-NH ("Fleet-NH"). All of the subsidiary banks are members of the Federal Reserve System, and the deposits of each are insured by the Federal Deposit Insurance Corporation ("FDIC") to the extent provided by law. The Corporation also has a thrift subsidiary, Fleet Bank, F.S.B. ("Fleet-FSB") located in Boca Raton, Florida. Fleet provides, through its nonbanking subsidiaries, a variety of financial services, including mortgage banking, asset-based lending, equipment leasing, consumer finance, real estate financing, securities brokerage services, investment banking, investment advice and management, data processing, and student loan servicing. On February 20, 1995, Fleet and Shawmut National Corporation ("Shawmut") entered into an Agreement and Plan of Merger providing for the merger of Shawmut with and into Fleet (the "Shawmut Merger"). The Shawmut Merger was consummated on November 30, 1995, and was accounted for as a pooling of interests. Under the terms of the Shawmut Merger, approximately 105 million Fleet common shares were exchanged for all the outstanding common shares of Shawmut. The outstanding preferred stock of Shawmut was exchanged for comparable issues of Fleet preferred stock. At the time of the Shawmut Merger, Shawmut had approximately $33 billion in assets and $21 billion in deposits. In connection with the Shawmut Merger, the Corporation has signed definitive agreements to divest 64 branches to comply with anti-trust concerns. The sales, which are expected to be completed during the first half of 1996, will consist of approximately $2.6 billion in deposits and $1.9 billion in loans. On December 19, 1995, Fleet signed a definitive agreement to purchase NatWest Bank, N.A. ("NatWest") for $2.7 billion in cash and up to an additional $560 million in accordance with an earnout provision. The earnout provision calls for an annual payment dependent upon the level of earnings from the NatWest franchise with a cap of $560 million over an eight-year period. Following the NatWest merger, Fleet expects to have approximately $90 billion in assets, reflecting an expected reduction of Fleet's and NatWest's assets. For additional information regarding the NatWest merger, including a copy of the NatWest merger agreement and certain historical and pro forma financial information relating thereto, see Fleet's Current Reports on Form 8-K dated December 19, 1995, February 8, 1996, and March 15, 1996. 3 For information pertaining to other acquisitions completed by Fleet in 1995, see "Acquisitions" below. The Corporation is organized along four functional lines of business, Commercial Financial Services, Financial Services and National Consumer, Consumer and Investment Services, and Treasury/Asset Collection/Equity Capital. Commercial Financial Services includes a broad range of commercial and corporate lending as well as commercial real estate, asset-based lending, precious metals, and leasing. In addition to incorporating the commercial function in each of the Corporation's banking subsidiaries, this business unit also includes Fleet Capital and Fleet Credit Corporation. Fleet Capital, a national asset-based lending business, was acquired in January 1995, and has 17 offices nationwide doing business in 40 states. Fleet Credit Corporation, which has 23 offices nationwide, has two divisions: the Leasing Division, which engages in middle-market equipment leasing, and the Business Credit Division, which engages in commercial finance activities. Financial Services and National Consumer includes Fleet's government banking, financial institutions, mortgage banking, national consumer lending, and processing businesses. This business unit includes Fleet Mortgage Group, Inc. ("FMG") , the Corporation's mortgage banking subsidiary, which conducts the purchase, origination, sale, and servicing of residential first mortgage loans, and the purchase and sale of servicing rights associated with mortgage loans. FMG currently ranks as one of the largest mortgage companies in the nation, with 90 loan origination offices in 36 states and 1.2 million customers. In February 1995, the Corporation completed its tender offer to purchase the 19% of FMG common stock that it did not already own for $20.00 in cash per share. This business unit also includes AFSA Data Corporation ("AFSA"), the Corporation's student loan processing subsidiary, the nation's largest third-party servicer of student loans, servicing in excess of 3.5 million accounts with more than $13 billion in total loans serviced. AFSA's three basic product lines include a campus-based product, a federal direct loan program, and the Federal Family Education Loan Program. Fleet Securities, Inc., a full-service municipal securities underwriter and dealer, is included in this business unit. The Consumer and Investment Services line of business includes retail banking, small business banking, credit card products, personal financial services, and investment services. This business unit has the largest branch-based banking franchise in the Northeast, with a total of 947 branches, and is the major provider of lendable funds for the Corporation. The Corporation's investment services business consists of personal asset management, endowment and custody services, employee benefit management and mutual funds. These services are provided by the Corporation's trust and investment management subsidiaries, Fleet Investment Services Group, and Fleet Investment Advisors, Inc. This unit includes the Corporation's discount brokerage subsidiary, Fleet Brokerage Securities, Inc., which is engaged in providing securities brokerage services, including clearing services, related securities credit extension, and other incidental activities through 12 offices in 11 states. The Treasury/Asset Collection/Equity Capital line of business includes the treasury function, which manages the Corporation's securities and residential mortgage portfolios, trading operations, asset/liability management function, and the wholesale funding needs of the Corporation. This unit also includes Fleet Equity Partners, the Corporation's venture capital financing subsidiary. Acquisitions On January 27, 1995, the Corporation completed its acquisition of NBB Bancorp, Inc. ("NBB"). The Corporation issued approximately 6.2 million treasury shares with an aggregate carrying value of approximately $200 million as well as approximately $230 million in cash. In addition, Fleet issued 2.5 million warrants to purchase Fleet common stock to NBB stockholders with an exercise price of $43.875 per share, and a term of six years. On January 31, 1995, the Corporation completed its purchase of substantially all the assets of the Business Finance Division of Barclays Business Credit, Inc., now known as Fleet Capital, for approximately $2.6 billion in cash. 4 The Corporation also completed its tender offer to purchase the 19% publicly-held shares of FMG common stock for $20.00 in cash per share on February 28, 1995. On March 3, 1995, the Corporation purchased Plaza Home Mortgage Corporation which operates a mortgage banking franchise, principally in California, for approximately $88 million in cash. On June 9, 1995, the Corporation completed its acquisition of Northeast Federal Corp. with assets of $3.3 billion. The Corporation issued approximately 5.8 million common shares with a fair value of approximately $193 million. Competition The Corporation's subsidiaries are subject to intense competition in all aspects of the businesses in which they compete from domestic and foreign banks, equipment leasing companies, finance companies, securities and investment advisory firms, real estate financing companies, mortgage banking companies, and other financial institutions. The Corporation principally competes on interest rates and other terms of financing arrangements, including specialized customer services and various banking arrangements and conveniences designed to attract depositors, borrowers, and other customers. Supervision and Regulation Banking is a highly regulated industry, with numerous federal and state laws and regulations governing the organization and operation of banks and their affiliates. As a bank holding company, Fleet is subject to regulation by the Board of Governors of the Federal Reserve Board (the "Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended (the "BHCA"), and the Home Owners Loan Act of 1933, as amended ("HOLA"). Fleet-Maine, Fleet-NH, and Fleet-New York as state-chartered member banks are subject to regulation by the Federal Reserve Board and bank regulators in their respective states. Fleet-CT, FNB-CT, FNB-MA, Fleet-MA, FBNY, and Fleet-RI are national banks subject to regulation and supervision by the Office of the Comptroller of the Currency (the "OCC"). The Corporation is also a savings and loan holding company within the meaning of the HOLA and, as such, is registered with, and subject to regulation by, the Office of Thrift Supervision (the "OTS"). Fleet-FSB is a federal savings association subject to regulation and supervision by the OTS. Each subsidiary bank's deposits are insured by the FDIC and each bank subsidiary is a member of the Federal Reserve System. Fleet is also subject to the reporting and other requirements of the Securities Exchange Act of 1934 (the "Exchange Act"). The BHCA requires that Fleet obtain prior approval from the Federal Reserve Board for bank and nonbank acquisitions and restricts the business operations permitted to Fleet. The BHCA also restricts the acquisition of shares of out-of-state banks unless the acquisition is specifically authorized by the laws of the state in which the bank to be acquired is located. In addition, Fleet's bank subsidiaries must obtain prior approval from their respective primary regulators for most acquisitions. Virtually all aspects of the subsidiary banks' businesses are subject to regulation and examination, depending on the charter of the particular banking subsidiary, by the Federal Reserve Board, the OCC, the OTS, the banking regulatory agency of the state in which they operate, or a combination of the above. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") provides for, among other things, increased funding for the Bank Insurance Fund of the FDIC and expanded regulation of depository institutions and their affiliates, including parent holding companies. The FDICIA provides the federal banking agencies with broad powers to take prompt corrective action to resolve problems of insured depository institutions, depending upon the particular institution's level of capital. FDICIA establishes five tiers of capital measurement ranging from "well-capitalized" to "critically undercapitalized". A depository institution may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position under certain circumstances. As of December 31, 1995, all of Fleet's subsidiary banking institutions met the requirements of a "well-capitalized" institution. 5 Under the FDICIA, a depository institution that is well-capitalized may accept brokered deposits. A depository institution that is adequately capitalized may accept brokered deposits only if it obtains a waiver from the FDIC, and may not offer interest rates on deposits "significantly higher" than those prevailing in its market. An undercapitalized depository institution may not accept brokered deposits. In Fleet's opinion, these limitations do not have a material effect on Fleet. FDICIA directs that each federal banking agency prescribe safety and soundness standards for depository institutions relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest-rate exposure, asset growth, compensation, asset-quality, earnings, and stock valuation. Final interagency regulations to implement these safety and soundness standards have recently been adopted by the federal banking agencies. In July 1995, the federal banking agencies published proposed guidelines establishing safety and soundness standards concerning asset-quality and earnings. If adopted in final form, these proposed guidelines will be incorporated into the Interagency Guidelines Establishing Standards for Safety and Soundness. The ultimate cumulative effect of these standards cannot currently be forecast. The FDICIA also contains a variety of other provisions that may affect Fleet's operations, including reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, and the requirements that a depository institution give 90 days' prior notice to customers and regulatory authorities before closing any branch. As a result of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, ("FIRREA"), any or all of Fleet's subsidiary banks can be held liable for any loss incurred by, or reasonably expected to be incurred by the FDIC after August 9, 1989, in connection with (a) the default of any other of Fleet's subsidiary banks or, (b) any assistance provided by the FDIC to any other of Fleet's subsidiary banks in danger of default. "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a "default" is likely to occur without regulatory assistance. Under the Federal Reserve Board capital guidelines, the minimum ratio of total capital to risk-adjusted assets (including certain off-balance sheet items, such as standby letters of credit) is 8%. At least half of the total capital is to be comprised of common equity, retained earnings, minority interests in the equity accounts of consolidated subsidiaries, and a limited amount of cumulative and noncumulative perpetual preferred stock, less deductible intangibles ("Tier 1 capital"). The remainder may consist of perpetual debt, mandatory convertible debt securities, a limited amount of subordinated debt, other preferred stock, and a limited amount of loan loss reserves ("Tier 2 capital"). Fleet is also subject to a minimum leverage ratio (Tier 1 capital to average quarterly assets, net of goodwill) requirement of 3% for bank holding companies that meet certain specified criteria, including that they have the highest regulatory rating. The rule indicates that the minimum leverage ratio should be 1% to 2% higher for holding companies undertaking major expansion programs or that do not have the highest regulatory rating. Fleet's banking subsidiaries are subject to similar capital requirements except that preferred stock must be noncumulative to qualify as Tier 1 capital. The federal banking agencies continue to consider capital requirements applicable to banking organizations. Effective September 1, 1995, the federal banking agencies adopted amendments to their risk-based capital regulations to provide for the consideration of interest-rate risk in the determination of a bank's minimum capital requirements. The amendments require that banks effectively measure and monitor their interest-rate risk and that they maintain capital adequate for that risk. Under the amendments, banks with excess interest-rate risk would be required to maintain additional capital beyond that generally required. In addition, effective January 17, 1995, the federal banking agencies adopted amendments to their risk-based capital standards to provide for the concentration of credit risk and certain risks arising from nontraditional activities, as well as a bank's ability to manage these risks, as important factors in assessing a bank's overall capital adequacy. As of December 31, 1995, Fleet's capital ratios exceeded all minimum regulatory capital requirements. 6 Under federal banking laws, failure to meet the minimum regulatory capital requirements could subject a banking institution to a variety of enforcement remedies available to federal regulatory authorities, including the termination of deposit insurance by the FDIC and seizure of the institution. Fleet is a legal entity separate and distinct from its subsidiaries. The ability of holders of debt and equity securities of Fleet to benefit from the distribution of assets of any subsidiary upon the liquidation or reorganization of such subsidiary is subordinate to prior claims of creditors of the subsidiary except to the extent that a claim of Fleet as a creditor may be recognized. There are various statutory and regulatory limitations on the extent to which banking subsidiaries of Fleet can finance or otherwise transfer funds to Fleet or its nonbanking subsidiaries, whether in the form of loans, extensions of credit, investments, or asset purchases. Such transfers by any subsidiary bank to Fleet or any nonbanking subsidiary are limited in amount to 10% of the bank's capital and surplus and, with respect to Fleet and all such nonbanking subsidiaries, to an aggregate of 20% of each such bank's capital and surplus. Furthermore, loans and extensions of credit are required to be secured in specified amounts and are required to be on terms and conditions consistent with safe and sound banking practice. In addition, there are regulatory limitations on the payment of dividends directly or indirectly to Fleet from its banking subsidiaries. Federal and state regulatory agencies have the authority to limit further Fleet's banking subsidiaries' payment of dividends. The payment of dividends by any subsidiary bank may also be affected by other factors, such as the maintenance of adequate capital for such subsidiary bank. Under the policies of the Federal Reserve Board, Fleet is expected to act as a source of financial strength to each subsidiary bank and to commit resources to support such subsidiary bank in circumstances where it might not do so absent such policy. In addition, any subordinated loans by Fleet to provide capital to any of the subsidiary banks would also be subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. Further, in the event of the bankruptcy of Fleet, any commitment by Fleet to its regulators to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment. On September 29, 1994, President Clinton signed into law the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act"). The Interstate Act facilitates the interstate expansion and consolidation of banking organizations by permitting (i) beginning one year after enactment of the legislation, bank holding companies that are adequately capitalized and managed to acquire banks located in states outside their home states regardless of whether such acquisitions are authorized under the law of the host state, (ii) the interstate merger of banks after June 1, 1997, subject to the right of individual states to "opt in" or "opt out" of this authority prior to such date, (iii) banks to establish new branches on an interstate basis provided that such action is specifically authorized by the law of the host state, (iv) foreign banks to establish, with approval of the regulators in the United States, branches outside their home states to the same extent that national or state banks located in such state would be authorized to do so, and (v) beginning September 29, 1995, banks to receive deposits, renew time deposits, close loans, service loans and receive payments on loans and other obligations as agent for any bank or thrift affiliate, whether the affiliate is located in the same or different state. Connecticut and Rhode Island, which are two states in which Fleet subsidiaries conduct banking operations, have adopted legislation opting into the interstate provisions of the Interstate Act. In addition, Fleet has recently filed applications for approval by the OCC to merge its banking subsidiaries in Connecticut, Massachusetts and Rhode Island in order to achieve cost savings and to increase convenience to its customers in those states. The banking industry is also affected by the monetary and fiscal policies of the federal government, including the Federal Reserve, which exerts considerable influence over the cost and availability of funds obtained for lending and investing. Proposals to change the laws and regulations governing the operations and taxation of banks, companies that control banks, and other financial institutions are frequently raised in Congress, in the state legislatures, and before various bank regulatory authorities. The likelihood of any major changes and the impact such changes might have on Fleet are impossible to determine. 7 See "Note 17. Commitments, Contingencies, and Other Disclosures" (pages 56-57) of the Notes to Consolidated Financial Statements and the "Capital" (page 31) and "Liquidity" (pages 30-31) sections of Management's Discussion and Analysis in the 1995 Annual Report to Shareholders (each of which are incorporated by reference herein) for information concerning restrictions on the banking subsidiaries' ability to pay dividends and other regulatory matters and legal proceedings. Statistical Information by Bank Holding Companies The following information from the following portions of the 1995 Annual Report to Shareholders is incorporated by reference herein: "Rate/Volume Analysis" table (page 59) for changes in the taxable- equivalent interest income and expense for each major category of interest-earning assets and interest-bearing liabilities. "Consolidated Average Balances/Interest Earned-Paid/Rates 1991-1995" table (pages 60-61) for average balance sheet amounts, related taxable-equivalent interest earned or paid, and related average yields and rates paid. "Note 3. Securities" of the Notes to Consolidated Financial Statements (pages 43-44) for information regarding book values, market values, maturities, and weighted average yields of securities (by category). "Note 4. Loans and Leases" of the Notes to the Consolidated Financial Statements (pages 44-45) for distribution of loans of the Registrant. "Loan and Lease Maturity" table and "Interest Sensitivity of Loans Over One Year" table (page 59) for maturities and sensitivities of loans to changes in interest rates. "Note 6. Nonperforming Assets" (page 45) and "Note 1. Summary of Significant Accounting Policies - Loans and Leases" (page 39) of the Notes to Consolidated Financial Statements for information on nonaccrual, past due, and restructured loans and the Registrant's policy for placing loans on nonaccrual status. "Loans and Leases" section of Management's Discussion and Analysis (pages 22-23) for information regarding loan concentrations of the Registrant. "Reserve for Credit Losses" section of Management's Discussion and Analysis (pages 25-26) for the analysis of loss experience, the allocation of the reserve for credit losses, and a description of factors which influenced management's judgment in determining the amount of additions to the allowance charged to operating expense. "Consolidated Average Balances/Interest Earned-Paid/Rates 1991-1995" table (pages 60-61) and the "Funding Sources" section of Management's Discussion and Analysis (pages 26) for deposit information. "Selected Financial Highlights" (page 1) for return on assets, return on equity, common dividends declared as a percentage of earnings per share, and equity to asset ratio. "Note 9. Short-term Borrowings" of the Notes to Consolidated Financial Statements (page 47) for information on short-term borrowings of the Registrant. 8 Item 2. Properties The Registrant maintains its corporate headquarters at One Federal Street, Boston, Massachusetts. The Registrant also maintains principal offices at 777 Main Street, Hartford, Connecticut, and 50 Kennedy Plaza, Providence, Rhode Island. A subsidiary of the Registrant is a partner with certain other parties in the ownership and management of 50 Kennedy Plaza, Providence, Rhode Island. Adjacent to the Providence building, Fleet-RI owns a building which houses the main branch of Fleet-RI and the offices of many of the Providence-based subsidiaries. Fleet-RI also owns an operations center, located in Providence. The Registrant also owns office buildings in Buffalo, NY, and Albany, NY, which house operational facilities of Fleet-New York. Portions of the Fleet-RI and Fleet-New York buildings are leased to nonaffiliates. The Registrant also leases buildings in Malden, MA and Hartford, CT that are utilized as operation centers. As of December 31, 1995, the Registrant's subsidiaries also operated approximately 1,700 domestic offices, of which approximately 600 are owned and 1,100 are leased from others. Item 3. Legal Proceedings Information regarding legal proceedings of the Registrant is incorporated by reference herein from "Note 17. Commitments, Contingencies and Other Disclosures" (pages 56-57) of the Registrant's 1995 Annual Report to Shareholders. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders in the fourth quarter. PART II. Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters For information regarding the U.S. market, high and low quarterly sales prices, and quarterly dividends declared and paid, in each case on Fleet's common stock, see the "Common Stock Price and Dividend Information" table (page 62) of the Registrant's 1995 Annual Report to Shareholders, which is incorporated by reference herein. At December 31, 1995, Fleet had 65,043 stockholders of record. Item 6. Selected Financial Data The information set forth in "Selected Financial Highlights" (page 1) of the Registrant's 1995 Annual Report to Shareholders is incorporated by reference herein. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information set forth in Management's Discussion and Analysis (pages 15-32) of the Registrant's 1995 Annual Report to Shareholders is incorporated by reference herein. Item 8. Financial Statements and Supplementary Data The following information set forth in the Registrant's 1995 Annual Report to Shareholders is incorporated by reference herein: 9 The Consolidated Financial Statements, together with the report thereon by KPMG Peat Marwick LLP (pages 34-38); the Notes to the Consolidated Financial Statements (pages 39-58); and the unaudited information presented in the "Quarterly Summarized Financial Information" table (page 62). Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure as defined by Item 304 of Regulation S-K. PART III. Item 10. Directors and Executive Officers of the Registrant The information set forth under the captions "Election of Directors", "Compensation of Executive Officers-Severance Agreements and Employment Contracts", and "Other Information Relating to Directors, Nominees and Executive Officers" in the Registrant's Proxy Statement with respect to the name of each nominee or director, his or her age, his or her positions and offices with the Registrant, his or her service on the Registrant's Board, any arrangement or understanding pursuant to which he or she has or is to be selected as a director or nominee, his or her business experience, his or her directorships held in other public companies, certain family relationships and involvement in certain legal proceedings is incorporated by reference herein. The names, positions, ages and business experience during the past five years of the executive officers of the Corporation as of March 1, 1996 are set forth below. The term of office of each executive officer extends until the annual meeting of the Board of Directors, and until a successor is chosen and qualified or until they shall have resigned, retired, or have been removed. Name Positions with the Corporation Age ---- ------------------------------ --- Joel B. Alvord............. Chairman 57 Terrence Murray............ President & Chief Executive Officer 56 Robert J. Higgins.......... Vice Chairman 50 Gunnar S. Overstrom, Jr.... Vice Chairman 53 H. Jay Sarles.............. Vice Chairman 50 Michael R. Zucchini........ Vice Chairman 49 David L. Eyles............. Executive Vice President & Chief Credit Policy Officer 56 Eugene M. McQuade.......... Executive Vice President & Chief Financial Officer 47 Anne M. Finucane........... Senior Vice President 43 Robert B. Hedges, Sr....... Senior Vice President 37 William C. Mutterperl...... Senior Vice President, Secretary & General Counsel 49 Anne M. Slattery........... Senior Vice President 48 M. Anne Szostak............ Senior Vice President 45 Brian T. Moynihan.......... Managing Director, Strategic Planning and Corporate Development 36 Joel B. Alvord assumed the role of Chairman of the Corporation upon consummation of the Shawmut Merger with and into Fleet on November 30, 1995. He had served as a Director of Shawmut from 1987 to November 30, 1995. Mr. Alvord previously served as Chairman and Chief Executive Officer of Shawmut from 1988 to November 30, 1995. Mr. Alvord began his 33-year tenure at FNB-CT (formerly Shawmut Bank Connecticut, National Association) in 1963. He became an officer of FNB-CT in 1965, a Vice President in 1967, Executive Vice President in 1976, and President and Director in 1978. 10 Terrence Murray joined Fleet-RI in 1962. After serving in various capacities for Fleet-RI and the Corporation, in April 1978, he was elected President of the Corporation. He became Chairman of the Board of Directors and Chief Executive Officer of the Corporation in 1982. Upon the merger of Fleet and Norstar Bancorp, Inc., in January 1988, he became President and Chief Operating Officer of Fleet. Mr. Murray was elected Chairman and Chief Executive Officer of Fleet in September 1988. Effective with the Shawmut Merger, Mr. Murray became President and Chief Executive Officer of Fleet. Mr. Murray has been a Director of Fleet since 1976. Robert J. Higgins joined Fleet-RI in 1971 and was elected President in February 1986. In March 1984, he was named a Vice President of the Corporation. In 1989, he was named an Executive Vice President of the Corporation and in 1990 was named Chief Executive Officer of Fleet-RI. In 1991, Mr. Higgins assumed the position of Chairman and Chief Executive Officer of Fleet-CT. In March 1993, he was named a Vice Chairman of the Corporation and is currently responsible for the commercial services division. Gunnar S. Overstrom became a Vice Chairman of the Corporation responsible for consumer banking and investment services upon the consummation of the merger of Shawmut with and into Fleet. Mr. Overstrom served as President and Chief Operating Officer of Shawmut from 1988 to November 30, 1995. Prior to the merger with Fleet, Mr. Overstrom was Chairman, Chief Executive Officer and a Director of FNB-CT as well as President, Chief Executive Officer and a Director of FNB-MA (formerly Shawmut Bank, N.A.). Mr. Overstrom joined FNB-CT in 1975 and after serving in various capacities for FNB-CT, he was elected President in 1986, Chief Executive Officer in 1988, and in 1992, he became Chairman of FNB-CT and Chief Executive Officer of FNB-MA. From October 1992 to September 1994, Mr. Overstrom also served as Chairman of FNB-MA. H. Jay Sarles is in charge of strategic planning, mergers and acquisitions, and staff support functions. Mr. Sarles joined Fleet-RI in 1968. In 1980, he was appointed a Vice President of the Corporation. Mr. Sarles was appointed Executive Vice President of the Corporation in February of 1986. In 1991, Mr. Sarles became President and Chief Executive Officer of Fleet Banking Group, Inc., the parent company of Fleet-MA and Fleet-CT. In March 1993, he was named a Vice Chairman of the Corporation. Michael R. Zucchini is responsible for the financial services division and national consumer businesses. Mr. Zucchini joined the Corporation in August 1987 as Executive Vice President and Chief Information Officer responsible for all data processing activities of the Corporation and its subsidiaries. Since 1974, Mr. Zucchini had served in various capacities for General RE Corp., Stamford, Connecticut and its subsidiary, General RE Services Corp., which engages in data processing. In March 1993, Mr. Zucchini was named a Vice Chairman of the Corporation. Mr. Zucchini is a Director of FMG and from June 1994 until November 1994, served as interim Chairman and Chief Executive Officer. David L. Eyles is an Executive Vice President and Chief Credit Policy Officer of the Corporation. Mr. Eyles was a Vice Chairman and Chief Credit Policy Officer of Shawmut, and a Vice Chairman and a Director of FNB-CT and FNB-MA until November 30, 1995. Mr. Eyles joined Shawmut in February 1992, following three months of working with Shawmut as a consultant. Between 1988 and 1991, he was Vice Chairman and Chairman of the Credit Policy Committee at Mellon Bank Corporation/Mellon Bank, N.A. Eugene M. McQuade joined the Corporation in 1992 as Senior Vice President-Finance. From 1980 to 1991, Mr. McQuade served in various capacities with Manufacturers Hanover Corporation and Manufacturers Hanover Trust Company, having served as its Executive Vice President and Controller from 1985 to 1991. In March 1993, Mr. McQuade was named an Executive Vice President of the Corporation and in July 1993 was elected as Chief Financial Officer. Mr. McQuade is a Director of FMG. Anne M. Finucane joined Fleet in September 1995 as Senior Vice President and Director of Corporate Marketing and Corporate Communications. Prior to joining Fleet, Ms. Finucane was the owner of Anne Finucane, Marketing and Telecommunications Consulting. From 1980 to 1994, Ms. Finucane held various executive positions at the advertising agency of Hill, Holliday, Connors, Cosmopulos, Inc. 11 Robert B. Hedges is a Senior Vice President responsible for Fleet's consumer banking alternative delivery systems, credit card business, and data base management. Mr. Hedges joined Shawmut in 1993 from First Manhattan Consulting Group, where he was Vice President from 1992 to 1993. From 1983 to 1992, Mr. Hedges was Vice President and Banking practice lender of the MAC Group, New York, a consulting firm specializing in management consulting. William C. Mutterperl joined Fleet-RI in 1977. In June 1985, Mr. Mutterperl was named Vice President, Secretary and General Counsel of the Corporation. In 1989, Mr. Mutterperl was named a Senior Vice President of the Corporation. Anne M. Slattery joined the Corporation in January, 1994, as Senior Vice President and head of Consumer and Community Banking and in November 1995 became responsible for the Consumer and Small Business Banking lines of business. From 1969 through 1993, Ms. Slattery served in various capacities with Citicorp, having last served as a managing director of U.S. Consumer Banking. M. Anne Szostak joined Fleet-RI in 1973, where she was an executive vice president from 1985 to 1988. In 1988 she was named Vice President of Human Resources for the Corporation. In 1991 she was named Chairman, President and Chief Executive Officer of Fleet-Maine. In May 1994, Ms. Szostak was named a Senior Vice President, Human Resources, of the Corporation. Brian T. Moynihan joined the Corporation in 1993 as Deputy General Counsel. In March 1994, he was named Vice President of Strategic Planning and Corporate Development for the Corporation. From 1991 to 1993, Mr. Moynihan was a partner in the law firm of Edwards & Angell, where he had been an associate since 1984. Item 11. Executive Compensation Pursuant to Instruction to Form 10-K and Item 402 of Regulation S-K, information set forth in the following sections of the Corporation's Proxy Statement is incorporated by reference herein: "Compensation of Directors", "Compensation of Executive Officers", and "Compensation Committee Interlocks and Insider Participation". Such incorporation by reference shall not be deemed to specifically incorporate by reference the information required by Item 402 (a)(8) of Regulation S-K. Item 12. Security Ownership of Certain Beneficial Owners and Management Pursuant to Instructions to Form 10-K and Item 403 of Regulation S-K, information set forth in the following sections of the Corporation's Proxy Statement is incorporated by reference herein: "Principal Stockholders" and "Beneficial Ownership by Directors and Executive Officers of Equity Securities of the Corporation". Item 13. Certain Relationships and Related Transactions Pursuant to Instructions to Form 10-K and Item 404 of Regulation S-K, information set forth in the "Indebtedness and Other Transactions" section of the Corporation's Proxy Statement is incorporated by reference herein. 12 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)(1). The financial statements of Fleet required in response to this Item are listed in response to Item 8 of this Report and are incorporated by reference herein. (a)(2). All schedules to the consolidated financial statements required by Article 9 of Regulation S-X and all other schedules to the financial statements of the Registrant have been omitted because the information is either not required, not applicable, or is included in the financial statements or notes thereto. (a)(3). See the exhibits listed below. (b) Ten Current Reports on Form 8-K were filed during the fourth quarter of 1995 to the date of this Report: October 18, 1995 (announcing third quarter earnings); October 26, 1995 (reporting the issuance of $250 million of 6% Senior Notes due October 26, 1998); November 15, 1995 (filing the Unaudited Pro Forma Condensed Combined Financial Statements as of September 30, 1995, and notes thereto, in connection with the Shawmut Merger); November 30, 1995 (announcing the closing of the Shawmut Merger); December 19, 1995 (announcing the signing of the NatWest Merger Agreement on December 19, 1995 and the signing of the KKR Exchange Agreement on December 31, 1995); January 17, 1996 (announcing 1995 and fourth quarter earnings); January 19, 1996 (filing its Supplemental Consolidated Financial Statements); February 8, 1996 (filing the Unaudited Pro Forma Combined Financial Statements; as of September 30, 1995, and notes thereto, in connection with the NatWest Merger); February 21, 1996 (reporting the issuance and sale of (a) 11,000,000 Depositary Shares, each representing a one-tenth interest in a share of Registrant's Series V 7.25% Perpetual Preferred Stock at a purchase price of $25 per Depositary Share and (b) 3,000,000 Depositary Shares, each representing a one-fifth interest in a share of Registrant's Series VI 6.75% Perpetual Preferred Stock at a purchase price of $50 per Depositary Share); March 15, 1996 (filing the Unaudited Pro Forma Combined Financial Statements as of December 31, 1995, and notes thereto, in connection with the NatWest Merger, and the Registrant's 1995 historical financial statements and notes thereto, management's discussion and analysis, and selected financial highlights). 13 (c) Exhibit Index Exhibit Number Page of this Report - ------ ------------------- 2 Agreement and Plan of Merger dated December 19, 1995, between the Registrant and National Westminster Bank (1) Plc 3(a) Restated Articles of Incorporation of the Registrant 3(b) By-Laws of the Registrant 4(a) Rights Agreement dated November 21, 1990, as amended by First Amendment to Rights Agreement dated March 28, 1991, a Second Amendment to Rights Agreement dated July 12, 1991, and a Third Amendment to Rights (2) Agreement dated February 20, 1995 4(b) Instruments defining the rights of security holders, (3) including indentures 4(c) Form of Rights Certificate for stock purchase rights issued to Whitehall Associates, L.P., and KKR Partners (4) II, L.P. 10(a)* Form of Change in Control Agreement together with Schedule of Persons who have entered into such contracts 10(b)* Form of Change in Control Agreement with Joel B. Alvord and Gunnar S. Overstrom, Jr. 10(c)* Stock Purchase Agreement dated July 12, 1991, among Registrant and Whitehall Associates, L.P., and KKR (5) Partners II, L.P. 10(d)* Exchange Agreement dated December 31, 1995, among Registrant and Whitehall Associates, L.P., and KKR (6) Partners II, L.P. 10(e)* Supplemental Compensation Plan for former Norstar (7) directors 10(f)* Fleet Financial Group Directors Retirement Plan (8) 10(g)* Supplemental Executive Retirement Plan (9) 10(h)* 1994 Performance-Based Bonus Plan for the Named (10) Executive Officers 10(i)* Amended and Restated 1992 Stock Option and Restricted Stock (11) Plan 10(j)* Employment Agreement dated as of February 20, 1995, between Registrant and Joel B. Alvord 10(k)* Employment Agreement dated as of February 20, 1995, between Registrant and Gunnar S. Overstrom, Jr. 10(l)* Shawmut National Corporation Stock Option and Restricted Stock Award Plan (assumed by Registrant on (12) November 30, 1995) 10(m)* Shawmut National Corporation Secondary Stock Option and Restricted Stock Award Plan (assumed by Registrant on November 30, 1995) 10(n)* Shawmut National Corporation 1989 Nonemployees Directors' Restricted Stock Plan (assumed by (13) Registrant on November 30, 1995) 10(o)* 1995 Restricted Stock Plan 11 Statement re: computation of per share earnings 12 Statement re: computation of ratios 13 1995 Annual Report to Shareholders 14 21 Subsidiaries of the Registrant 23 Accountants' consent 27 Financial Data Schedule 27(a) Restated Financial Data Schedule * Management contract, or compensatory plan or arrangement. (1) Incorporated by reference to Exhibit 2 of Registrant's Form 8-K Current Report dated February 20, 1995. (2) Incorporated by reference to Registrant's Registration Statement on Form 8-A dated November 29, 1990, as amended by an Amendment to Application on Report on Form 8-A dated September 6, 1991, and as further amended by a Form 8-A/A dated March 17, 1995. (3) Registrant has no instruments defining the rights of holders of equity or debt securities where the amount of securities authorized thereunder exceeds 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request. (4) Incorporated by reference to Exhibit 4(c) of the Registrant's Form 8-K Current Report dated July 12, 1991. (5) Incorporated by reference to Exhibit 4 of Registrant's Form 8-K Current Report dated July 12, 1991. (6) Incorporated by reference to Exhibit 2(b) of Registrant's Form 8-K Current Report dated December 19, 1995. (7) Incorporated by reference to Exhibit 10(i) of the Registrant's 1993 Form 10-K Annual Report filed March 30, 1994. (8) Incorporated by reference to Exhibit 10(j) of Registrant's 1993 Form 10-K Annual Report filed March 30, 1994. (9) Incorporated by reference to Exhibit 10(k) of the Registrant's 1993 Form 10-K Annual Report filed March 30, 1994. (10) Incorporated by reference to Exhibit 10(h) of the Registrant's 1994 Form 10-K Annual Report filed March 17, 1995. (11) Incorporated by reference to Exhibit 10(i) of Registrant's 1994 Form 10-K Annual Report filed March 17, 1995. (12) Incorporated by reference to Exhibit 10(i) of Shawmut's Form 10-K Annual Report for the fiscal year ended December 31, 1994 (Commission File No. 1-10102). (13) Incorporated by reference to Shawmut's 1989 Proxy Statement dated March 13, 1989 (Commission File No. 1-10102). (d) Financial Statement Schedules -- None. 15 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FLEET FINANCIAL GROUP, INC. (Registrant) /s/ Eugene M. McQuade /s/ Robert C. Lamb, Jr. ----------------------------- ---------------------------- Eugene M. McQuade Robert C. Lamb, Jr. Executive Vice President and Chief Accounting Officer Chief Financial Officer and Controller Dated March 28, 1996 Dated March 28, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated. /s/ Joel B. Alvord /s/ Raymond C. Kennedy ----------------------------- ------------------------- Joel B. Alvord, Chairman Raymond C. Kennedy, and Director Director /s/ Terrence Murray /s/ Robert J. Matura ----------------------------- ------------------------- Terrence Murray, President, Robert J. Matura, Chief Executive Officer and Director Director /s/ William Barnet III /s/ Arthur C. Milot ----------------------------- ------------------------- William Barnet III, Director Arthur C. Milot, Director /s/ Bradford R. Boss ----------------------------- ------------------------- Bradford R. Boss, Director Thomas D. O'Connor, Director /s/ Stillman B. Brown /s/ Michael B. Picotte ----------------------------- ------------------------- Stillman B. Brown, Director Michael B. Picotte, Director /s/ Paul J. Choquette, Jr. /s/ Lois D. Rice ----------------------------- ------------------------- Paul J. Choquette, Jr., Lois D. Rice, Director Director /s/ John T. Collins /s/ John R. Riedman ----------------------------- ------------------------- John T. Collins, Director John R. Riedman, Director /s/ John S. Scott ----------------------------- ------------------------- Bernard M. Fox, Director John S. Scott, Director /s/ James F. Hardymon ----------------------------- ------------------------- James F. Hardymon, Director Samuel O. Thier, Director /s/ Robert M. Kavner /s/ Paul R. Tregurtha ----------------------------- ------------------------- Robert M. Kavner, Director Paul R. Tregurtha, Director 16 EX-3.(A) 2 EXHIBIT 3(a) STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS BUSINESS CORPORATION RESTATED ARTICLES OF INCORPORATION OF FLEET FINANCIAL GROUP, INC. ------------------- Pursuant to the provisions of Section 7-1.1-59 of the General Laws, 1956, as amended, the undersigned corporation adopts the following Restated Articles of Incorporation: FIRST: The name of the corporation (hereinafter called the Corporation) is FLEET FINANCIAL GROUP, INC. SECOND: The period of its duration is perpetual. THIRD: The nature of the business of the Corporation and the objects or purposes to be transacted, promoted or carried on by it are as follows: 1. To purchase or otherwise acquire and to hold, pledge, sell, exchange or otherwise dispose of securities (which term includes any shares of stock, bonds, debentures, notes, mortgages or other instruments representing rights to receive, purchase or subscribe for the same or representing any other rights or interest therein or in any property or assets) created or issued by any person, firm, association, corporation (including, to the extent permitted by the laws of the State of Rhode Island, the Corporation) or government or subdivision, agency or instrumentality thereof; to make payment therefor in any lawful manner; and to exercise, as owner or holder thereof, any and all rights, powers and privileges in respect thereof (to the extent aforesaid). 2. To make, manufacture, produce, prepare, process, purchase or otherwise acquire, and to hold, use, sell, import, export, or otherwise trade or deal in and with, goods, wares, products, merchandise, machines, machinery, appliances and apparatus, of every kind, nature and any manufacturing or other business of any kind or character whatsoever, including, but not by way of limitation, importing, exporting, mining, quarrying, producing, farming, agriculture, forestry, construction, management, advisory, mercantile, financial or investment business, any business engaged in rendering any manner of services and any business of buying, selling, leasing or dealing in properties of any and all kinds, whether any such business is located in the United States of America or any foreign country, and whether or not related to, conducive to, incidental to, or in any way connected with, the foregoing business. 3. To engage in research, exploration, laboratory and development work relating to any material, substance, compound or mixture now known or which may hereafter be known, discovered or developed and to perfect, develop, manufacture, use, apply and generally to deal in and with any such material, substance, compound or mixture. 4. To purchase, lease or otherwise acquire, to hold, own, use, develop, maintain, manage and operate, to sell, transfer, lease, assign, convey, exchange, or otherwise turn to account or dispose of, and, generally, to deal in and with, personal and real property, tangible or intangible, of every kind and description, wheresoever situated, and any and all rights, concessions, interests and privileges therein. 5. To adopt, apply for, obtain, register, purchase, lease or otherwise acquire, to maintain, protect, hold, use, own, exercise, develop, manufacture under, operate and introduce and to sell and grant licenses or other rights in respect of, assign or otherwise dispose of, turn to account, or in any manner deal with, and contract with reference to, any trademarks, trade names, patents, patent rights, concessions, franchises, designs, copyrights and distinctive marks and rights analogous thereto and inventions, devices, improvements, processes, recipes, formulae and the like, including, but not by way of limitation, such thereof as may be covered by, used in connection with, or secured or received under, 1 Letters Patent of the United States of America or elsewhere, and any licenses and rights in respect thereof, in connection therewith or appertaining thereto. 6. To make, enter into, perform and carry out contracts of every kind and description with any person, firm, association, corporation or government or subdivision, agency or instrumentality thereof; to endorse or guarantee the payment of principal, interest or dividends upon, and to guarantee the performance of sinking fund or other obligations of, any securities or the payment of a certain amount per share in liquidation of the capital stock of any other corporation; and to guarantee in any way permitted by law the performance of any of the contracts or other undertakings of any person, firm, association, corporation or government or subdivision, agency or instrumentality thereof. 7. To acquire by purchase, exchange or otherwise, all, or any part of, or any interest in, the properties, assets, business and good will of any one or more persons, firms, associations or corporations heretofore or hereafter engaged in any business whatsoever; to pay for the same in cash, property or its own or other securities; to hold, operate, lease, reorganize, liquidate, sell or in any manner dispose of the whole or any part thereof; to assume or guarantee, in connection therewith, the performance of any liabilities, obligations or contracts of such persons, firms, associations or corporations; and to conduct the whole or any part of any business thus acquired. 8. To lend its uninvested funds from time to time to such extent, to such persons, firms, associations, corporations or governments or subdivisions, agencies or instrumentalities thereof, and on such terms and on such security, if any, as the Board of Directors of the Corporation (hereinafter called the Board of Directors) may determine. 9. To borrow money for any of the purposes of the Corporation, from time to time, and without limits as to amount; to issue and sell from time to time its own securities in such amounts, on such terms and conditions, for such purposes and for such consideration, as may now be or hereafter shall be permitted by the laws of the State of Rhode Island; and to secure such securities by mortgage upon, or the pledge of, or the conveyance or assignment in trust of, the whole or any part of the properties, assets, business and good will of the Corporation then owned or thereafter acquired. 10. To promote, organize, manage, aid or assist, financially or otherwise, persons, firms, associations or corporations engaged in any business whatsoever; and to assume or underwrite the performance of all or any of their obligations. 11. To organize or cause to be organized under the laws of the State of Rhode Island, any other state or states of the United States of America, the District of Columbia, any territory, dependency, colony or possession of the United States of America, or of any foreign country, a corporation or corporations for the purpose of transacting, promoting or carrying on any or all objects or purposes for which the Corporation is organized; to dissolve, wind up, liquidate, merge or consolidate any such corporation or corporations or to cause the same to be dissolved, wound up, liquidated, merged or consolidated; and, subject to the laws of the State of Rhode Island, to consolidate or merge with or into one or more other corporations organized under the laws of the State of Rhode Island or under the laws of any other state or states in the United States of America, the District of Columbia, any territory, dependency, colony or possession of the United States of America or of any foreign country if the laws under which said other corporation or corporations are formed shall permit such consolidation or merger. 12. To conduct its business in any and all of its branches and maintain offices both within and without the State of Rhode Island in any and all states of the United States of America, in the District of Columbia, in any or all territories, dependencies, colonies or possessions of the United States of America and in foreign countries. 13. To such extent as a business corporation organized under the laws of the State of Rhode Island may now or hereafter lawfully do, to do, either as principal or agent and either alone or through subsidiaries or in connection with other persons, firms, associations or corporations, all and everything 2 necessary, suitable, convenient or proper for, or in connection with, or incident to, the accomplishment of any of the purposes or the attainment of any one or more of the objects herein enumerated or designed directly or indirectly to promote the interests of the Corporation or to enhance the value of its properties and in general to engage in any lawful act or activity for which corporations may be organized under the General Laws of Rhode Island; and to do any and all things and exercise all powers, rights and privileges which a business corporation may now or hereafter be organized or authorized to do or to exercise under the laws of the State of Rhode Island. 14. Whenever the context permits, the following provisions shall govern the construction of the paragraphs of these purposes: no specified enumeration shall be construed as restricting in any way any general language; any word, whether in the singular or plural shall be construed to mean both the singular and the plural; any phrase in the conjunctive or in the disjunctive shall include both the conjunctive and disjunctive; the mention of the whole shall include any part or parts; any one or more or all of the purposes set forth may be pursued from time to time and whenever deemed desirable; verbs in the present or future tense shall be construed to include both the present and future tenses or either of them. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 616,000,000, of which 16,000,000 shares of the par value of $1 each are to be of a class designated "Preferred Stock" and 600,000,000 of the par value of $0.01 each are to be of a class designated "Common Stock". The voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the classes of stock of the Corporation which are fixed by these Articles of Incorporation, and the authority vested in the Board of Directors to fix by vote or votes providing for the issue of Preferred Stock, the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of Preferred Stock which are not fixed by these Articles of Incorporation, are as follows: (a) The Preferred Stock may be issued from time to time in one or more series of any number of shares; provided that the aggregate number of shares issued and not canceled of any and all such series shall not exceed the total number of shares of Preferred Stock hereinabove authorized. Each series of Preferred Stock shall be distinctively designated by letter or descriptive words. All series of Preferred Stock shall rank equally and be identical in all respects except as permitted by the provisions of paragraph (b) of this Article FOURTH. (b) Authority is hereby vested in the Board of Directors from time to time to issue the Preferred Stock of any series and in connection with the creation of each such series to fix by vote or votes providing for the issue of shares thereof the voting powers, if any, the designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of such series to the full extent now or hereafter permitted by these Articles of Incorporation and the laws of the State of Rhode Island, in respect of the matters set forth in the following subparagraphs (1) to (8), inclusive: (1) The distinctive designation of such series and the number of shares which shall constitute such series, which number may be increased or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; (2) The dividend rate of such series, any preferences to or provisions in relation to the dividends payable on any other class or classes or of any other series of stock, and any limitations, restrictions or conditions on the payment of dividends; (3) The price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed by the Corporation; 3 (4) The amount or amounts payable upon the shares of such series in the event of any liquidation, dissolution or winding up of the Corporation; (5) Whether or not the shares of such series shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of shares of such series and, if so entitled, the amount of such fund and the manner of its application; (6) Whether or not the shares of such series shall be made convertible into, or exchangeable for, shares of any other class or classes of stock of the Corporation or shares of any other series of Preferred Stock, and, if made so convertible or exchangeable, the conversion price or prices, or the rate or rates of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange; (7) Whether or not the shares of such series shall have any voting powers and, if voting powers are so granted, the extent of such voting powers; and (8) Whether or not the issue of any additional shares of such series or of any future series in addition to such series shall be subject to restrictions in addition to the restrictions, if any, on the issue of additional shares imposed in the vote or votes fixing the terms of any outstanding series of Preferred Stock theretofore issued pursuant to this Article FOURTH and, if subject to additional restrictions, the extent of such additional restrictions. (c) The holders of Preferred Stock of each series shall be entitled to receive, when and as declared by the Board of Directors, dividends in cash at the rate for such series fixed by the Board of Directors as provided in paragraph (b) of this Article FOURTH, and no more, payable quarterly on the first days of January, April, July and October or of such other months as may be designated by the Board of Directors (each of the quarterly periods ending on the first day of January, April, July and October in each year, or on the first days of such other months, respectively, being hereinafter called a dividend period), in each case from the date of cumulation (as defined in paragraph (h) of this Article FOURTH) of such series. Except as may otherwise be provided in the vote or votes providing for the issue of any given series of Preferred Stock, dividends on Preferred Stock shall be cumulative (whether or not there shall be net profits or net assets of the Corporation legally available for the payment of such dividends), so that, if at any time full cumulative dividends (as defined in paragraph (h) of this Article FOURTH) upon the Preferred Stock of all series to the end of the last completed dividend period shall not have been paid or declared and a sum sufficient for payment thereof set apart, the amount of the deficiency shall be fully paid, but without interest, or dividends in such amount shall have been declared on each such series and a sum sufficient for the payment thereof shall have been set apart for such payment, before any sum or sums shall be set aside for or applied to the purchase or redemption of Preferred Stock of any series (either pursuant to any applicable sinking fund provisions or any redemptions authorized pursuant to paragraph (g) of this Article FOURTH or otherwise) or set aside for or applied to the purchase of Common Stock and before any dividend shall be declared or paid or any other distribution ordered or made upon the Common Stock (other than a dividend payable in Common Stock); provided, however, that any moneys deposited in the sinking fund provided for any series of Preferred Stock in the vote or votes providing for the issue of shares of said series, in compliance with the provisions of such sinking fund and of this paragraph (c), may thereafter be applied to the purchase or redemption of Preferred Stock in accordance with the terms of such sinking fund, whether or not at the time of such application full cumulative dividends upon the outstanding Preferred Stock of all series to the end of the last completed dividend period shall have been paid or declared and set apart for payment. All dividends declared upon the Preferred Stock of the respective series outstanding shall be declared pro rata, so that the amounts of dividends declared per share on the Preferred Stock of different series shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of such respective series bear to each other. (d) Before any sum or sums shall be set aside for or applied to the purchase of Common Stock and before any dividends shall be declared or paid or any distribution ordered or made upon the Common 4 Stock (other than a dividend payable in Common Stock), the Corporation shall comply with the sinking fund provisions, if any, of any vote or votes providing for the issue of any series of Preferred Stock any shares of which shall at the time be outstanding. (e) Subject to the provisions of paragraphs (c) and (d) of this Article FOURTH, the holders of Common Stock shall be entitled, to the exclusion of the holders of Preferred Stock of any and all series, to receive such dividends as from time to time may be declared by the Board of Directors. (f) In the event of any liquidation, dissolution or winding up of the Corporation, the holders of Preferred Stock of each series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, before any payment shall be made to the holders of Common Stock, an amount determined as provided in paragraph (b) of this Article FOURTH for every share of their holdings of Preferred Stock of such series. If upon any liquidation, dissolution or winding up of the Corporation the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of Preferred Stock of all series the full amounts to which they respectively shall be entitled, the holders of Preferred Stock of all series shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares of Preferred Stock held by them upon such distribution if all amounts payable on or with respect to Preferred Stock of all series were paid in full. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment shall have been made to the holders of Preferred Stock of the full amount to which they shall be entitled as aforesaid, the holders of Common Stock shall be entitled, to the exclusion of the holders of Preferred Stock of any and all series, to share, ratably according to the number of shares of Common Stock held by them, in all remaining assets of the Corporation available for distribution to its stockholders. Neither the merger or consolidation of the Corporation into or with another corporation nor the merger or consolidation of any other corporation into or with the Corporation, nor the sale, transfer or lease of all or substantially all the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation. (g) Subject to any requirements which may be applicable to the redemption of any given series of Preferred Stock as provided in any vote or votes providing for the issue of such series of Preferred Stock, the Preferred Stock of all series, or of any series thereof, or any part of any series thereof, at any time outstanding, may be redeemed by the Corporation, at its election expressed by vote of the Board of Directors, any time or from time to time, upon not less than 30 days previous notice to the holders of record of Preferred Stock to be redeemed, given by mail in such manner as may be prescribed by vote or votes of the Board of Directors, (1) If such redemption shall be otherwise than by the application of moneys in any sinking fund referred to in paragraph (d) of this Article FOURTH, at the redemption price, fixed as provided in paragraph (b) of this Article FOURTH, at which shares of Preferred Stock of the particular series may then be redeemed at the option of the Corporation and (2) If such redemption shall be by the application of moneys in any sinking fund referred to in paragraph (d) of this Article FOURTH, at the redemption price, fixed as provided in paragraph (b) of this Article FOURTH, at which shares of Preferred Stock of the particular series may then be redeemed for such sinking fund; provided, however, that, before any Preferred Stock of any series shall be redeemed at said redemption price thereof specified in clause (1) of this paragraph (g), all moneys at the time in the sinking fund, if any, for Preferred Stock of that series shall first be applied, as nearly as may be, to the purchase or redemption of Preferred Stock of that series as provided in the vote or votes of the Board of Directors providing for such sinking fund. If less than all the outstanding shares of Preferred Stock of any series are to be redeemed, the redemption may be made either by lot or pro rata in such manner as may be prescribed by vote of the Board of Directors. The Corporation may, if it shall so elect, provide moneys for the payment of the redemption price by depositing the amount thereof for the account of the holders 5 of Preferred Stock entitled thereto with a bank or trust company doing business in the City of New York, in the State of New York, or in the City of Providence, in the State of Rhode Island, and having capital and surplus of at least $5,000,000. The date upon which such deposit may be made by the Corporation (hereinafter called the "date of deposit") shall be prior to the date fixed as the date of redemption. In any such case there shall be included in the notice of redemption a statement of the date of deposit and of the name and address of the bank or trust company with which the deposit has been or will be made. On and after the date fixed in any such notice of redemption as the date of redemption (unless default shall be made by the Corporation in providing moneys for the payment of the redemption price pursuant to such notice) or, if the Corporation shall have made such deposit on or before the date specified therefor in the notice, then on and after the date of deposit all rights of the holders of the Preferred Stock to be redeemed as stockholders of the Corporation, except the right to receive the redemption price as hereinafter provided, and, in the case of such deposit, any conversion rights not theretofore expired, shall cease and terminate. Such conversion rights, however, in any event shall cease and terminate upon the date fixed for redemption or upon any earlier date fixed by the Board of Directors pursuant to paragraph (b) of this Article FOURTH for termination of such conversion rights. Anything herein contained to the contrary notwithstanding, said redemption price shall include an amount equal to accrued dividends on the Preferred Stock to be redeemed to the date fixed for the redemption thereof and the Corporation shall not be required to declare or pay on such Preferred Stock to be redeemed, and the holders thereof shall not be entitled to receive, any dividends in addition to those thus included in the redemption price, provided, however, that the Corporation may pay in regular course any dividends thus included in the redemption price either to the holders of record on the record date fixed for the determination of stockholders entitled to receive such dividends (in which event, anything herein to the contrary notwithstanding, the amount so deposited need not include any dividends so paid or to be paid) or as part of the redemption price upon surrender of the certificates for the shares redeemed. At any time on or after the date fixed as aforesaid for such redemption or, if the Corporation shall elect to deposit the money for such redemption as herein provided, then at any time on or after the date of deposit and without awaiting the date fixed as aforesaid for such redemption, the respective holders of record of the Preferred Stock to be redeemed shall be entitled to receive the redemption price upon actual delivery to the Corporation, or, in the event of such deposit, to the bank or trust company with which such deposit shall be made, of certificates for the shares to be redeemed, such certificates, if required, to be properly stamped for transfer and duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly executed in blank. Any moneys so deposited which shall remain unclaimed by the holders of such Preferred Stock at the end of five years after the redemption date shall be paid by such bank or trust company to the Corporation and any interest accrued on moneys so deposited shall belong to the Corporation and shall be paid to it from time to time. Preferred Stock redeemed pursuant to the provisions of this paragraph (g) shall be canceled and shall thereafter have the status of authorized and unissued shares of Preferred Stock. (h) The term "date of cumulation" as used with reference to any series of Preferred Stock shall be deemed to mean the date fixed by the Board of Directors as the date of cumulation of such series at the time of creation thereof or, if no date shall have been fixed, the date on which shares of such series are first issued. Whenever used with reference to any share of any series of Preferred Stock, the term "full cumulative dividends" shall be deemed to mean (whether or not in any dividend period, or any part thereof, in respect of which such term is used there shall have been net profits or net assets of the Corporation legally available for the payment of such dividends) that amount which shall be equal to dividends at the full rate fixed for such series as provided in paragraph (b) of this Article FOURTH for the period of time elapsed from the date of cumulation of such series to the date as of which full cumulative dividends are to be computed (including an amount equal to the dividend at such rate for any fraction of a dividend period included in such period of time); and the term "accrued dividends" shall be deemed to mean full cumulative dividends to the date as of which accrued dividends are to be computed, less the amount of all dividends paid, or deemed paid as hereinafter in this paragraph (h) provided, upon said share. In the event of the issue of additional shares of Preferred Stock of any series 6 after the original issue of shares of Preferred Stock of such series, all dividends paid or accrued on Preferred Stock of such series prior to the date of issue of such additional Preferred Stock shall be deemed to have been paid on the additional Preferred Stock so issued. (i) No holder of stock of any class of the Corporation, whether now or hereafter authorized, shall have any preemptive, preferential or other rights to subscribe for or purchase or acquire any shares of any class or any other securities of the Corporation, whether now or hereafter authorized, and whether or not convertible into, or evidencing or carrying the right to purchase, shares of any class or any other securities now or hereafter authorized, and whether the same shall be issued for cash, services or property, or by way of dividend or otherwise. (j) Subject to the provisions of these Articles of Incorporation and except as otherwise provided by law, the shares of stock of the Corporation, regardless of class, may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine. (k) Except as otherwise provided by law, or these Articles of Incorporation, or by the vote or votes providing for the issue of any series of Preferred Stock, the holders of shares of Preferred Stock as such holders, shall not have any right to vote, and are hereby specifically excluded from the right to vote, in the election of directors or for any other purpose. Except as aforesaid, the holders of Preferred Stock, as such holders, shall not be entitled to notice of any meeting of stockholders. (l) Subject to the provisions of any applicable law, or of the Bylaws of the Corporation as from time to time amended, with respect to the closing of the transfer books or the fixing of a record date for the determination of stockholders entitled to vote and except as otherwise provided by law or by these Articles of Incorporation, or by the vote or votes providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall exclusively possess voting power for the election of directors and for all other purposes, each holder of record of shares of Common Stock being entitled to one vote for each share of Common Stock standing in his name on the books of the Corporation. (As of the date of these Restated Articles of Incorporation, the following series of Preferred Stock have been authorized by the Board of Directors of the Corporation: (i) Series III 10.12% Perpetual Preferred Stock, the terms and provisions of which are set forth in Exhibit A hereto, (ii) Series IV 9.375% Perpetual Preferred Stock, the terms and provisions of which are set forth in Exhibit B hereto, (iii) Dual Convertible Preferred Stock, the terms and provisions of which are set forth in Exhibit C hereto, (iv) Cumulative Participating Junior Preferred Stock, the terms and provisions of which are set forth in Exhibit D hereto, (v) Preferred Stock with Cumulative and Adjustable Dividends, the terms and provisions of which are set forth in Exhibit E hereto, (vi) 9.30% Cumulative Preferred Stock, the terms and provisions of which are set forth in Exhibit F hereto, (vii) 9.35% Cumulative Preferred Stock, the terms and provisions of which are set forth in Exhibit G hereto, (viii) Series V 7.25% Perpetual Preferred Stock, the terms and provisions of which are set forth in Exhibit H hereto and (ix) Series VI 6.75% Perpetual Preferred Stock, the terms and provisions of which are set forth in Exhibit I hereto, said Exhibits A through I being hereby incorporated by reference in this Article FOURTH as if set forth herein. As of the date of these Restated Articles of Incorporation, there were issued and outstanding (i) 519,758 shares of Series III 10.12% Perpetual Preferred Stock, (ii) 478,838 shares of Series IV 9.375% Perpetual Preferred Stock, (iii) no shares of Dual Convertible Preferred Stock, (iv) no shares of Cumulative Participating Junior Preferred Stock, (v) 688,700 shares of Preferred Stock with Cumulative and Adjustable Dividends, (vi) 575,000 shares of 9.30% Cumulative Preferred Stock, (vii) 500,000 shares of 9.35% Cumulative Preferred Stock, (viii) 1,100,000 shares of Series V 7.25% Perpetual Preferred Stock and (ix) 600,000 shares of Series VI 6.75% Perpetual Preferred Stock.) FIFTH: The private property of the stockholders of the Corporation shall not be subject to the payment of corporate debts to any extent whatsoever. 7 SIXTH: Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, the meeting and vote of stockholders may be dispensed with and such action may be taken with the written consent of stockholders having not less than the minimum percentage of the total vote required by statute for the proposed corporate action, and provided that prompt notice of such action be given to all stockholders who would have been entitled to vote upon the action if such meeting were held. SEVENTH: (a) Directors of the Corporation need not be stockholders, but no person shall be elected a Director who has attained the age of 72 and no person shall continue to serve as Director after the date of the first meeting of the stockholders of the Corporation held on or after the date on which such person attained the age of 72. The powers and authorities herein conferred upon the Board of Directors are in furtherance and not in limitation of those conferred by the laws of the State of Rhode Island. In addition to the powers and authorities herein or by statute expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Rhode Island, of these Articles of Incorporation and of the Bylaws of the Corporation. (b) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors of the Corporation (exclusive of directors to be elected by the holders of any one or more series of the Preferred Stock voting separately as a class or classes) that shall constitute the Board of Directors shall be 13, unless otherwise determined from time to time by resolution adopted by the affirmative vote of: (1) At least 80% of the Board of Directors, and (2) A majority of the Continuing Directors. (c) Subject to applicable law, the Directors shall be divided into three (3) classes, each class to be as nearly equal in number as possible. The term of office of Directors of the first class shall expire at the annual meeting of stockholders to be held in 1984 and until their respective successors are duly elected and qualified. The term of office of Directors of the second class shall expire at the annual meeting of stockholders to be held in 1985 and until their respective successors are duly elected and qualified. The term of office of Directors of the third class shall expire at the annual meeting of stockholders to be held in 1986 and until their respective successors are duly elected and qualified. Subject to the foregoing, at each annual meeting of stockholders, commencing at the annual meeting to be held in 1984, the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting and until their successors shall be duly elected and qualified. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the number of directors, may be filled only by the Board of Directors, acting by vote of 80% of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their respective successors shall be duly elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, (i) the terms of the director or directors elected by such holders shall expire at the next succeeding annual meeting of stockholders and vacancies created with respect to any directorship of the directors so elected may be filled in the manner specified by such Preferred Stock, and (ii) this Article SEVENTH shall be deemed to be construed and/or modified so as to permit the full implementation of the terms and conditions relating to election of directors of any series of Preferred Stock that has been or will be designated by the Board of Directors. (d) Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these 8 Articles of Incorporation or the Bylaws of the Corporation), any one or more directors of the Corporation may be removed at any time, but only for cause and only by either (1) the affirmative vote of a majority of the Continuing Directors and a majority of the Board of Directors or (2) the affirmative vote, at a meeting of the stockholders called for that purpose, as to all stock held by the holders of 80% or more of the outstanding Voting Shares, voting separately as a class. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of this Section (d) shall not apply with respect to the director or directors elected by such holders of Preferred Stock. (e) For purposes of this Article SEVENTH, the following definitions shall apply: (1) Affiliate. An "Affiliate" of, or a Person "affiliated with", a specified Person, means a Person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. (2) Associate. The term "Associate" used to indicate a relationship with any Person means: (A) Any corporation or organization (other than the Corporation or a Subsidiary of the Corporation) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent or more of any class of equity securities; (B) Any trust or other estate in which such Person has a ten percent or greater beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; (C) Any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person; or (D) Any investment company registered under the Investment Company Act of 1940 for which such Person or any Affiliate or Associate of such Person serves as investment adviser. (3) Beneficial Owner. A Person shall be considered the "Beneficial Owner" of any shares of stock (whether or not owned of record): (A) With respect to which such Person or any Affiliate or Associate of such Person directly or indirectly has or shares (i) voting power, including the power to vote or to direct the voting of such shares of stock, and/or (ii) investment power, including the power to dispose of or to direct the disposition of such shares of stock; (B) Which such Person or any Affiliate or Associate of such Person has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, and/or (ii) the right to vote pursuant to any agreement, arrangement or understanding (whether such right is exercisable immediately or only after the passage of time); or (C) Which are Beneficially Owned within the meaning of (A) or (B) of this Section (3) by any other Person with which such first mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding, written or oral, with respect to acquiring, holding, voting or disposing of any shares of stock of the Corporation or any Subsidiary of the Corporation or acquiring, holding or disposing of all or substantially all, or any Substantial Part, of the assets or business of the Corporation or a Subsidiary of the Corporation. For the purpose only of determining whether a Person is the Beneficial Owner of a percentage specified in this Article SEVENTH of the outstanding Voting Shares, such shares shall be deemed to include any Voting Shares which may be issuable pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants, options or otherwise 9 and which are deemed to be beneficially owned by only such Person pursuant to the foregoing provisions of this Section (3). (4) Business Combination. A "Business Combination" means: (A) The sale, exchange, lease, transfer or other disposition to or with a Related Person or any Affiliate or Associate of such Related Person by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all or substantially all, or any Substantial Part, of its or their assets or businesses (including, without limitation, any securities issued by a Subsidiary); (B) The purchase, exchange, lease or other acquisition by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all or substantially all, or any Substantial Part, of the assets or business of a Related Person or any Affiliate or Associate of such Related Person; (C) Any merger or consolidation of the Corporation or any Subsidiary thereof into or with a Related Person or any Affiliate or Associate of such Related Person, irrespective of which Person is the surviving entity in such merger or consolidation; (D) Any reclassification of securities, recapitalization or other transaction (other than a redemption in accordance with the terms of the security redeemed) which has the effect, directly or indirectly, of increasing the proportionate amount of Voting Shares of the Corporation or any Subsidiary thereof which are Beneficially Owned by a Related Person, or any partial or complete liquidation, spinoff, split off or split up of the Corporation or any Subsidiary thereof; provided however, that this Section (4)(D) shall not relate to any transaction of the types specified herein that has been approved by (i) a majority of the Board of Directors, and (ii) 80% of the Continuing Directors; or (E) The acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of Voting Shares or securities convertible into Voting Shares or any voting securities or securities convertible into voting securities of any Subsidiary of the Corporation, or the acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of any rights, warrants or options to acquire any of the foregoing or any combination of the foregoing Voting Shares or voting securities of a Subsidiary of the Corporation. As used in this definition, a "series of related transactions" shall be deemed to include not only a series of transactions with the same Related Person but also a series of separate transactions with a Related Person or any Affiliate or Associate of such Related Person. Anything in this definition to the contrary notwithstanding, this definition shall not be deemed to include any transaction of the type set forth in Sections (4)(A) through (4)(C) above between or among any two or more Subsidiaries of the Corporation or the Corporation and one or more Subsidiaries of the Corporation if such transaction has been approved by the affirmative vote of at least 80% of the Board of Directors and a majority of the Continuing Directors on or prior to the Date of Determination. (5) Continuing Director. A "Continuing Director" shall mean: (A) An individual who was a member of the Board of Directors of the Corporation first elected by the stockholders or by the Board of Directors prior to April 13, 1983 or prior to the time that a Related Person became the Beneficial Owner of in excess of 10% of the Voting Shares of the Corporation entitled to vote in the election of directors; or (B) An individual designated (before such individual's initial election as a director) as a Continuing Director by a majority of the then Continuing Directors. (6) Date of Determination. The term "Date of Determination" means: (A) The date on which a binding agreement (except for the fulfillment of conditions precedent, including, without limitation, votes of stockholders to approve such transaction) is 10 entered into by the Corporation, as authorized by its Board of Directors, and another Person providing for any Business Combination; or (B) If such an agreement as referred to in Section (6)(A) above is amended so as to make it less favorable to the Corporation and its stockholders, the date on which such amendment is approved by the Board of Directors of the Corporation; or (C) In cases where neither Section (6)(A) or (6)(B) above shall be applicable, the record date for the determination of stockholders of the Corporation entitled to notice of and to vote upon the transaction in question. A majority of the Continuing Directors shall have the power and duty to determine the Date of Determination as to any transaction under this Article SEVENTH. Any such determination shall be conclusive and binding for all purposes of this Article. (7) Person. The term "Person" shall mean any individual, partnership, corporation, group or other entity (other than the Corporation, any Subsidiary of the Corporation for itself or as a fiduciary for customers in the ordinary course, or a trustee holding stock for the benefit of employees of the Corporation or its Subsidiaries, or any one of them, pursuant to one or more employee benefit plans or arrangements). When two or more Persons act as a partnership, limited partnership, syndicate, association or other group for the purpose of acquiring, holding or disposing of shares of stock, such partnership, syndicate, association or group shall be deemed a "Person". (8) Related Person. "Related Person" means any Person which is the Beneficial Owner, as of the Date of Determination or immediately prior to the consummation of a Business Combination, or both, of 10% or more of the Voting Shares, or any Person who is an Affiliate of the Corporation and at any time within five years preceding the Date of Determination was the Beneficial Owner of 10% or more of the then outstanding Voting Shares, but does not include any one group of more than one Continuing Director. (9) Substantial Part. The term "Substantial Part" as used with reference to the assets of the Corporation, of any Subsidiary or of any Related Person means assets having a value of more than five percent of the total consolidated assets of the Corporation and its Subsidiaries as of the end of the Corporation's most recent fiscal year ending prior to the time the determination is being made. (10) Subsidiary. "Subsidiary" shall mean any corporation or entity of which the Person in question owns not less than 50% of any class of equity securities, directly or indirectly. (11) Voting Shares. "Voting Shares" shall mean shares of the Corporation's capital stock entitled to vote generally in the election of directors. (12) Certain Determinations With Respect to Article SEVENTH. (A) A majority of the Continuing Directors shall have the conclusive power and authority to determine, for the purposes of this Article SEVENTH, on the basis of information known to them: (i) the number of Voting Shares of which any Person is the Beneficial Owner, (ii) whether a Person is an Affiliate or Associate of another, (iii) whether a Person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of "Beneficial Owner" as hereinabove defined, (iv) whether the assets subject to any Business Combination constitute a "Substantial Part" as hereinabove defined, (v) whether two or more transactions constitute a "series of related transactions" as hereinabove defined, (vi) any matters referred to in subsection (12)(B) below, and (vii) such other matters with respect to which a determination is required under this Article SEVENTH. Any such determination shall be final and binding for all purposes hereunder. (B) A Related Person shall be deemed to have acquired a Voting Share of the Corporation at the time when such Related Person became the Beneficial Owner thereof. With respect to Voting Shares owned by Affiliates, Associates or other Persons whose ownership is attributed to a Related Person under the foregoing definition of Beneficial Owner, if the price paid by such Related Person for such shares is not determinable, the price so paid shall be deemed to be the higher of (i) the price paid upon acquisition thereof by the Affiliate, Associate or other Person or (ii) the market price of the shares in question (as determined by a majority of the Continuing Directors) at the time when the Related Person became the Beneficial Owner thereof. 11 (f) Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), and in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law, this Article SEVENTH shall not be amended, altered, changed or repealed without: (1) The affirmative vote of 80% of the Board of Directors and of a majority of Continuing Directors, and (2) The affirmative vote as to all stock held by the holders of 80% or more of the outstanding Voting Shares, voting separately as a class. EIGHTH: (a) The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in these Articles of Incorporation, and other provisions authorized by the laws of the State of Rhode Island at the time in force may be added or inserted in these Articles of Incorporation, in the manner (i) now or hereafter prescribed by law, and (ii) as has otherwise been provided in Articles SEVENTH and NINTH of these Articles of Incorporation; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to these Articles of Incorporation in their present form or as hereafter amended are granted subject to the right reserved in this Article EIGHTH. (b) Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), and in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law, this Article EIGHTH shall not be amended, altered, changed or repealed without the affirmative vote as to all stock held by the holders of 80% or more of the outstanding shares of the Corporation's capital stock entitled to vote generally in the election of directors, voting separately as class. NINTH: (a) Definitions and Related Matters as to Certain Business Combinations. 1.1 Affiliate. An "Affiliate" of, or a Person "affiliated with", a specified Person, means a Person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. 1.2 Associate. The term "Associate" used to indicate a relationship with any Person means: (1) Any corporation or organization (other than the Corporation or a Subsidiary of the Corporation) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent or more of any class of equity securities; (2) Any trust or other estate in which such Person has a ten percent or greater beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; (3) Any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person; or (4) Any investment company registered under the Investment Company Act of 1940 for which such Person or any Affiliate or Associate of such Person serves as investment adviser. 1.3 Beneficial Owner. A Person shall be considered the "Beneficial Owner" of any shares of stock (whether or not owned of record): (1) With respect to which such Person or any Affiliate or Associate of such Person directly or indirectly has or shares (i) voting power, including the power to vote or to direct the voting of such shares of stock, and/or (ii) investment power, including the power to dispose of or to direct the disposition of such shares of stock; 12 (2) Which such Person or any Affiliate or Associate of such Person has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, and/or (ii) the right to vote pursuant to any agreement, arrangement or understanding (whether such right is exercisable immediately or only after the passage of time); or (3) Which are Beneficially Owned within the meaning of (1) or (2) of this Section 1.3 by any other Person with which such first-mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding, written or oral, with respect to acquiring, holding, voting or disposing of any shares of stock of the Corporation or any Subsidiary of the Corporation or acquiring, holding or disposing of all or substantially all, or any Substantial Part, of the assets or business of the Corporation or a Subsidiary of the Corporation. For the purpose only of determining whether a Person is the Beneficial Owner of a percentage specified in this Article NINTH of the outstanding Voting Shares, such shares shall be deemed to include any Voting Shares which may be issuable pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants, options or otherwise and which are deemed to be beneficially owned by only such Person pursuant to the foregoing provisions of this Section 1.3. 1.4 Business Combination. A "Business Combination" means: (1) The sale, exchange, lease, transfer or other disposition to or with a Related Person or any Affiliate or Associate of such Related Person by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all or substantially all, or any Substantial Part, of its or their assets or business (including, without limitation, any securities issued by a Subsidiary); (2) The purchase, exchange, lease or other acquisition by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all, or any Substantial Part, of the assets or business of a Related Person or any Affiliate or Associate of such Related Person; (3) Any merger or consolidation of the Corporation or any Subsidiary thereof into or with a Related Person or any Affiliate or Associate of such Related Person, irrespective of which Person is the surviving entity in such merger or consolidation; (4) Any reclassification of securities, recapitalization or other transaction (other than a redemption in accordance with the terms of the security redeemed) which has the effect, directly or indirectly, of increasing the proportionate amount of Voting Shares of the Corporation or any Subsidiary thereof which are Beneficially Owned by a Related Person, or any partial or complete liquidation, spin-off, split-off or split-up of the Corporation or any Subsidiary thereof; provided, however, that this Section 1.4(4) shall not relate to any transaction of the types specified herein that has been approved by (i) a majority of the Board of Directors and (ii) 80% of the Continuing Directors; or (5) The acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of Voting Shares or securities convertible into Voting Shares or any voting securities or securities convertible into voting securities of any Subsidiary of the Corporation, or the acquisition upon the issuance thereof of Beneficial Ownership by a Related Person of any rights, warrants or options to acquire any of the foregoing or any combination of the foregoing Voting Shares or voting securities of a Subsidiary of the Corporation. 13 As used in this definition, a "series of related transactions" shall be deemed to include not only a series of transactions with the same Related Person but also a series of separate transactions with a Related Person or any Affiliate or Associate of such Related Person. Anything in this definition to the contrary notwithstanding, this definition shall not be deemed to include any transaction of the type set forth in Section 1.4(1) through 1.4(3) above between or among any two or more Subsidiaries of the Corporation or the Corporation and one or more Subsidiaries of the Corporation if such transaction has been approved by the affirmative vote of at least 80% of the Board of Directors and a majority of the Continuing Directors on or prior to the Date of Determination. 1.5 Continuing Director. A "Continuing Director" shall mean: (1) An individual who was a member of the Board of Directors of the Corporation first elected by the stockholders or by the Board of Directors prior to April 13, 1983 or prior to the time that a Related Person became the Beneficial Owner of in excess of 10% of the Voting Shares of the Corporation entitled to vote in the election of directors; or (2) An individual designated (before such individual's initial election as a director) as a Continuing Director by a majority of the then Continuing Directors. 1.6 Date of Determination. The term "Date of Determination" means: (1) The date on which a binding agreement (except for the fulfillment of conditions precedent, including, without limitation, votes of stockholders to approve such transaction) is entered into by the Corporation, as authorized by its Board of Directors, and another Person providing for any Business Combination; or (2) If such an agreement as referred to in Section 1.6(1) above is amended so as to make it less favorable to the Corporation and its stockholders, the date on which such amendment is approved by the Board of Directors of the Corporation; or (3) In cases where neither Section 1.6(1) or (2) above shall be applicable, the record date for the determination of stockholders of the Corporation entitled to notice of and to vote upon the transaction in question. A majority of the Continuing Directors shall have the power and duty to determine the Date of Determination as to any transaction under this Article NINTH. Any such determination shall be conclusive and binding for all purposes of this Article. 1.7 Person. The term "Person" shall mean any individual, partnership, corporation, group or other entity (other than the Corporation, any Subsidiary of the Corporation for itself or as a fiduciary for customers in the ordinary course, or a trustee holding stock for the benefit of employees of the Corporation or its Subsidiaries, or any one of them, pursuant to one or more employee benefit plans or arrangements). When two or more Persons act as a partnership, limited partnership, syndicate, association or other group for the purpose of acquiring, holding or disposing of shares of stock, such partnership, syndicate, association or group shall be deemed a "Person". 1.8 Related Person. "Related Person" means any Person which is the Beneficial Owner, as of the Date of Determination or immediately prior to the consummation of a Business Combination or both, of 10% or more of the Voting Shares, or any Person who is an Affiliate of the Corporation and at any time within five years preceding the Date of Determination was the Beneficial Owner of 10% or more of the then outstanding Voting Shares, but does not include any one or group of more than one Continuing Director. 1.9 Substantial Part. The term "Substantial Part" as used with reference to the assets of the Corporation, of any Subsidiary or of any Related Person means assets having a value of more than five 14 percent of the total consolidated assets of the Corporation and its Subsidiaries as of the end of the Corporation's most recent fiscal year ending prior to the time the determination is being made. 1.10 Subsidiary. "Subsidiary" shall mean any corporation or entity of which the Person in question owns not less than 50% of any class of equity securities, directly or indirectly. 1.11 Voting Shares. "Voting Shares" shall mean shares of the Corporation's capital stock entitled to vote generally in the election of directors. 1.12 Certain Determinations With Respect to Article NINTH. (1) A majority of the Continuing Directors shall have the conclusive power and authority to determine, for the purposes of this Article NINTH, on the basis of information known to them: (i) the number of Voting Shares of which any Person is the Beneficial Owner, (ii) whether a Person is an Affiliate or Associate of another, (iii) whether a Person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of "Beneficial Owner" as hereinabove defined, (iv) whether the assets subject to any Business Combination constitute a "Substantial Part" as hereinabove defined, (v) whether two or more transactions constitute a "series of related transactions" as hereinabove defined, (vi) any matters referred to in subsection 1.12(2) below, and (vii) such other matters with respect to which a determination is required under this Article NINTH. Any such determination shall be final and binding for all purposes hereunder. (2) A Related Person shall be deemed to have acquired a Voting Share of the Corporation at the time when such Related Person became the Beneficial Owner thereof. With respect to Voting Shares owned by Affiliates, Associates or other Persons whose ownership is attributed to a Related Person under the foregoing definition of Beneficial Owner, if the price paid by such Related Person for such shares is not determinable, the price so paid shall be deemed to be the higher of (i) the price paid upon acquisition thereof by the Affiliate, Associate or other Person or (ii) the market price of the shares in question (as determined by a majority of the Continuing Directors) at the time when the Related Person became the Beneficial Owner thereof. (b) Approval of Certain Business Combinations. Whether or not a vote of the stockholders is otherwise required in connection with the transaction, neither the Corporation nor any of its Subsidiaries shall become a party to any Business Combination without prior compliance with the provisions of Section 1.1 or 1.2 or 1.3 hereinbelow, in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law. 1.1 Prior Approval by the Board of Directors. Such Business Combination was approved by the Board of Directors of the Corporation by the affirmative vote of at least 80% of the Board of Directors of the Corporation either (a) at a time prior to the acquisition of 10% or more of the outstanding Voting Shares of the Corporation by the Related Person, or (b) after such acquisition, but only so long as such Related Person sought and obtained the approval, by the affirmative vote of at least 80% of the Board of Directors of the Corporation, of the acquisition of 10% or more of the outstanding Voting Shares prior to such acquisition being consummated. 1.2 Approval by Continuing Directors and Additional Requirements. Such Business Combination (a) shall be approved at a meeting of the Board of Directors by the affirmative vote of 80% of the Continuing Directors and a majority of the Board of Directors, and (b) all of the conditions hereinafter set forth in subsections (1) through (5) shall be satisfied: (1) The ratio of (i) the aggregate amount of the cash and the fair market value of other consideration to be received per share of Common Stock in such Business Combination by holders of Common Stock other than the Related Person involved in such Business Combination, to (ii) the market price per share of the Common Stock immediately prior to the announcement of the 15 proposed Business Combination, is at least as great as the ratio of (x) the highest per share price (including brokerage commissions, transfer taxes and soliciting dealers' fees) which such Related Person has theretofore paid in acquiring any Common Stock prior to such Business Combination, to (y) the market price per share of Common Stock immediately prior to the initial acquisition by such Related Person of any shares of Common Stock; and (2) The aggregate amount of the cash and the fair market value of other consideration to be received per share of Common Stock in such Business Combination by holders of Common Stock, other than the Related Person involved in such Business Combination, (i) is not less than the highest per share price (including brokerage commissions, transfer taxes and soliciting dealers' fees) paid by such Related Person in acquiring any of its holdings of Common Stock, (ii) is not less than the earnings per share of Common Stock for the four consecutive fiscal quarters of the Corporation immediately preceding the Date of Determination of such Business Combination multiplied by the then price/earnings multiple (if any) of such Related Person as customarily computed and reported in the financial community; provided, that for the purposes of this clause (ii), if more than one Person constitutes the Related Person involved in the Business Combination, the price/earnings multiple (if any) of the Person having the highest price/earnings multiple shall be used for the computation in this clause (ii), and (iii) is not less than the book value of a share of the Common Stock, as reflected in the balance sheet of the Corporation as of the last day of the last fiscal quarter of the Corporation preceding the Date of Determination; and (3) The consideration (if any) to be received in such Business Combination by holders of Common Stock other than the Related Person involved shall, except to the extent that a stockholder agrees otherwise as to all or part of the shares which he or she owns, be in the same form and of the same kind as the consideration paid by the Related Person in acquiring Common Stock already owned by it; and (4) After such Related Person became a Related Person and prior to the consummation of such Business Combination: (i) such Related Person shall have taken steps to ensure that the Board of Directors of the Corporation included at all times representation by Continuing Directors proportionate to the ratio that the number of Voting Shares of the Corporation from time to time owned by stockholders who are not Related Persons bears to all Voting Shares of the Corporation outstanding at the time in question (with a Continuing Director to occupy any resulting fractional position among the directors); (ii) such Related Person shall not have acquired from the Corporation, directly or indirectly, any shares of the Corporation (except (x) upon conversion of convertible securities acquired by it prior to becoming a Related Person or (y) as a result of a pro rata stock dividend, stock split or division of shares or (z) in a transaction consummated after this Article NINTH was added to these Articles of Incorporation and which satisfied all applicable requirements of this Article NINTH); (iii) such Related Person shall not have acquired any additional Voting Shares of the Corporation or securities convertible into or exchangeable for Voting Shares except as a part of the transaction which resulted in such Related Person's becoming a Related Person; and (iv) such Related Person shall not have (x) received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the Corporation or any Subsidiary, or (y) made any major change in the Corporation's business or equity capital structure or entered into any contract, arrangement or understanding with the Corporation except any such change, contract, arrangement or understanding as may have been approved by the favorable vote of not less than 80% of the Continuing Directors and a majority of the Board of Directors of the Corporation; and (5) A proxy statement complying with the requirements of the Securities Exchange Act of 1934 shall have been mailed to all holders of Voting Shares for the purpose of soliciting stockholder approval of such Business Combination. Such proxy statement shall contain at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may have furnished in writing and, if 16 deemed advisable by two thirds of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such Business Combination from the point of view of the holders of Voting Shares other than any Related Person (such investment banking firm to be selected by two thirds of the Continuing Directors, to be furnished with all information it reasonably requests, and to be paid by the Corporation a reasonable fee for its services upon receipt by the Corporation of such opinion). For purposes of Sections 1.1 (1) and (2) hereof, in the event of a Business Combination upon consummation of which the Corporation would be the surviving corporation or company or would continue to exist (unless it is provided, contemplated or intended that as part of such Business Combination or within one year after consummation thereof a plan of liquidation or dissolution of the Corporation will be effected), the term "other consideration to be received" shall include (without limitation) Common Stock retained by stockholders of the Corporation other than Related Persons who are parties to such Business Combination. 1.3 Approval by Stockholders. If there is not full compliance with the provisions of Section 1.1 or 1.2 of paragraph (b) of this Article, such Business Combination shall be approved by the affirmative vote of 80% of the Voting Shares, voting as a single class; provided that a proxy statement complying with the requirements of the Securities Exchange Act of 1934 shall have been mailed to all holders of Voting Shares for the purpose of soliciting stockholder approval of such Business Combination. Such proxy statement shall contain at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may have furnished in writing and, if deemed advisable by two thirds of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such Business Combination from the point of view of the holders of Voting Shares other than any Related Person (such investment banking firm to be selected by two thirds of the Continuing Directors, to be furnished with all information it reasonably requests, and to be paid a reasonable fee by the Corporation for its services upon receipt by the Corporation of such opinion). (c) Amendments to this Article NINTH. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), and in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law, this Article NINTH shall not be amended, altered, changed or repealed without: (1) The affirmative vote of 80% of the Board of Directors and a majority of the Continuing Directors, and (2) The affirmative vote as to all stock held by the holders of 80% or more of the outstanding Voting Shares, voting separately as a class. (d) Amendments Recommended by Directors. The provisions of paragraph (c) of this Article NINTH shall not apply to, and the vote referred to therein shall not be required for, any amendment, addition, alteration or repeal of any provision of this Article NINTH that is recommended to the stockholders by the favorable vote of (1) a majority of the Board of Directors, and (2) not less than 80% of the Continuing Directors, and any such amendment, addition, alteration or repeal so recommended shall require only the vote, if any, required under the applicable provisions of the Rhode Island Business Corporation Law. TENTH: (a) No director of the Corporation shall be liable to the Corporation or to its stockholders for monetary damages for breach of the director's duty as a director; provided, however, that this Article TENTH shall not eliminate or limit the liability of a director: (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which 17 involve intentional misconduct or a knowing violation of law; (iii) the liability imposed pursuant to the provisions of R.I.G.L. Section 7-1.1-43 (as in effect or as hereafter amended); or (iv) for any transaction from which the director derived an improper personal benefit unless said transaction is permitted by R.I.G.L. Section 7-1.1-37.1 (as in effect or as hereafter amended). If the Rhode Island General Laws are amended after the adoption of this Article TENTH to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of each director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Rhode Island General Laws, as so amended. Neither the amendment nor repeal of this Article TENTH nor the adoption of any provision of these Articles of Incorporation inconsistent with this Article TENTH shall eliminate or reduce the effect of this Article TENTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article TENTH, would occur or arise, prior to such amendment, repeal or adoption of an inconsistent provision. (b) Notwithstanding any other provision of these Articles of Incorporation, including Section EIGHTH (a), or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), and in addition to such additional vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law, this Article TENTH shall not be amended, altered, changed or repealed without: (1) the affirmative vote of 80% of the Board of Directors and a majority of Continuing Directors (as defined in Article SEVENTH of these Articles of Incorporation), and (2) the affirmative vote as to all stock held by the holders of 80% or more of the outstanding Voting Shares (as defined in Article SEVENTH of these Articles of Incorporation), voting separately as a class. ELEVENTH: The Restated Articles of Incorporation correctly set forth without change the corresponding provisions of the Articles of Incorporation as heretofore amended, and supersede the original Articles of Incorporation and all amendments thereto. 18 EXHIBIT A FLEET FINANCIAL GROUP, INC. SERIES III 10.12% PERPETUAL PREFERRED STOCK (a) Designation. The designation of the series of Preferred Stock shall be "Series III 10.12% Perpetual Preferred Stock" (hereinafter called this "Series") and the number of shares constituting this Series is One Million One Hundred Thousand (1,100,000). (b) Dividend Rate. (1) The holders of shares of this Series shall be entitled to receive dividends thereon at a rate of 10.12% per annum computed on the basis of an issue price thereof of $100 per share, and no more, payable quarterly out of the funds of the Corporation legally available for the payment of dividends. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when, as and if declared by the Board, on March 1, June 1, September 1 and December 1 of each year, commencing September 1, 1991. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past quarters may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) No full dividends shall be declared or paid or set apart for payment on the Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other preferred stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other class or series of preferred stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other preferred stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (3) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. A-1 (4) Dividends payable on this Series for any period, including the period from the original issue of such shares until September 1, 1991, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (c) Redemption. (1) The shares of this Series shall not be redeemable prior to June 1, 1996. On and after June 1, 1996, the Corporation, at its option, may redeem shares of this Series, as a whole or in part, at any time or from time to time, at a redemption price per share as follows: If redeemed during the twelve-month period beginning June 1, 1996-- $105.060 per share If redeemed during the twelve-month period beginning June 1, 1997-- $104.048 per share If redeemed during the twelve-month period beginning June 1, 1998-- $103.036 per share If redeemed during the twelve-month period beginning June 1, 1999-- $102.024 per share If redeemed during the twelve-month period beginning June 1, 2000-- $101.012 per share If redeemed at any time from and after June 1, 2001--$100.000 per share plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the aforesaid redemption price. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. A-2 (d) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive and be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of this Series upon liquidation, the amount of $100 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (d). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (d), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (d), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Conversion or Exchange. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (f) Voting. The shares of this Series shall not have any voting powers, either general or special, except that: (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, Optional or Other Special Rights, and the Qualifications, Limitations or Restrictions thereof, or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting, increasing or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series A-3 as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares. (3) If, at the time of any annual meeting of stockholders for the election of directors, a default in preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation (other than the Corporation's Series II 6 1/2% Cumulative Convertible Preferred Stock (the "Series II Preferred") and any other class or series of the Corporation's preferred stock expressly entitled to elect additional directors to the Board by a vote separate and distinct from the vote provided for in this paragraph (3) ("Voting Preferred")) shall exist, the number of directors constituting the Board shall be increased by two (without duplication of any increase made pursuant to the terms of any other class or series of the Corporation's preferred stock other than the Series II Preferred and any Voting Preferred) and the holders of the Corporation's preferred stock of all classes and series (other than the Series II Preferred and any such Voting Preferred) shall have the right at such meeting, voting together as a single class without regard to class or series, to the exclusion of the holders of Common Stock, the Series II Preferred and the Voting Preferred, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon shares of any class or series of the Corporation's preferred stock ranking prior to or on a parity with shares of this Series as to dividends (other than the Series II Preferred and any Voting Preferred). Each director elected by the holders of shares of any series of the Preferred Stock or any other class or series of the Corporation's preferred stock in an election provided for by this paragraph (3) (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for such director's election, voting together as a single class without regard to class or series, at a meeting of the stockholders, or of the holders of shares of the Corporation's preferred stock, called for that purpose. So long as a default in any preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall exist (other then the Series II Preferred and any Voting Preferred) (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for the removed director's election, voting together as a single class without regard to class or series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid shall be deemed for all purposes hereto to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board shall be reduced by two. For purposes hereof, a "default in preference dividends" on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall be deemed to have occurred whenever the amount of accrued dividends upon such class or series of the Corporation's preferred stock shall be equivalent to six full quarterly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all such shares of the Corporation's preferred stock of each and every series then outstanding (other than the Series II Preferred, any Voting Preferred or shares of any class or series ranking junior to shares of this Series as to dividends) shall have been paid to the end of the last preceding quarterly dividend period. (g) Reacquired Shares. Shares of this Series which have been issued and reacquired through redemption or purchase shall, upon compliance with an applicable provision of the Rhode Island A-4 Business Corporation Act, have the status of authorized and unissued shares of Preferred Stock and may be reissued, but only as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board. (h) Relation to Existing Preferred Classes of Stock. Shares of this Series are equal in rank and preference with all other series of the Preferred Stock outstanding on the date of original issue of the shares of this Series and the Preferred Stock with Cumulative and Adjustable Dividends, $20.00 par value, and are senior in rank and preference to the Common Stock and the Cumulative Participating Junior Preferred Stock of the Corporation. (i) Relation to Other Preferred Classes of Stock. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Series, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to the shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. A-5 EXHIBIT B FLEET FINANCIAL GROUP, INC. SERIES IV 9.375% PERPETUAL PREFERRED STOCK (a) Designation. The designation of the series of Preferred Stock shall be "Series IV 9.375% Perpetual Preferred Stock" (hereinafter called this "Series") and the number of shares constituting this Series is One Million (1,000,000). (b) Dividend Rate. (1) The holders of shares of this Series shall be entitled to receive dividends thereon at a rate of 9.375% per annum computed on the basis of an issue price thereof of $100 per share, and no more, payable quarterly out of the funds of the Corporation legally available for the payment of dividends. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when, as and if declared by the Board, on March 1, June 1, September 1 and December 1 of each year, commencing March 1, 1992. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past quarters may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) No full dividends shall be declared or paid or set apart for payment on the Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other preferred stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other class or series of preferred stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other preferred stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (3) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. B-1 (4) Dividends payable on this Series for any period, including the period from the original issue of such shares until March 1, 1992, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (c) Redemption. (1) The shares of this Series shall not be redeemable prior to December 1, 1996. On and after December 1, 1996, the Corporation, at its option, may redeem shares of this Series, in whole or in part, at any time or from time to time, at a redemption price of $100 per share, plus accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the aforesaid redemption price. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive and be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of this Series upon liquidation, the amount of $100 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. B-2 (2) Neither the sale of all or substantially all the property or business of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (d). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (d), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (d), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Conversion or Exchange. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (f) Voting. The shares of this Series shall not have any voting powers, either general or special, except that: (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, Optional or Other Special Rights, and the Qualifications, Limitations or Restrictions thereof, or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting, increasing or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares. (3) If, at the time of any annual meeting of stockholders for the election of directors, a default in preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation (other than the Corporation's Series II 6 1/2% Cumulative Convertible Preferred Stock (the "Series II Preferred") and any other class or series of the Corporation's preferred stock expressly entitled to elect additional directors to the Board by a vote separate and B-3 distinct from the vote provided for in this paragraph (3) ("Voting Preferred")) shall exist, the number of directors constituting the Board shall be increased by two (without duplication of any increase made pursuant to the terms of any other class or series of the Corporation's preferred stock other than the Series II Preferred and any Voting Preferred) and the holders of the Corporation's preferred stock of all classes and series (other than the Series II Preferred and any such Voting Preferred) shall have the right at such meeting, voting together as a single class without regard to class or series, to the exclusion of the holders of Common Stock, the Series II Preferred and the Voting Preferred, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon shares of any class or series of the Corporation's preferred stock ranking prior to or on a parity with shares of this Series as to dividends (other than the Series II Preferred and any Voting Preferred). Each director elected by the holders of shares of any series of the Preferred Stock or any other class or series of the Corporation's preferred stock in an election provided for by this paragraph (3) (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for such director's election, voting together as a single class without regard to class or series, at a meeting of the stockholders, or of the holders of shares of the Corporation's preferred stock, called for that purpose. So long as a default in any preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall exist (other than the Series II Preferred and any Voting Preferred) (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for the removed director's election, voting together as a single class without regard to class or series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid shall be deemed for all purposes hereto to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board shall be reduced by two. For purposes hereof, a "default in preference dividends" on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall be deemed to have occurred whenever the amount of accrued dividends upon such class or series of the Corporation's preferred stock shall be equivalent to six full quarterly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all such shares of the Corporation's preferred stock of each and every series then outstanding (other than the Series II Preferred, any Voting Preferred or shares of any class or series ranking junior to shares of this Series as to dividends) shall have been paid to the end of the last preceding quarterly dividend period. (g) Reacquired Shares. Shares of this Series which have been issued and reacquired through redemption or purchase shall, upon compliance with an applicable provision of the Rhode Island Business Corporation Act, have the status of authorized and unissued shares of Preferred Stock and may be reissued but only as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board. (h) Relation to Existing Preferred Classes of Stock. Shares of this Series are equal in rank and preference with all other series of the Preferred Stock outstanding on the date of original issue of the shares of this Series and the Preferred Stock with Cumulative and Adjustable Dividends, $20.00 par B-4 value, and are senior in rank and preference to the Common Stock and the Cumulative Participating Junior Preferred Stock of the Corporation. (i) Relation to Other Preferred Classes of Stock. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Series, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to the shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. B-5 EXHIBIT C FLEET FINANCIAL GROUP, INC. DUAL CONVERTIBLE PREFERRED STOCK (a) Designation. The designation of this series of Preferred Stock created by this resolution shall be "Dual Convertible Preferred Stock" (the "Dual Convertible Preferred Stock") consisting of 1,415,000 shares. The stated value of the Dual Convertible Preferred Stock shall be $200 per share. (b) Rank. The Dual Convertible Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank prior to the Common Stock, par value $1.00 per share (the "Common Stock"), of the Corporation. (All equity securities of the Corporation to which the Dual Convertible Preferred Stock ranks prior with respect to dividend rights and rights on liquidation, winding up and dissolution, including the Common Stock, are collectively referred to herein as the "Junior Securities", all equity securities of the Corporation with which the Dual Convertible Preferred Stock ranks on a parity with respect to dividend rights and rights on liquidation, winding up and dissolution are collectively referred to herein as the "Parity Securities" and all equity securities of the Corporation to which the Dual Convertible Preferred Stock ranks junior, whether with respect to dividends or upon liquidation, dissolution, winding-up or otherwise, are collectively referred to herein as the "Senior Securities.") The Dual Convertible Preferred Stock shall be subject to the creation of Junior Securities, Parity Securities and Senior Securities, subject, in the case of Senior Securities, to obtaining the approval of the holders of the shares of the Dual Convertible Preferred Stock in accordance with paragraph (h). (c) Dividends. (i) The holders of the shares of Dual Convertible Preferred Stock shall be entitled to receive, out of funds legally available for the payment of dividends, cumulative dividends in an amount equal to 50% of the dividends declared on the common stock, par value $.01 per share ("Holding Common Stock"), of Fleet/Norstar Holding Company, Inc., a Rhode Island corporation ("Holding"), and its successor or assign; provided, however, that dividends shall not become payable on the shares of the Dual Convertible Preferred Stock until an aggregate of $15 million of dividends have been declared by Holding and shall only become payable to the extent of dividends declared by Holding in excess of such amount; and, provided further, that the amount of such dividends shall be subject to reduction in accordance with paragraph (f) (iv); and, provided further, that dividends shall not become payable on the shares of the Dual Convertible Preferred Stock as a result of the declaration of the Dividend Note (as hereinafter defined) or other amounts payable as dividends by Holding to the Corporation pursuant to the Tax Allocation Agreement (as hereinafter defined). Such dividends shall be payable from time to time as declared by the Board (each of such dates being a "dividend payment date"), in preference to dividends on the Junior Securities. Such dividends shall be paid to the holders of record at the close of business on the tenth business day immediately preceding each dividend payment date (each of such dates being a "dividend payment record date"). Each of such dividends shall be fully cumulative and shall accrue without interest, until paid. (ii) All dividends paid with respect to shares of the Dual Convertible Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the holders entitled thereto. (iii) No full dividends shall be declared by the Board of Directors or paid or set apart for payment by the Corporation on any Parity Securities for any period unless full cumulative accrued dividends have been or contemporaneously are declared and paid or declared and a sum set apart sufficient for such payment on the Dual Convertible Preferred Stock. If any dividends are not paid C-1 in full upon the shares of the Dual Convertible Preferred Stock and any other Parity Securities, all dividends declared upon shares of the Dual Convertible Preferred Stock and any other Parity Securities shall be declared pro rata so that the amount of dividends declared per share of the Dual Convertible Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accrued dividends per share on the Dual Convertible Preferred Stock and such Parity Securities bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Dual Convertible Preferred Stock or any other Parity Securities which may be in arrears. Any dividend not paid pursuant to paragraph (c)(i) hereof or this paragraph (c)(iii) shall be fully cumulative and shall accrue (whether or not declared), without interest, as set forth in paragraph (c)(i) hereof. (iv) (A) Holders of shares of the Dual Convertible Preferred Stock shall be entitled to receive the dividends provided for in paragraph (c)(i) hereof in preference to and in priority over any dividends upon any of the Junior Securities. (B) So long as any shares of the Dual Convertible Preferred Stock are outstanding, the Board of Directors shall not declare, and the Corporation shall not pay or set apart for payment, any dividend on any of the Junior Securities or 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 of the Junior Securities or Parity Securities or any warrants, rights or options exercisable for or convertible into any of the Junior Securities or Parity Securities, or make any distribution in respect of the Junior Securities, either directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than distributions or dividends in Junior Securities to the holders of Junior Securities), and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any of the Junior Securities or Parity Securities or any warrants, rights, calls or options exercisable for or convertible into any of the Junior Securities or Parity Securities 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 Dual Convertible Preferred Stock not paid on the dates provided for in paragraph (c) (i) hereof shall have been or be paid; provided, however, that the foregoing restriction shall not prohibit the Corporation from redeeming the rights outstanding under that certain Rights Agreement dated as of November 21, 1990, as amended, between the Corporation and Fleet National Bank, for a redemption price not in excess of $.01 per right. (d) Payment in Liquidation. (i) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of shares of Dual Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders an amount in cash equal to $200 for each share outstanding, plus an amount in cash equal to all accrued but unpaid dividends thereon to the date of liquidation, dissolution or winding up, before any payment shall be made or any assets distributed to the holders of any of the Junior Securities. If the assets of the Corporation are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Dual Convertible Preferred Stock and any Parity Securities, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of Dual Convertible Preferred Stock and the holders of outstanding shares of such Parity Securities are entitled were paid in full. (ii) For the purposes of this paragraph (d), neither the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or C-2 substantially all of the property or assets of the Corporation nor the consolidation or merger of the Corporation with or into one or more other corporations nor the consolidation or merger of one or more corporations with or into the Corporation shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up. (e) Common Stock Conversion. (i) Upon the terms and in the manner set forth in this paragraph (e) and subject to the provisions for adjustment contained in paragraph (e) (vii), (A) the shares of the Dual Convertible Preferred Stock shall be convertible, in whole, but not in part, at the option of the holders thereof, at any time after the date that is one year after the Issue Date (as hereinafter defined) and (B) each share of the Dual Convertible Preferred Stock shall be convertible, from time to time in part, after the date that is ten years after the Issue Date, or such earlier date as provided in paragraph (e)(ii), in either case, upon surrender to the Corporation of the certificates for the shares to be converted, into a number of fully paid and nonassessable shares of Common Stock equal to the aggregate stated value of the Dual Convertible Preferred Stock to be converted divided by a conversion price (the "Conversion Price") of $17.65. As used herein, the term "Issue Date" shall mean the date of initial issuance of the Dual Convertible Preferred Stock. (ii) If, prior to the date that is one year after the Issue Date, there occurs a sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation or a consolidation or merger of the Corporation with or into another corporation in which the shares of Common Stock are converted into cash, assets or securities (other than shares of Common Stock where the Corporation is the surviving corporation), the time when the conversion rights of holders of shares of Dual Convertible Preferred Stock into Common Stock become effective shall be accelerated and such conversion rights shall be effective at and after a time at least 20 business days prior to the consummation of such transaction. (iii) In order to convert shares of the Dual Convertible Preferred Stock into Common Stock, (x) if such shares are converted in whole, but not in part, pursuant to paragraph (e)(i)(A) above, there shall be delivered to the Corporation written evidence reasonably satisfactory to it that the holders of a majority of the shares of Dual Convertible Preferred Stock have elected to convert the Dual Convertible Preferred Stock into Common Stock (the "Common Stock Conversion Election"), and (y) if such shares are converted in part, the holder thereof shall deliver a properly completed and duly executed written notice of election to convert specifying the number (in whole shares) of the shares of the Dual Convertible Preferred Stock to be converted. In either case, each holder of shares of the Dual Convertible Preferred Stock shall (A) deliver a written notice to the Corporation at its principal office or at the office of the agency which may be maintained for such purpose (the "Common Stock Conversion Agent") specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued, (B) surrender the certificate for such shares of Dual Convertible Preferred Stock to the Corporation or the Common Stock Conversion Agent, accompanied, if so required by the Corporation or the Common Stock Conversion Agent, by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation or the Common Stock Conversion Agent duly executed by the holder or his attorney duly authorized in writing, and (C) pay any transfer or similar tax required by paragraph (e)(ix). (iv) (A) A "Common Stock Conversion" shall be deemed to have been effected at the close of business on the date (the "Common Stock Conversion Date") on which the Corporation or the Common Stock Conversion Agent shall have received (x) the written notice of Common Stock Conversion Election or (y) a notice of election to convert, a surrendered certificate, any required C-3 payments contemplated by paragraph (e) (ix) below, and all other required documents. Immediately upon conversion, the rights of the holders of converted shares of Dual Convertible Preferred Stock shall cease and the persons entitled to receive the shares of Common Stock upon the conversion of such shares of Dual Convertible Preferred Stock shall be treated for all purposes as having become the beneficial owners of such shares of Common Stock; provided, however, that such persons shall be entitled to receive when paid dividends accrued on such shares of Dual Convertible Preferred Stock to the last preceding dividend payment date and unpaid as of the date of such conversion. A Common Stock Conversion shall be at the Conversion Price in effect on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record of the Common Stock at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the Common Stock Conversion Date. (B) As promptly as practicable after the Common Stock Conversion Date, the Corporation shall deliver or cause to be delivered at the office or agency of the Common Stock Conversion Agent, to or upon the written order of the holders of the surrendered shares of Dual Convertible Preferred Stock, a certificate or certificates representing the number of fully paid and nonassessable shares of Common Stock, with no personal liability attaching to the ownership thereof, free of all taxes with respect to the issuance thereof, liens, charges and security interests and not subject to any preemptive rights, into which such shares of Dual Convertible Preferred Stock have been converted in accordance with the provisions of this paragraph (e), and any cash payable in respect of fractional shares as provided in paragraph (e)(v). (C) Upon the surrender of a certificate representing shares of Dual Convertible Preferred Stock that is converted in part, the Corporation shall issue or cause to be issued for the holder a new certificate representing shares of Dual Convertible Preferred Stock equal in number to the unconverted portion of the shares of Dual Convertible Preferred Stock represented by the certificate so surrendered. (v) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion or redemption of any shares of Dual Convertible Preferred Stock. Instead of any fractional interest in a share of Common Stock which would otherwise be deliverable upon the conversion or redemption of a share of Dual Convertible Preferred Stock, the Corporation shall pay to the holder of such share (a "Fractional Shareholder") an amount in cash (computed to the nearest cent) equal to the current market price (as defined in paragraph (e)(vii)(E) below) thereof on the business day next preceding the day of conversion or redemption. If more than one share shall be surrendered for conversion or redemption at one time by the same holder, the number of full shares of Common Stock issuable upon conversion or redemption thereof shall be computed on the basis of the aggregate stated value of the shares of Dual Convertible Preferred Stock so surrendered. (vi) The holders of shares of Dual Convertible Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding dividend payment date notwithstanding the conversion thereof or the Corporation's default in payment of the dividend due on such dividend payment date. (vii) The Conversion Price shall be subject to adjustment as follows: (A) If the Corporation shall (1) declare or pay a dividend on its outstanding Common Stock in shares of Common Stock or make a distribution to holders of its Common Stock in shares of Common Stock, (2) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (3) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (4) issue by reclassification of its shares C-4 of Common Stock other securities of the Corporation, then the Conversion Price in effect immediately prior thereto shall be adjusted so that the holder of any shares of Dual Convertible Preferred Stock thereafter converted shall be entitled to receive the number and kind of shares of Common Stock or other securities that the holder would have owned or have been entitled to receive after the happening of any of the events described above had such shares of Dual Convertible Preferred Stock been converted immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph (e)(vii)(A) shall become effective on the date of the dividend payment, subdivision, combination or issuance retroactive to the record date with respect thereto, if any, for such event. Such adjustment shall be made successively. (B) If the Corporation shall issue to all holders of its Common Stock rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock at a price per share that is lower than the then current market price per share of Common Stock (as defined in paragraph (e)(vii)(E) below), then the Conversion Price shall be adjusted in accordance with the following formula: 0 + (N x P) (M) AC = C x 0 + N
where: AC = the adjusted Conversion Price. C = the current Conversion Price. 0 = the number of shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock offered. P = the offering price per share of the additional shares. the current market price per share of Common Stock on the record M = date.
The adjustment shall be made successively whenever any such rights, options, warrants or convertible or exchangeable securities are issued, and shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, options, warrants or convertible or exchangeable securities. (C) Upon the expiration of any rights, options, warrants or convertible or exchangeable securities issued by the Corporation to all holders of its Common Stock which caused an adjustment to the Conversion Price pursuant to paragraph (e) (vii) (B), if any thereof shall not have been exercised, then the Conversion Price shall be increased by the amount of the initial adjustment of the Conversion Price pursuant to paragraph (e) (vii) (B) in respect of such expired rights, options, warrants or convertible or exchangeable securities. (D) If the Corporation shall distribute to all holders of its outstanding Common Stock any shares of capital stock of the Corporation (other than Common Stock) or evidences of indebtedness or assets (excluding ordinary cash dividends and dividends or distributions referred to in paragraphs (e) (vii) (A) and (B) above) or rights or warrants to subscribe for or purchase any of its securities (excluding those referred to in paragraph (e) (vii) (B) above), (any of the foregoing being hereinafter in this paragraph (e) (vii) (D) called the "Securities or Assets"), then in each such case, unless the Corporation elects to reserve shares or other units of such Securities or Assets for distribution to the holders of the Dual Convertible Preferred Stock upon the conversion of the shares of Dual Convertible Preferred Stock so that any such holder converting shares of Dual Convertible Preferred Stock will receive upon such conversion, in addition to the shares of the Common Stock to which such holder is entitled, the amount and kind of such Securities or Assets which such holder would have received if such holder had, immediately prior to the record date for C-5 the distribution of the Securities or Assets, converted its shares of Dual Convertible Preferred Stock into Common Stock, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction of which the numerator shall be the current market price per share (as defined in paragraph (e) (vii) (E) below) of the Common Stock on the record date mentioned below less the then fair market value (as determined by the Board in good faith) of the portion of the capital stock or assets or evidences of indebtedness so distributed or of such rights or warrants applicable to one share of Common Stock, and of which the denominator shall be the current market price per share of the Common Stock on such record date; provided, however, that if the then fair market value (as so determined) of the portion of the Securities or Assets so distributed applicable to one share of Common Stock is equal to or greater than the current market price per share of the Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of shares of the Dual Convertible Preferred Stock shall have the right to receive the amount and kind of Securities and Assets such holder would have received had such holder converted each such share of the Dual Convertible Preferred Stock immediately prior to the record date for the distribution of the Securities or Assets. Such adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (E) For the purposes of any computation under paragraph (e) (vii), and for the purposes of paragraphs (e) (v) and (g)(ii), the current market price per share of Common Stock at any date shall be deemed to be the average of the daily closing prices for the 20 consecutive trading days commencing on the 30th trading day prior to the date in question. The closing price for each day shall be (i) if the Common Stock is listed or admitted to trading on a national securities exchange, the closing price on the New York Stock Exchange Consolidated Tape (or any successor composite tape reporting transactions on national securities exchanges) or, if such a composite tape shall not be in use or shall not report transactions in the Common Stock, the last reported sales price regular way on the principal national securities exchange on which the Common Stock is listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of Common Stock has been traded during such 20 consecutive trading days), or, if there is no transaction on any such day in any such situation, the mean of the bid and asked prices on such day or, (ii) if the Common Stock is not listed or admitted to trading on any such exchange, the closing price, if reported, or, if the closing price is not reported, the average of the closing bid and asked prices as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or, (iii) if bid and asked prices for the Common Stock on each such day shall not have been reported through NASDAQ, the average of the bid and asked prices for such date as furnished by any three New York Stock Exchange member firms regularly making a market in the Common Stock and not affiliated with the Corporation selected for such purpose by the Board or, (iv) if no such quotations are available, the fair market value of the Common Stock as determined by a New York Stock Exchange member firm regularly making a market in the Common Stock selected for such purpose by the Board. (F) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% of such price; provided, however, that any adjustments which by reason of this paragraph (e) (vii) (F) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this paragraph (e) (vii) shall be made to the nearest one hundredth of a cent or to the nearest one-hundredth of a share, as the case may be. (G) If the Corporation shall be a party to any transaction, including without limitation a merger, consolidation, sale of all or substantially all of the Corporation's assets, liquidation or recapitalization of the Common Stock (each of the foregoing being referred to as a "Transaction"), in each case (except in the case of a Common Stock Fundamental Change (as hereinafter defined)) C-6 as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), in addition to the right to exchange the Dual Convertible Preferred Stock for Holding Common Stock, which shall survive the consummation of any such Transaction, each share of Dual Convertible Preferred Stock shall thereafter be convertible into the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one share of Dual Convertible Preferred Stock was convertible immediately prior to such Transaction. The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (e) (vii) (G) and it shall not consent or agree to the occurrence of any Transaction until the corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Dual Convertible Preferred Stock, which shall contain provisions (i) enabling the holders of the Dual Convertible Preferred Stock to convert into the consideration received by holders of Common Stock at the Conversion Price immediately after such Transaction and (ii) acknowledging the right of the Dual Convertible Preferred Stock to be exchanged for Holding Common Stock and assuming any obligations with respect thereto. The provisions of this paragraph (e) (vii) (G) shall similarly apply to successive Transactions. (H) In the event of a Common Stock Fundamental Change, in addition to the right to exchange the Dual Convertible Preferred Stock for Holding Common Stock, which shall survive the consummation of any such Common Stock Fundamental Change, each share of Dual Convertible Preferred Stock shall be convertible into common stock of the kind received by holders of Common Stock as the result of such Common Stock Fundamental Change. The Conversion Price immediately following such Common Stock Fundamental Change shall be the Conversion Price in effect immediately prior to such Common Stock Fundamental Change multiplied by a fraction, the numerator of which is the Purchaser Stock Price (as hereinafter defined) and the denominator of which is the Applicable Price (as hereinafter defined). The Corporation shall not consent or agree to the occurrence of any Common Stock Fundamental Change until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Dual Convertible Preferred Stock, which shall contain provisions (i) enabling the holders of the Dual Convertible Preferred Stock to convert into the consideration received by holders of Common Stock at the Conversion Price immediately after such Fundamental Change and (ii) acknowledging the right of the Dual Convertible Preferred Stock to be exchanged for Holding Common Stock and assuming any obligations with respect thereto. The provisions of this paragraph (e)(vii)(H) shall similarly apply to successive Common Stock Fundamental Changes. (I) As used herein: (1) The term "Applicable Price" means the current market price for one share of the Common Stock (determined in accordance with paragraph (e)(vii)(E)) on the record date for the determination of the holders of Common Stock entitled to receive common stock in connection with such Common Stock Fundamental Change, or, if there is no such record date, on the date upon which the holders of Common Stock shall have the right to receive such common stock. (2) The term "Common Stock Fundamental Change" shall mean the occurrence of any transaction or event in connection with which all or substantially all the Common Stock shall be exchanged for, converted into, acquired for or shall constitute solely the right to receive common stock that, for the ten consecutive trading days immediately prior to such Common Stock Fundamental Change, has been admitted for listing on a national securities exchange or quoted on the National Market System of NASDAQ (whether by means of an exchange order, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise). C-7 (3) The term "Purchaser Stock Price" shall mean, with respect to any Common Stock Fundamental Change, the current market price for one share of the common stock received by holders of Common Stock in such Common Stock Fundamental Change (determined in accordance with paragraph (e)(vii)(E) as if such paragraph were applicable to such common stock) on the record date for the determination of the holders of Common Stock entitled to receive such common stock or, if there is no such record date, on the date upon which the holders of Common Stock shall have the right to receive such common stock. (J) For the purposes of this paragraph (e)(vii) and paragraph (e)(x), the term "shares of Common Stock" shall mean (i) the class of stock designated as the Common Stock of the Corporation at the date hereof or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from no par value to par value. If at any time, as a result of an adjustment made pursuant to paragraphs (e) (vii) (A), (D), (G) or (H) above, the holders of Dual Convertible Preferred Stock shall become entitled to receive any securities other than shares of Common Stock, thereafter the number of such other securities so issuable upon conversion of the shares of Dual Convertible Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Dual Convertible Preferred Stock contained in this paragraph (e) (vii). (K) Notwithstanding the foregoing, in any case which this paragraph (e) (vii) provides that an adjustment shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of such event (i) issuing to the holder of any share of Dual Convertible Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to paragraph (e)(v). (L) If the Corporation shall take any action affecting the Common Stock, other than action described in this paragraph (e) (vii), which in the opinion of the Board would materially adversely affect the conversion rights of the holders of the shares of Dual Convertible Preferred Stock, the Conversion Price for the Dual Convertible Preferred Stock may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board may determine in good faith to be equitable in the circumstances. Failure of the Board to provide for any such adjustment prior to the effective date of any such action by the Corporation affecting the Common Stock shall be evidence that such Board has determined that it is equitable to make no adjustments in the circumstances. (viii) Whenever the Conversion Price is adjusted as herein provided, the Chief Financial Officer of the Corporation shall compute the adjusted Conversion Price in accordance with the foregoing provisions and shall prepare a certificate setting forth such adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based. A copy of such certificate shall be filed promptly with the Common Stock Conversion Agent. Promptly after delivery of such certificate, the Corporation shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which such adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to the holder of each share of Dual Convertible Preferred Stock at his last address as shown on the stock books of the Corporation. C-8 (ix) The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on the conversion of shares of Dual Convertible Preferred Stock pursuant to this paragraph (e); provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any registration or transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the registered holder of Dual Convertible Preferred Stock converted or to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (x) (A) The Corporation shall at all times reserve and keep available, free from all liens, charges and security interests and not subject to any preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its issued Common Stock held in its treasury, or both, for the purpose of effecting the conversion of the Dual Convertible Preferred Stock, the full number of shares of Common Stock then deliverable upon the conversion of all outstanding shares of the Dual Convertible Preferred Stock. (B) Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value (if any) of the Common Stock issuable upon conversion of the Dual Convertible Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted Conversion Price. (xi) If (A) the Corporation shall declare a dividend on its outstanding Common Stock (excluding ordinary cash dividends) or make a distribution to holders of its Common Stock; (B) the Corporation shall authorize the granting to the holders of the Common Stock of rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase any shares of Common Stock or any of its securities; (C) there shall be any reclassification of the Common Stock or any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of the Corporation is required, or the sale or transfer of all or substantially all of the assets of the Corporation; or (D) there shall be any Common Stock Fundamental Change; then the Corporation shall cause to be mailed to the holders of shares of the Dual Convertible Preferred Stock at their addresses as shown on the stock books of the Corporation, as promptly as possible, but at least 15 days, prior to the applicable date hereinafter specified, a notice stating (l) the date on which a record is to be taken for the purpose of such dividend or distribution, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend or distribution are to be determined or (2) the date on which such reclassification, consolidation, merger, sale, transfer or Common Stock Fundamental Change is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or Common Stock Fundamental Change. (f) Holding Exchange. (i) Upon the terms and in the manner set forth in this paragraph (f), the shares of Dual Convertible Preferred Stock shall be exchangeable, in whole, but not in part, at the option of the holders thereof, upon surrender to the Corporation of the certificates representing such shares of Dual Convertible Preferred Stock, for a number of fully paid and nonassessable shares of Holding Common Stock equal to 50% of the shares of Holding Common Stock on a fully diluted basis on the Holding Exchange Date (as hereinafter defined). (ii) On the Issue Date, all of the shares of Dual Convertible Preferred Stock will be issued to one or more limited partnerships (the "Partnerships"), for which Kohlberg Kravis Roberts & Co. or one of its affiliates acts as sole general partner. The Partnerships shall distribute all shares of C-9 Dual Convertible Preferred Stock then owned by the Partnerships to the partners thereof (the "Distribution") upon the earlier to occur of (A) the date of the Automatic Early Distribution (as hereinafter defined) or (B) the date that is six years after the Issue Date, unless the Partnerships shall have received the consent of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") to an alternative date on which to effect the Distribution (which shall not be earlier than the date that is four years after the Issue Date). The Partnerships shall promptly notify the Corporation of the Distribution. (iii) The shares of Dual Convertible Preferred Stock shall be exchangeable for Holding Common Stock, in whole, but not in part, in accordance with this paragraph (f), (A) at any time after the Automatic Early Distribution shall have been effected and before the date that is ten years after the Issue Date, or (B) from time to time after the date that is (x) four years after the Issue Date or at any time after such date, if the Partnerships do not own any shares of Dual Convertible Preferred Stock on any such date and before the date that is ten years after the Issue Date, or (y) the date that the Distribution shall have been effected, which shall be six years after the Issue Date unless the Partnerships shall have received the consent of the Federal Reserve Board to an alternative date on which to effect the Distribution (which shall not be earlier than the date that is four years after the Issue Date) and before the date that is ten years after the Issue Date (the period of time set forth in either clause (x) or (y) of this paragraph (f)(iii)(B) is referred to herein as the "Exchange Period"). (iv) At any time and from time to time during the Exchange Period, the holders of a majority of the shares of the Dual Convertible Preferred Stock shall have the right to have an independent nationally recognized investment banking firm render an opinion (an "Appraisal") of the fair price for all the outstanding shares of Holding Common Stock as if all such shares were to be sold to a third party in their entirety reflecting a full control premium (the "Appraised Price"). The fees and expenses of such investment banking firm shall be paid by the Corporation. The Corporation shall be entitled to reduce the amount of dividends that would otherwise be payable on the Dual Convertible Preferred Stock pursuant to paragraph (c) (i) by the amount of such fees and expenses paid by the Corporation. The investment banking firm that performs each Appraisal shall be selected by the Corporation but shall be reasonably acceptable to the holders of a majority of the shares of the Dual Convertible Preferred Stock. The holders of a majority of the shares of the Dual Convertible Preferred Stock shall have 30 days to accept or reject the Appraised Price set by any Appraisal. The Dual Convertible Preferred Stock will become exchangeable for Holding Common Stock for a period of 90 days commencing on the date that is six months after the written acceptance by the holders of a majority of the shares of the Dual Convertible Preferred Stock of the Appraised Price set by an Appraisal. If the holders of the Dual Convertible Preferred Stock do not elect to exchange their shares of the Dual Convertible Preferred Stock for Holding Common Stock during any such 90-day period, in addition to their other rights hereunder, the holders shall be entitled to have additional Appraisals rendered and to otherwise comply with the requirements hereof to have the Dual Convertible Preferred Stock again become exchangeable for Holding Common Stock. (v) The right to exchange the Dual Convertible Preferred Stock for Holding Common Stock may also be exercised at any time on or after the 60th day after the Corporation shall have given notice to the holders of the shares of the Dual Convertible Preferred Stock that the Corporation's consolidated Tier 1 capital leverage ratio, based on the rules and regulations of the Federal Reserve Board as currently in effect (using year-end 1992 standards) as disclosed in any report of condition filed by the Corporation with any bank regulatory authority, adjusted to include the Corporation's goodwill existing at the Issue Date, shall be less than 3%. The Corporation shall give the holders of the shares of the Dual Convertible Preferred Stock immediate notice if its consolidated Tier 1 capital leverage ratio as reported in any such regulatory filing, adjusted to include its goodwill existing at the Issue Date, falls below 3%. Prior to the fifth day after the Partnerships shall have C-10 received such notice, unless the Partnerships shall have received the consent of the Federal Reserve Board to an extension of such date, the Partnerships shall effect the Distribution with respect to all shares of Dual Convertible Preferred Stock then owned by the Partnerships (the "Automatic Early Distribution"). The Corporation shall cause an Appraisal to be prepared at the Corporation's expense and delivered to the holders of the shares of the Dual Convertible Preferred Stock within 20 days after the Corporation's notice of capital deficiency. The holders of a majority of the shares of the Dual Convertible Preferred Stock shall have 20 days to accept or reject such Appraisal. If such Appraisal is accepted, the Corporation may redeem at its option, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock in whole, but not in part, for the Gross Redemption Price, determined and payable in accordance with paragraph (g) below. (vi) In order to exchange shares of the Dual Convertible Preferred Stock into Holding Common Stock, there shall be delivered to the Corporation written evidence reasonably satisfactory to it that the holders of a majority of the shares of Dual Convertible Preferred Stock have elected to exchange the Dual Convertible Preferred Stock into Holding Common Stock (the "Holding Exchange Election"), which election shall be binding on all the holders of the shares of the Dual Convertible Preferred Stock. Each holder of shares of the Dual Convertible Preferred Stock shall (A) deliver a written notice of the name or names in which such holder wishes the certificate or certificates for shares of Holding Common Stock to be issued to the Corporation at its principal office or at the office of the agency which may be maintained for such purpose (the "Holding Exchange Agent"), (B) surrender the certificate for such shares of Dual Convertible Preferred Stock to the Corporation or the Holding Exchange Agent, accompanied, if so required by the Corporation or the Holding Exchange Agent, by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation or the Holding Exchange Agent duly executed by the holder or his attorney duly authorized in writing, and (C) pay any transfer or similar tax required by paragraph (f)(x)(A). (vii) (A) The "Holding Exchange" shall be deemed to have been effected at the close of business on the fifth business day after the date (the "Holding Exchange Date") on which the Corporation shall have received the written notice of the Holding Exchange Election. Immediately upon exchange, the rights of all the holders of Dual Convertible Preferred Stock shall cease and the persons entitled to receive the shares of Holding Common Stock upon the exchange of Dual Convertible Preferred Stock shall be treated for all purposes as having become the beneficial owners of such shares of Holding Common Stock; provided, however, that such persons shall be entitled to receive when paid dividends accrued on such shares of Dual Convertible Preferred Stock to the last preceding dividend payment date and unpaid as of the date of such exchange. (B) As promptly as practicable after the Holding Exchange Date subject to the provisions of paragraph (f) (x), the Corporation shall deliver or cause to be delivered at the office or agency of the Holding Exchange Agent, to or upon the written order of the holders of the surrendered shares of Dual Convertible Preferred Stock, a certificate or certificates representing the number of fully paid and nonassessable shares of Holding Common Stock into which such shares of Dual Convertible Preferred Stock have been exchanged in accordance with the provisions of this paragraph (f). (viii) No fractional shares or scrip representing fractional shares of Holding Common Stock shall be issued upon the exchange of the Dual Convertible Preferred Stock for Holding Common stock. The Corporation shall cause Holding to effect a stock split or reverse stock split so that no fractional shares become deliverable pursuant to the Holding Exchange. (ix) The holders of shares of Dual Convertible Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding dividend payment date notwithstanding the exchange thereof or the Corporation's default in payment of the dividend due on such dividend payment date. C-11 (x) (A) The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Holding Common Stock on the exchange of shares of Dual Convertible Preferred Stock pursuant to this paragraph (f); provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any registration or transfer involved in the issue or delivery of shares of Holding Common Stock in a name other than that of the registered holder or Dual Convertible Preferred Stock exchanged or to be exchanged, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (B) If the Board of Directors of Holding determines in good faith that (i) the declaration and payment of the dividend note (the "Dividend Note") described in Section 3 of the Supplemental Tax Allocation Agreement between the Corporation and Holding, dated the Issue Date (the "Tax Allocation Agreement"), would cause Holding to be unable to comply with regulatory capital maintenance requirements and policies then in effect or with safe and sound banking practices or (ii) Holding will have insufficient cash to pay the Dividend Note, then the Corporation may condition the issuance of Holding Common Stock to any holder of the Dual Convertible Preferred Stock upon the receipt of a cash capital contribution (a "Capital Contribution") from such holder to Holding concurrently with such issuance equal to the product of a fraction, the numerator of which equals the number of shares of Holding Common Stock for which such holder's Dual Convertible Preferred Stock may be exchanged and the denominator of which equals the total number of shares of Holding Common Stock that will be outstanding (on a fully diluted basis) after all of the shares of Dual Convertible Preferred Stock have been exchanged, multiplied by the amount of the Dividend Note and, in such event, the declaration and payment of the Dividend Note to the Corporation will be conditioned upon Holding's receipt of a Capital Contribution from the Corporation equal to 50% of the amount of the Dividend Note. Except as provided in this paragraph (f) (x), the holders of the Dual Convertible Preferred Stock shall have no obligation to make any capital contribution, including, without limitation, with respect to the obligations of Holding to the Corporation under the Tax Allocation Agreement. (C) The Board of Directors of Holding shall give written notice of its determination to require a Capital Contribution to each holder of record of the shares of the Dual Convertible Preferred Stock, which notice shall state the amount of such holder's required Capital Contribution and the consequences of failing to make such Capital Contribution. If any holder of the Dual Convertible Preferred Stock fails to make such holder's Capital Contribution within 90 days of such notice, the shares of Holding Common Stock for which such holder's shares of the Dual Convertible Preferred Stock may be exchanged (the "Escrowed Shares") shall be deposited by the Corporation in escrow with an independent trustee (the "Trustee") that is not affiliated with the Corporation. The Trustee shall be empowered and directed to sell such of the Escrowed Shares as will be sufficient to realize net proceeds (after the payment of the fees and expenses of the Trustee) equal to such holder's required Capital Contribution, together with interest on such amount at the prime rate then in effect at the Corporation's banking subsidiaries commencing on the 90th day after the notice of such Capital Contribution ("Interest"). The holder of the shares of the Dual Convertible Preferred Stock to which such Escrowed Shares relate may obtain the release of such Escrowed Shares from the Trustee at any time prior to the Trustee's disposition thereof by paying the amount of the Capital Contribution, together with Interest thereon, to the Trustee. The Trustee shall have the right to sell such of the Escrowed Shares in a public offering or in one or more private sales as will result in the receipt of sufficient proceeds, after the payment of the fees and expenses of the Trustee therefrom, to pay the required Capital Contribution, together with Interest thereon, with respect to such Escrowed Shares. The Trustee shall use its best efforts to obtain the highest price for the Escrowed Shares to be sold. The Trustee shall not be prohibited from selling, and shall be specifically authorized to sell, any of the Escrowed Shares to the Corporation provided that the Corporation purchases such shares for a consideration at least equal to the book value thereof. C-12 Upon the receipt of sufficient proceeds to pay the required Capital Contribution, together with Interest thereon, the balance of such Escrowed Shares will be released to the holder of the Dual Convertible Preferred Stock to which such Escrowed Shares relate in exchange for the Dual Convertible Preferred Stock held by such holder. (g) Optional Redemption. (i) The Corporation may redeem at its option, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock, in whole, but not in part, at any time during the period after the acceptance of any Appraisal by the holders of a majority of the shares of Dual Convertible Preferred Stock but before the 90-day period following the acceptance of any Appraisal during which the Dual Convertible Preferred Stock becomes exchangeable for Holding Common Stock in accordance with paragraph (f) (iv) or before the Dual Convertible Preferred Stock becomes exchangeable for Holding Common Stock in accordance with paragraph (f)(v) above (the "Optional Redemption Period"), at a redemption price equal to 50% of the Appraised Price (the "Gross Redemption Price"), together with accrued and unpaid dividends thereon to the date of redemption. The Appraised Price that is applicable to any Optional Redemption Period shall be the Appraised Price set forth in the Appraisal, the acceptance of which gave rise to such Optional Redemption Period. (ii) The Gross Redemption Price shall be reduced by the aggregate of (A) the aggregate current market price of the shares of Common Stock into which the Dual Convertible Preferred Stock would then be convertible, regardless of whether such shares are actually convertible at such time (which current market price shall be determined in accordance with paragraph (e) (vii) (E) and the date in question for purposes thereof shall be the date that the Optional Redemption Notice (as hereinafter defined) is mailed in accordance with paragraph (g)(iii) below) or, if any Transaction has been effected in which shares of Common Stock were converted into the right to receive stock, securities or other property (including cash or any combination thereof) (the "Transaction Consideration") and the Common Stock is no longer outstanding, the value of the Transaction Consideration into which the Dual Convertible Preferred Stock would then be convertible, and (B) the value of the rights to purchase Common Stock (the "Rights") issued to the Partnerships on the Issue Date. The value of the Rights shall be determined as follows: (1) with respect to any portion of the Rights that has been exercised and the holder of such Rights received Common Stock upon the exercise thereof, the value of such Rights shall be equal to the aggregate current market price of the Common Stock received upon the exercise of the Rights on the date of exercise less the aggregate exercise price paid for such Common Stock (which current market price shall be determined in accordance with paragraph (e) (vii) (E) and the date in question for purposes thereof shall be the date of exercise); (2) with respect to any portion of the Rights that has not been exercised, the value of such Rights shall be equal to the aggregate current market price of the Common Stock that the holders of such Rights would then be entitled to receive upon the exercise thereof in their entirety less the aggregate exercise price that would then be payable upon such exercise (which current market price shall be determined in accordance with paragraph (e) (vii) (E) and the date in question for purposes thereof shall be the date that the Optional Redemption Notice is mailed); and (3) with respect to any portion of the Rights that has been exercised and the Corporation exercised its option to purchase such Rights rather than issue Common Stock upon the exercise thereof, the value of such Rights shall be equal to the aggregate purchase price received by the holders thereof upon the Corporation's purchase of such Rights. The value of the Transaction Consideration shall be determined as follows: (1) with respect to any portion of the Transaction Consideration that consists of stock or securities, the value of such stock or securities shall be equal to the aggregate current market price C-13 of such stock or securities (determined in accordance with paragraph (e) (vii) (E) as if such paragraph were applicable to such stock or securities and the date in question for purposes thereof shall be the date that the Optional Redemption Notice is mailed); and (2) with respect to any portion of the Transaction Consideration that consists of other property, the value of such other property shall be equal to its then aggregate fair market value as determined by the Board in good faith. If the Corporation certifies in the Optional Redemption Notice that it must report gain, and that it will do so on its tax return for the taxable year of the redemption, that will result in an actual income tax liability or an actual reduction in income tax refund (or combination thereof) on the income tax return of the Corporation for the taxable year of the redemption as a direct result of the actual redemption of the Dual Convertible Preferred Stock for cash and/or the issuance of Common Stock or debt securities of the Corporation pursuant to paragraph (g) (i), the Gross Redemption Price shall be reduced by one-half of the amount of the total income tax liability actually to be incurred as a result of, and/or the actual reduction in income tax refund to occur caused by, such redemption, as will be reported on the income tax return of the Corporation to be filed for the taxable year of the redemption, including any income tax for which the Corporation is liable as a result of such reduction. If the Corporation does not expect to incur an actual tax liability or reduction in refund (or combination thereof) in the year of the redemption, the Gross Redemption Price shall be reduced by one-half of the amount determined by the Board of Directors of the Corporation in good faith, equal to the projected tax liability to be incurred by the Corporation in future years as a result of the redemption appropriately discounted to take into account the period of time before such tax liability will actually be paid by the Corporation. The Corporation will not provide the certification in the Optional Redemption Notice unless there is substantial authority that requires gain to be recognized by the Corporation on the redemption and no substantial authority supporting the position that gain is not recognized by the Corporation on the redemption. If the Corporation subsequently receives a refund of all or any portion of the taxes paid or has a reduction in the tax liability that resulted in a reduction of the Gross Redemption Price, the Corporation shall promptly pay the former holders of the Dual Convertible Preferred Stock their respective proportionate share of 50% of such refund or reduction in tax liability, together with any interest at the underpayment rate set forth in Section 6621(a) (2) of the Internal Revenue Code of 1986, as amended. The Gross Redemption Price reduced by the value of the Rights in accordance with clause (B) above and any reduction pursuant to the three preceding sentences shall be referred to herein as the "Net Redemption Price", and further reduced by the aggregate current market price of the Common Stock or the aggregate value of the Transaction Consideration in accordance with clause (A) above shall be referred to herein as the "Balance". (iii) The Net Redemption Price shall be payable to the holders of the shares of Dual Convertible Preferred Stock as follows: (A) certificates representing the number of shares of Common Stock or, if any Transaction has been effected, certificates representing the number of shares of stock or securities together with any other property, into which the Dual Convertible Preferred Stock would then be convertible, regardless of whether such shares are actually convertible at such time, and any cash payable in respect of fractional shares as provided in paragraph (e)(v), shall be delivered to the holders of the Dual Convertible Preferred Stock in accordance with the procedures for effecting a Common Stock Conversion; and (B) the Balance shall be payable, at the Corporation's option, in any combination of cash or the Corporation's capital and other securities having a realizable market value (as determined by an independent nationally recognized investment banking firm selected and paid for by the Corporation and reasonably acceptable to the holders of at least a majority of the shares of the Dual Convertible Preferred Stock) equal to the Balance. C-14 (iv) The Corporation shall have the obligation to redeem, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock, in whole, but not in part, if (A) the Corporation offers to redeem (the "Redemption Offer") the Dual Convertible Preferred Stock at a redemption price other than the Gross Redemption Price, which offer, if made after the Distribution shall have been effected, may only be made during an Optional Redemption Period or during the period after an Appraisal has been received and prior to the acceptance or rejection thereof by the holders of the shares of the Dual Convertible Preferred Stock, and (B) the holders of a majority of the outstanding shares of the Dual Convertible Preferred Stock shall have elected to accept the Redemption Offer, which election shall be binding on all the holders of the shares of the Dual Convertible Preferred Stock. Written notice of every Redemption Offer shall be given by first class mail, postage prepaid, to each holder of record of the shares of the Dual Convertible Preferred Stock at such holder's address as the same appears on the stock register of the Corporation. Each Redemption Offer shall state: (A) the consideration offered by the Corporation for all the shares of the Dual Convertible Preferred Stock (the "Alternative Redemption Price"); (B) the proposed date on and the manner in which the Alternative Redemption Price would be payable; and (C) the Gross Redemption Price, the Net Redemption Price and the Balance, together with a certificate of the Chief Financial Officer of the Corporation setting forth in reasonable detail the facts upon and the manner in which each was determined. (v) If the Corporation shall redeem shares of Dual Convertible Preferred Stock pursuant to this paragraph (g), written notice of such redemption (the "Optional Redemption Notice") shall be given by first class mail, postage prepaid, mailed not less than 10 days nor more than 30 days prior to the redemption date, to each holder of record of the shares of the Dual Convertible Preferred Stock at such holder's address as the same appears on the stock register of the Corporation. The Optional Redemption Notice shall state: (A) the redemption date; (B) the Gross Redemption Price, the Net Redemption Price and the Balance, together with a certificate of the Chief Financial Officer of the Corporation setting forth in reasonable detail the facts upon and the manner in which each was determined or the Alternative Redemption Price, as the case may be; (C) that shares of Dual Convertible Preferred Stock called for redemption may be converted in accordance with, and subject to the terms of, paragraph (e) hereof at any time prior to the date fixed for redemption (unless the Corporation shall default in payment of the Net Redemption Price or the Alternative Redemption Price, in which case such right shall not terminate at such date); (D) the place or places where certificates for such shares are to be surrendered for payment of the Net Redemption Price or the Alternative Redemption Price; (E) the amount of any accrued and unpaid dividends; and (F) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (vi) The Optional Redemption Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the Net Redemption Price or the Alternative Redemption Price) dividends on the shares of Dual Convertible Preferred Stock shall cease to accrue and said shares shall no longer be deemed to be outstanding and shall have the status of authorized but unissued shares of Preferred Stock, undesignated as to series, and all rights of the holders thereof as shareholders of the Corporation (except the right to receive from the Corporation the Net Redemption Price or the Alternative Redemption Price and any accrued and unpaid dividends) shall cease. Upon surrender in accordance with the Optional Redemption Notice of any certificates for the shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the Optional Redemption Notice shall so state), such shares shall be redeemed by the Corporation at the Net Redemption Price or the Alternative Redemption Price, as the case may be, plus any accrued and unpaid dividends thereon. (h) Voting Rights. C-15 (i) The holders of record of shares of Dual Convertible Preferred Stock shall not be entitled to any voting rights except as hereinafter provided in this paragraph (h) or as otherwise provided by law. (ii)(A) Whenever any matter is required to be acted upon herein by the holders of a majority of the Dual Convertible Preferred Stock, the affirmative vote of the holders of a majority of the outstanding Dual Convertible Preferred Stock, whether at a special meeting of such holders called as hereinafter provided, or by the written consent of such holders pursuant to Section 7-1.1-30.3 of the Rhode Island Business Corporation Act, shall be required to adopt such matter, which adoption shall be binding on all the holders of the shares of Dual Convertible Preferred Stock. (B) Upon the written request of the holders of at least 10% of the shares of the Dual Convertible Preferred Stock, addressed to the Secretary of the Corporation, a proper officer of the Corporation shall call a special meeting of holders of Dual Convertible Preferred Stock. Such meeting shall be held at the earliest practicable date upon the notice required for special meetings of shareholders at a place designated by the holders of at least 10% of the shares of the Dual Convertible Preferred Stock. If such meeting shall not be called by the proper officers of the Corporation within 5 days after the personal service of such written request upon the Secretary of the Corporation, or within 10 days after mailing the same within the United States, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of at least 10% of the shares of Dual Convertible Preferred Stock may designate in writing a holder of Dual Convertible Preferred Stock to call such meeting at the expense of the Corporation, and such meeting may be called by such person designated upon the notice required for special meetings of shareholders and shall be held at the same place as is elsewhere provided in this paragraph (h)(ii)(B). Any holder of Dual Convertible Preferred Stock that would be entitled to vote at such meeting shall have access to the stock books of the Corporation relating to the Dual Convertible Preferred Stock and the right to examine and to make extracts therefrom, in person or by agent or attorney, at any reasonable time or times, for the purpose of causing a meeting of shareholders to be called pursuant to the provisions of this paragraph or otherwise communicating with the holders of the Dual Convertible Preferred Stock or for any other proper purpose. (C) At any meeting of the holders of the Dual Convertible Preferred Stock, the presence in person or by proxy of the holders of a majority of the then outstanding shares of Dual Convertible Preferred Stock shall be required and be sufficient to constitute a quorum of such holders for the action to be taken by such class. At any such meeting or adjournment thereof in the absence of a quorum of the holders of shares of Dual Convertible Preferred Stock, the holders of a majority of such shares present in person or by proxy shall have the power to adjourn the meeting from time to time, without notice (except as required by law) other than announcement at the meeting, until a quorum shall be present. (D) At any meeting of the holders of the Dual Convertible Preferred Stock, the holders of a majority of the outstanding shares of the Dual Convertible Preferred Stock shall be entitled to designate a committee (the "Committee") consisting of as many holders of the Dual Convertible Preferred Stock as the holders of a majority of such shares may determine to be appropriate. The Committee may be empowered to act on behalf of all holders of the Dual Convertible Preferred Stock with respect to certain matters affecting the exchangeability of the Dual Convertible Preferred Stock specified in paragraphs (f) (iv) and (f) (v) and the acceptability of the Corporation's selection of an investment banking firm hereunder if so designated by the holders of the Dual Convertible Preferred Stock pursuant to this paragraph (h)(ii)(D); provided, however, that in no event may the Committee be empowered to elect to convert the Dual Convertible Preferred Stock into Common Stock, to accept any Redemption Offer or to exchange the Dual Convertible Preferred Stock for Holding Common Stock on behalf of the holders thereof. C-16 (iii) So long as any shares of the Dual Convertible Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of 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, authorize any new class of Senior Securities. (iv) So long as any shares of the Dual Convertible Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of 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, amend the Certificate of Incorporation or this Certificate of Designation so as to affect materially and adversely the specified rights, preferences, privileges or voting rights of shares of Dual Convertible Preferred Stock. (i) Other Redemption Rights. (i) If less than 10% of the shares of the Dual Convertible Preferred Stock originally issued is then outstanding, the Corporation may redeem at its option, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock, in whole, but not in part, at any time on or after the date that is ten years after the Issue Date, at a redemption price of $200 per share (the "Stated Value Redemption Price"), together with accrued and unpaid dividends thereon to the date of redemption, without interest. (ii) The Corporation may redeem at its option, with the prior approval of the Federal Reserve Board, the Dual Convertible Preferred Stock, in whole, but not in part, at any time on or after the date that is 12 years after the Issue Date, at a redemption price in cash equal to the Fair Market Value (as hereinafter defined) of such shares. The Corporation shall have the right to have an independent nationally recognized investment banking firm render an opinion of the fair market value for all the outstanding shares of the Dual Convertible Preferred Stock as if all such shares were to be sold to a third party (the "Fair Market Value"). The investment banking firm that renders such opinion shall be selected by the Corporation but shall be reasonably acceptable to the holders of a majority of the outstanding shares of the Dual Convertible Preferred Stock. Such determination of Fair Market Value shall be binding and conclusive on the Corporation and the holders of the Dual Convertible Preferred Stock. The fees and expenses of such investment banking firm shall be paid by the Corporation. (iii) If the Corporation shall redeem shares of Dual Convertible Preferred Stock pursuant to this paragraph (i), written notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 90 days nor more than 120 days prior to the redemption date, to each holder of record of the shares of the Dual Convertible Preferred Stock at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (A) the redemption date; (B) the number of shares of Dual Convertible Preferred Stock to be redeemed; (C) the Stated Value Redemption Price or the Fair Market Value of such holder's shares, as the case may be; (D) that shares of Dual Convertible Preferred Stock called for redemption may be converted in accordance with, and subject to the terms of, paragraph (e) hereof at any time prior to the date fixed for redemption (unless the Corporation shall default in payment of the Stated Value Redemption Price or the Fair Market Value of such shares, in which case such right shall not terminate at such date); (E) the place or places where certificates for such shares are to be surrendered for payment of the Stated Value Redemption Price or the Fair Market Value of such shares; and (F) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (iv) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the Stated Value Redemption Price or the Fair Market Value of such shares) dividends on the shares of Dual C-17 Convertible Preferred Stock shall cease to accrue and said shares shall no longer be deemed to be outstanding and shall have the status of authorized but unissued shares of Preferred Stock, undesignated as to series, and all rights of the holders thereof as shareholders of the Corporation (except the right to receive from the Corporation the Stated Value Redemption Price and any accrued and unpaid dividends or the Fair Market Value of such shares) shall cease. Upon surrender in accordance with said notice of any certificates for the shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the Stated Value Redemption Price plus any accrued and unpaid dividends thereon or the Fair Market Value of such shares, as the case may be. C-18 EXHIBIT D FLEET FINANCIAL GROUP, INC. CUMULATIVE PARTICIPATING JUNIOR PREFERRED STOCK Section 1. Designation and Amount. The shares of such series shall be designated as "Cumulative Participating Junior Preferred Stock" (the "Junior Preferred Stock") and the number of shares constituting the Junior Preferred Stock shall be 1,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Junior Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Junior Preferred Stock. Section 2. Dividends and Distributions. (A) The holders of shares of Junior Preferred Stock, in preference to the holders of Common Stock, par value $1.00 per share (the "Common Stock"), of the Corporation, and of any other junior stock, but subject to the rights of holders of any senior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first days of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Junior Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Junior Preferred Stock. In the event the Corporation shall at any time after November 21, 1990 declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock), then in each such case the amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Junior Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or D-1 unless the date of issue is a Quarterly Dividend Payment Date or is a date after the Record Date for the determination of holders of shares of Junior Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Junior Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Junior Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 50 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Junior Preferred Stock shall have the following voting rights: (A) Each share of Junior Preferred Stock shall entitle the holder thereof to one hundred votes (subject to adjustment as set forth below) on all matters submitted to a vote of the stockholders of the Corporation (including, without limitation, the election of directors). In the event the Corporation shall at any time after November 21, 1990, declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock), then in each such case the number of votes to which holders of shares of Junior Preferred Stock were entitled to immediately prior to such event shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in the Restated Articles of Incorporation, or by law, the holders of shares of Junior Preferred Stock, the holders of shares of Common Stock and the holders of any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If at any time dividends on any Junior Preferred Stock shall be in arrears in an amount equal to the full accrued dividends for six (6) or more quarterly dividend periods, whether or not consecutive, shall not have been paid or declared and a sum sufficient for the payment thereof irrevocably set aside in trust for the holders of all of such shares, the Board of Directors of the Corporation shall promptly take all necessary actions to increase the authorized number of directors of the Corporation by one (1) and the holders of the shares of the Junior Preferred Stock then outstanding shall be entitled (by series, voting as a single class) to elect one (1) person director to the Board of Directors of the Corporation (such right to elect one (1) director being hereinafter sometimes referred to as the "special voting rights"), each outstanding share having such right being entitled for such purpose to one vote; provided, however, that at such time as the arrearage in payment of dividends which gave rise to the exercise of the special voting rights has been cured with regard to the Junior Preferred Stock by waiver or payment of all accrued dividends, the right of the holders of such shares so to vote as provided in this paragraph (C)(i) of this Section 3 shall cease (subject to renewal from time to time upon the same terms and conditions) and the term of office of the person who is at that time a director elected by such holders shall terminate and the number of directors of the Corporation shall be automatically reduced by one (1). (ii) At any time after the special voting rights shall have become vested in the holders of the shares of the Junior Preferred Stock as provided in paragraph (C)(i) of this Section 3, the Secretary of the Corporation, as promptly as possible but in any event within twenty (20) days after receipt of the written request of the holders of 10% of the shares of the Junior Preferred Stock then outstanding, addressed to the Corporation at its principal office, shall call a special meeting of the holders of the D-2 shares of the Junior Preferred Stock for the purpose of electing such additional director, such meeting to be held at any place as provided by the Bylaws of the Corporation for meetings of the Corporation's stockholders, and upon not less than ten (10) nor more than twenty (20) days notice. If such meeting shall not be so called within twenty (20) days after receipt of the request by the Secretary of the Corporation, then the holders of 10% of the shares of the Junior Preferred Stock then outstanding may, by written notice to the Secretary of the Corporation, designate any person to call such meeting, and the person so designated may call such meeting, at any such place as provided above and upon not less than ten (10) nor more than twenty (20) days notice and for that purpose shall have access to the stockholder record books of the Corporation. No such special meeting of the holders of the shares of the Junior Preferred Stock and no adjournment thereof shall be held on a date later than thirty (30) days before the annual meeting of stockholders of the Corporation. At any meeting so called or at any annual meeting held at any time when the special voting rights are in effect, the holders of a majority of the shares of the Junior Preferred Stock then outstanding, present in person or by proxy, shall be sufficient to constitute a quorum for the election of such additional director, and such additional director, together with any and all other directors who are then members of the Board of Directors, shall constitute the duly elected directors of the Corporation. (iii) With respect to a vacancy arising in the directorship referred to in paragraph (C)(i) of this Section 3 at any time when the special voting rights are in effect pursuant to paragraph (C)(i) of this Section 3, upon the written request of the holders of 10% of the shares of the Junior Preferred Stock then outstanding, addressed to the Corporation at its principal office, the Secretary of the Corporation shall give notice of a special meeting of holders of the shares of the Junior Preferred Stock of the election of a director to fill such vacancy caused by the death, resignation or other inability to serve as a director elected by such holders, to be held not less than ten (10) nor more than twenty (20) days following receipt by the Secretary of the Corporation of such written request. So long as special voting rights are in effect pursuant to paragraph (i) of this Section 3(c), any director who shall have been so elected by the holders of the Junior Preferred Stock may be removed at any time, either with or without cause, only by the affirmative vote of the holders of the shares at the time entitled to cast a majority of the votes entitled to be cast for the election of such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders. (D) Except as set forth herein, or as otherwise provided by the Restated Articles of Incorporation or by law, holders of Junior Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. (E) Holders of Junior Preferred Stock shall be entitled to such notice of each meeting of stockholders as is furnished to the holders of Common Stock with respect to such meeting. Section 4. Certain Restrictions. (A) Subject to the provisions of the Restated Articles of Incorporation, whenever quarterly dividends or other dividends or distributions payable on the Junior Preferred Stock as provided in Section 2 are in arrears as of any Quarterly Dividend Payment Date, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Junior Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and all such parity D-3 stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends and upon dissolution, liquidation or winding up) to the Junior Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Junior Preferred Stock, or any shares of stock ranking on a parity with the Junior Preferred Stock, except in accordance with the terms of the Restated Articles of Incorporation and with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Junior Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Restated Articles of Incorporation, or as otherwise required by law. Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Junior Preferred Liquidation Preference"). Following the payment of the full amount of the Junior Preferred Liquidation Preference, no additional distributions shall be made to the holders of shares of Junior Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Junior Preferred Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii) immediately above being referred to as the "Adjustment Number"). Following the payment of the full amount of the Junior Preferred Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Junior Preferred Stock and Common Stock, respectively, holders of Junior Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to one (1) with respect to such Junior Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Junior Preferred Liquidation Preference and the liquidation preferences of all other series of D-4 preferred stock, if any, which rank on a parity with the Junior Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time after November 21, 1990, (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, Etc. In case the Corporation should enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Junior Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after November 21, 1990 declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange of change of shares of Junior Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. Ranking. The Junior Preferred Stock shall rank junior, as to dividends and upon liquidation, dissolution or winding up, to (a) the Common Stock, (b) the Preferred Stock with Cumulative and Adjustable Dividends, $20 par value, (c) any other class of capital stock of the Corporation unless the terms of such class shall expressly provide otherwise, and (d), to the extent permitted by the Restated Articles of Incorporation, all other series of Preferred Stock issued by the Corporation. Section 9. No Redemption. The shares of Junior Preferred Stock shall not be redeemable. Section 10. Fractional Shares. The Junior Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of Junior Preferred Stock. D-5 EXHIBIT E FLEET FINANCIAL GROUP, INC. PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS (a) Designation. The designation of this series of Preferred Stock shall be "Preferred Stock with Cumulative and Adjustable Dividends" (hereinafter called this "Series") and the number of shares constituting this Series is 688,700. Shares of this Series shall have a stated value of $50 per share. The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board and by the filing of a certificate pursuant to the provisions of the Rhode Island Business Corporation Act stating that such reduction has been so authorized, but the number of authorized shares of this Series shall not be increased. (b) Dividend Rate. (1) The dividend rate on the shares of this Series shall be $.8875 per share for the period (the "Initial Dividend Period") from the date of their original issue to and including March 31, 1988. Dividend rates on the shares of this Series shall be for each quarterly dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and the Initial Dividend Period or any Quarterly Dividend Period being hereinafter individually referred to as a "Dividend Period" and collectively referred to as "Dividend Periods") thereafter, which Quarterly Dividend Periods shall commence on January 1, April 1, July 1, and October 1, in each year and shall end on and include the day next preceding the first day of the next Quarterly Dividend Period, at a rate per annum of the stated value thereof of 2.25% below the Applicable Rate (as defined in paragraph (2) of this Section (b)) in respect of such Quarterly Dividend Period. Anything to the contrary herein notwithstanding, the dividend rate for any Quarterly Dividend Period shall in no event be less than 6% or greater than 12% per annum. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when and as declared by the Board, on January 1, April 1, July 1, and October 1, of each year, commencing on April 1, 1988. Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) Except as provided below in this paragraph, the "Applicable Rate" for any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate (each as hereinafter defined) for such Dividend Period. In the event that the Corporation determines in good faith that for any reason one or more of such rates cannot be determined for any Quarterly Dividend Period, then the Applicable Rate for such Quarterly Dividend Period shall be the higher of whichever of such rates can be so determined. In the event that the Corporation determines in good faith that none of such rates can be determined for any Quarterly Dividend Period, then the Applicable Rate in effect for the preceding Dividend Period shall be continued for such Dividend Period. (3) Except as provided below in this paragraph, the "Treasury Bill Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of the March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being E-1 determined. In the event that the Federal Reserve Board does not publish such a weekly per annum market discount rate during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum market discount rate for three-month U.S. Treasury bills shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate shall be published during the relevant Calendar Period as provided below) for all of the U.S. Treasury bills then having maturities of not less than 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason no such U.S. Treasury Bill Rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable noninterest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Treasury Bill Rate for any Quarterly Dividend Period as provided above in this paragraph, the Treasury Bill Rate for such Dividend Period shall be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a maturity of not less than 80 nor more than 100 days from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (4) Except as provided in this paragraph, the "Ten Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of the March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Ten Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only E-2 one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Ten Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. (5) Except as provided below in the paragraph, the "Twenty Year Constant Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly by the Federal Reserve Board during the Calendar Period immediately prior to the last ten calendar days of the March, June, September or December, as the case may be, prior to the Quarterly Dividend Period for which the dividend rate on this Series is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Twenty Year Average Yield during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year Average Yield, if only one such Yield shall be published during the relevant Calendar Period as provided below), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Twenty Year Average Yield shall not be published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly average yield to maturity, if only one such yield shall be published during the relevant Calendar Period as provided below) for all of the actively trade marketable U.S. Treasury fixed interest securities (other than Special Securities) then having maturities of not less than eighteen nor more than twenty-two years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Twenty Year Constant Maturity Rate for any Quarterly Dividend Period as provided above in this paragraph, then the Twenty Year Constant Maturity Rate for such Dividend Period shall be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eighteen nor more than twenty-two years from the date of each such quotation, as quoted daily for each business day in New York City (or less frequently if daily quotations shall not be generally available) to the Corporation by at least three recognized U.S. Government securities dealers selected by the Corporation. E-3 (6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Twenty Year Constant Maturity Rate shall each be rounded to the nearest five hundredths of a percentage point. (7) The dividend rate with respect to each Quarterly Dividend Period will be calculated as promptly as practicable by the Corporation according to the appropriate method described herein. The mathematical accuracy of each such calculation will be confirmed in writing by independent accountants of recognized standing. The Corporation will cause each dividend rate to be published in a newspaper of general circulation in New York City prior to the commencement of the new Quarterly Dividend Period to which it applies and will cause notice of such dividend rate to be enclosed with the dividend payment checks next mailed to the holders of shares of this Series. (8) For purposes of this Section (b), the term (i) "Calendar Period" shall mean 14 calendar days; (ii) "Special Securities" shall mean securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount. (iii) "Ten Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and (iv) "Twenty Year Average Yield" shall mean the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of 20 years). (9) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other Preferred Stock ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other Preferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (10) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (9) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon E-4 liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (11) Dividends payable on each share of this Series for each full Quarterly Dividend Period shall be computed by dividing the dividend rate for such Quarterly Dividend Period by four and applying such rate against the stated value, per share of this Series. Dividends payable on this Series for any period less than a full Quarterly Dividend Period shall be computed on the basis of a 360-day year consisting of 30-day months. (c) Redemption. (1) The shares of this Series shall not be redeemable prior to April 1, 1988. On and after April 1, 1988, the Corporation, at its option, may redeem shares of this Series, as a whole or in part, at any time or from time to time, at a redemption price (i) in the case of any redemption on a redemption date occurring on or after April 1, 1988, and prior to April 1, 1993, of $51.50 per share, and (ii) in the case of any redemption on a redemption date occurring on or after April 1, 1993, of $50.00 per share, plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any shares of this Series which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or E-5 acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Conversion or Exchange. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (e) Voting. The shares of this Series shall not have any voting powers either general or special, except that (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation of the Corporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification or any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (3) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends on the Preferred Stock shall exist, the number of directors constituting the Board of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for that purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference E-6 dividends shall no longer exist, the number of directors constituting the Board of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to exist whenever the amount of accrued dividends upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (f) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Stock upon liquidation, the amount of $50.00 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this Section (f). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (f), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph 1 of this Section (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation of this Series. (g) Ranking of Classes of Stock. Any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Series, if the holders of such stock E-7 shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. E-8 EXHIBIT F FLEET FINANCIAL GROUP, INC. 9.30% CUMULATIVE PREFERRED STOCK (a) Designation. The designation of this series of Preferred Stock shall be "9.30% Cumulative Preferred Stock" (hereinafter called the "Preferred Shares") and the number of shares constituting this series shall be 575,000. Such Preferred Shares shall have a stated value of $250 per share. The number of authorized Preferred Shares may be reduced by further resolution duly adopted by the Board and by the filing of a certificate pursuant to the provisions of the Rhode Island Business Corporation Act stating that such reduction has been so authorized, but the number of authorized Preferred Shares shall not be increased. (b) Dividends. (1) Dividend periods ("Dividend Periods") shall commence on January 1, April 1, July 1 and October 1 in each year and shall end on and include the day next preceding the first day of the next Dividend Period. The dividend rate on the Preferred Shares from November 3, 1992 to and including December 31, 1992 (the "Initial Dividend Period") and for each Dividend Period thereafter will be 9.30% per annum of the stated value thereof. Such dividends shall be cumulative from November 3, 1992 and shall be payable when and as declared by the Board, on January 15th, April 15th, July 15th and October 15th of each year, commencing January 15, 1993. Each such dividend shall be paid to the holders of record of Preferred Shares as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to the Preferred Shares for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Preferred Shares for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the Preferred Shares and any other Preferred Stock ranking on a parity as to dividends with the Preferred Shares, all dividends declared upon shares of the Preferred Shares and any other Preferred Stock ranking on a parity as to dividends with the Preferred Shares shall be declared pro rata so that the amount of dividends declared per share on the Preferred Shares and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Preferred Shares and such other Preferred Stock bear to each other. Holders of the Preferred Shares shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Shares which may be in arrears. (3) So long as any of the Preferred Shares are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to the Preferred Shares as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with the Preferred Shares as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking F-1 junior to or on a parity with the Preferred Shares as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Preferred Shares as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding Preferred Shares shall have been paid for all past dividend payment periods. (4) Dividends payable on each Preferred Share for each Dividend Period shall be computed by annualizing the applicable dividend rate and dividing by four. Dividends payable on the Preferred Shares for any period less than a full Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (c) Redemption. (1) The Preferred Shares shall not be redeemable prior to October 15, 1997. On and after October 15, 1997, the Corporation, at its option, may redeem the Preferred Shares, as a whole or in part, at any time or from time to time at a redemption price equal to $250 per share plus accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding Preferred Shares are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board of the Corporation or by any duly authorized committee thereof or by any other method as may be determined by the Board of the Corporation or by any duly authorized committee thereof in its sole discretion to be equitable, provided that such method satisfies any applicable requirements of any securities exchange on which the Preferred Shares are listed. (3) In the event the Corporation shall redeem Preferred Shares, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of Preferred Shares to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the Preferred Shares so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of the Corporation or any duly authorized committee thereof shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any of the Preferred Shares which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of the Corporation or any duly authorized committee thereof. F-2 (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on the Preferred Shares are in arrears, no Preferred Shares shall be redeemed unless all outstanding Preferred Shares of this series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any Preferred Shares; provided, however, that the foregoing shall not prevent the purchase or acquisition of Preferred Shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Preferred Shares. (d) Conversion or Exchange. The holders of the Preferred Shares shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (e) Voting. The Preferred Shares shall not have any voting powers, either general or special, except that (i) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the Preferred Shares at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of Preferred Shares shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of the Preferred Shares; (ii) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the Preferred Shares and all other series of Preferred Stock ranking on a parity with the Preferred Shares, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of Preferred Shares and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the Preferred Shares as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (iii) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends (as defined below) on the Preferred Stock shall exist, the number of directors constituting the Board of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he or she shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for the purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (a) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (b)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (b) in case of the removal of any Preferred Director, the vacancy may be filled by the vote of F-3 the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to exist whenever the amount of accrued dividends upon any series of Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (f) Liquidation Rights. (1) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of the Preferred Shares shall be entitled to receive, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Shares upon liquidation, the amount of $250 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all of the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation, nor the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this Section (f). (3) After the payment to the holders of the Preferred Shares of the full preferential amounts provided for in this Section (f), the holders of the Preferred Shares as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of the Preferred Shares upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (l) of this Section (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the Preferred Shares upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the Preferred Shares, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of the Preferred Shares then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to the Preferred Shares. (g) Ranking of Classes of Stock. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the Preferred Shares, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon F-4 voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of the Preferred Shares; (2) on a parity with the Preferred Shares, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of the Preferred Shares, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of the Preferred Shares; and (3) junior to the Preferred Shares, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of the Preferred Shares shall be entitled to receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. F-5 EXHIBIT G FLEET FINANCIAL GROUP, INC. 9.35% CUMULATIVE PREFERRED STOCK (a) Designation. The designation of this series of Preferred Stock shall be "9.35% Cumulative Preferred Stock" (hereinafter called the "Preferred Shares") and the number of shares constituting this series shall be 500,000. Such Preferred Shares shall have a stated value of $250 per share. The number of authorized Preferred Shares may be reduced by further resolution duly adopted by the Board and by the filing of a certificate pursuant to the provisions of the Rhode Island Business Corporation Act stating that such reduction has been so authorized, but the number of authorized Preferred Shares shall not be increased. (b) Dividends. (1) Dividend periods ("Dividend Periods") shall commence on January 15, April 15, July 15 and October 15 in each year and shall end on and include the day next preceding the first day of the next Dividend Period. The dividend rate on the Preferred Shares from January 26, 1995 to and including April 14, 1995 (the "Initial Dividend Period") and for each Dividend Period thereafter will be 9.35% per annum of the stated value thereof. Such dividends shall be cumulative from January 26, 1995 and shall be payable when and as declared by the Board, on January 15, April 15, July 15 and October 15 of each year, commencing April 15, 1995. Each such dividend shall be paid to the holders of record of Preferred Shares as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) No full dividends shall be declared or paid or set apart for payment on Preferred Stock of any series ranking, as to dividends, on a parity with or junior to the Preferred Shares for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Preferred Shares for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the Preferred Shares and any other Preferred Stock ranking on a parity as to dividends with the Preferred Shares, all dividends declared upon shares of the Preferred Shares and any other Preferred Stock ranking on a parity as to dividends with the Preferred Shares shall be declared pro rata so that the amount of dividends declared per share on the Preferred Shares and such other Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Preferred Shares and such other Preferred Stock bear to each other. Holders of the Preferred Shares shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Shares which may be in arrears. (3) So long as any of the Preferred Shares are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to the Preferred Shares as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with the Preferred Shares as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking G-1 junior to or on a parity with the Preferred Shares as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Preferred Shares as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding Preferred Shares shall have been paid for all past dividend payment periods. (4) Dividends payable on each Preferred Share for each Dividend Period shall be computed by annualizing the applicable dividend rate and dividing by four. Dividends payable on the Preferred Shares for any period less than a full Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (c) Redemption. (1) The Preferred Shares shall not be redeemable prior to January 15, 2000. On and after January 15, 2000, the Corporation, at its option, may redeem the Preferred Shares, as a whole or in part, at any time or from time to time at a redemption price equal to $250 per share plus accrued and unpaid dividends thereon to the date fixed for redemption. Notwithstanding the foregoing, to the extent applicable law requires, the Preferred Shares may not be redeemed by the Corporation without the prior approval of the Board of Governors of the Federal Reserve System. (2) In the event that fewer than all the outstanding Preferred Shares are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board of the Corporation or by any duly authorized committee thereof or by any other method as may be determined by the Board of the Corporation or by any duly authorized committee thereof in its sole discretion to be equitable, provided that such method satisfies any applicable requirements of any securities exchange on which the Preferred Shares are listed. (3) In the event the Corporation shall redeem Preferred Shares, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of Preferred Shares to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the Preferred Shares so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of the Corporation or any duly authorized committee thereof shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Any of the Preferred Shares which shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without G-2 designation as to series until such shares are once more designated as part of a particular series by the Board of the Corporation or any duly authorized committee thereof. (6) Notwithstanding the foregoing provisions of this Section (c), if any dividends on the Preferred Shares are in arrears, no Preferred Shares shall be redeemed unless all outstanding Preferred Shares of this series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any Preferred Shares; provided, however, that the foregoing shall not prevent the purchase or acquisition of Preferred Shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Preferred Shares. (d) Conversion or Exchange. The holders of the Preferred Shares shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (e) Voting. The Preferred Shares shall not have any voting powers, either general or special, except that (i) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the Preferred Shares at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of Preferred Shares shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of Designation, Preferences and Rights or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of the Preferred Shares; (ii) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the Preferred Shares and all other series of Preferred Stock ranking on a parity with the Preferred Shares, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of Preferred Shares and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the Preferred Shares as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares; (iii) If at the time of any annual meeting of stockholders for the election of directors a default in preference dividends (as defined below) on the Preferred Stock shall exist, the number of directors constituting the Board of the Corporation shall be increased by two, and the holders of the Preferred Stock of all series shall have the right at such meeting, voting together as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Preferred Stock. Each director elected by the holders of shares of Preferred Stock (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he or she shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of Preferred Stock, called for the purpose. So long as a default in any preference dividends on the Preferred Stock shall exist, (a) any vacancy in the office G-3 of a Preferred Director may be filled (except as provided in the following clause (b)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (b) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Preferred Stock, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board of the Corporation shall be reduced by two. For the purposes hereof, a "default in preference dividends" on the Preferred Stock shall be deemed to exist whenever the amount of accrued dividends upon any series of Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Preferred Stock of each and every series then outstanding shall have been paid to the end of the last preceding quarterly dividend period. (f) Liquidation Rights. (1) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of the Preferred Shares shall be entitled to receive, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the Preferred Shares upon liquidation, the amount of $250 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all of the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation, nor the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this Section (f). (3) After the payment to the holders of the Preferred Shares of the full preferential amounts provided for in this Section (f), the holders of the Preferred Shares as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of the Preferred Shares upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the Preferred Shares upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the Preferred Shares, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (5) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of the Preferred Shares then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (f) before any payment shall be made to the holders of any class of capital stock of the Corporation ranking junior upon liquidation to the Preferred Shares. G-4 (g) Ranking of Classes of Stock. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the Preferred Shares, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of the Preferred Shares; (2) on a parity with the Preferred Shares, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of the Preferred Shares, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of the Preferred Shares; and (3) junior to the Preferred Shares, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of the Preferred Shares shall be entitled to receipt of dividends or of amounts distributable upon voluntary or involuntary dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. G-5 EXHIBIT H CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE ARTICLES OF INCORPORATION OR IN ANY AMENDMENT THERETO, OF THE SERIES V 7.25% PERPETUAL PREFERRED STOCK OF FLEET FINANCIAL GROUP, INC. ------------------- PURSUANT TO SECTION 7-1.1-15 OF THE RHODE ISLAND BUSINESS CORPORATION ACT ------------------- We, the undersigned, William C. Mutterperl and Marc C. Leslie, the Senior Vice President and the Assistant Secretary, respectively, of FLEET FINANCIAL GROUP, INC., a Rhode Island corporation (hereinafter called the "Corporation"), DO HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of the Corporation at a meeting duly convened and held on February 21, 1996, at which a quorum was present and acting throughout. "RESOLVED, that pursuant to authority conferred upon the Board of Directors (the "Board") of Fleet Financial Group, Inc., a Rhode Island corporation (the "Corporation"), by the Restated Articles of Incorporation, as amended, (the "Articles of Incorporation") of the Corporation, the Board hereby creates a series of Preferred Stock of the Corporation to consist of 1,265,000 shares, and hereby fixes the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series (in addition to the designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, set forth in the Articles of Incorporation which are applicable to the Preferred Stock of all classes or series) as follows: (a) Designation. The designation of the series of Preferred Stock shall be "Series V 7.25% Perpetual Preferred Stock" (hereinafter called this "Series") and the number of shares constituting this Series is one million two hundred sixty-five thousand (1,265,000). (b) Dividend Rate. (1) The holders of shares of this Series shall be entitled to receive dividends thereon at a rate of 7.25% per annum computed on the basis of an issue price thereof of $250 per share, and no more, payable quarterly out of the funds of the Corporation legally available for the payment of dividends. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when, as and if declared by the Board, on January 15, April 15, July 15 and October 15 of each year, commencing April 15, 1996 (a "Dividend Payment Date"). Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past quarters may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. H-1 (2) No full dividends shall be declared or paid or set apart for payment on the Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other preferred stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other class or series of preferred stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other preferred stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (3) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in paragraph (2) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (4) Dividends payable on this Series for any period, including the period from the original issue of such shares until April 15, 1996, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (c) Redemption. (1) The shares of this Series shall not be redeemable prior to April 15, 2001. On and after April 15, 2001, the Corporation, at its option, may redeem shares of this Series, in whole or in part, at any time or from time to time, at a redemption price of $250 per share, plus accrued and unpaid dividends thereon to the date fixed for redemption. (2) In the event that fewer than all the outstanding shares of this Series are to be redeemed pursuant to subsection (1), the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. (3) In the event the Corporation shall redeem shares of this Series pursuant to subsections (1) or (2), notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or H-2 places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption under either subsection (1) or (2) above shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the applicable redemption price. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. (d) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive and be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of this Series upon liquidation, the amount of $250 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (d). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (d), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (d), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Conversion or Exchange. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. H-3 (f) Voting. The shares of this Series shall not have any voting powers, either general or special, except that: (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, Optional or Other Special Rights, and the Qualifications, Limitations or Restrictions thereof, or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting, increasing or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares. (3) If, at the time of any annual meeting of stockholders for the election of directors, a default in preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation (other than any other class or series of the Corporation's preferred stock expressly entitled to elect additional directors to the Board by a vote separate and distinct from the vote provided for in this paragraph (3) ("Voting Preferred")) shall exist, the number of directors constituting the Board shall be increased by two (without duplication of any increase made pursuant to the terms of any other class or series of the Corporation's preferred stock other than any Voting Preferred) and the holders of the Corporation's preferred stock of all classes and series (other than any such Voting Preferred) shall have the right at such meeting, voting together as a single class without regard to class or series, to the exclusion of the holders of Common Stock and the Voting Preferred, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon shares of any class or series of the Corporation's preferred stock ranking prior to or on a parity with shares of this Series as to dividends (other than any Voting Preferred). Each director elected by the holders of shares of any series of the Preferred Stock or any other class or series of the Corporation's preferred stock in an election provided for by this paragraph (3) (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for such director's election, voting together as a single class without regard to class or series, at a meeting of the stockholders, or of the holders of shares of the Corporation's preferred stock, called for that purpose. So long as a default in any preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall exist (other than any Voting Preferred) (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred H-4 Director, the vacancy may be filled by the vote of the holders of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for the removed director's election, voting together as a single class without regard to class or series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid shall be deemed for all purposes hereto to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board shall be reduced by two. For purposes hereof, a "default in preference dividends" on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall be deemed to have occurred whenever the amount of accrued dividends upon such class or series of the Corporation's preferred stock shall be equivalent to six full quarterly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all such shares of the Corporation's preferred stock of each and every series then outstanding (other than any Voting Preferred or shares of any class or series ranking junior to shares of this Series as to dividends) shall have been paid to the end of the last preceding quarterly dividend period. (g) Reacquired Shares. Shares of this Series which have been issued and reacquired through redemption or purchase shall, upon compliance with an applicable provision of the Rhode Island Business Corporation Act, have the status of authorized and unissued shares of Preferred Stock and may be reissued but only as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board. (h) Relation to Existing Preferred Classes of Stock. Shares of this Series are equal in rank and preference with all other series of the Preferred Stock outstanding on the date of original issue of the shares of this Series and are senior in rank and preference to the Common Stock and the Cumulative Participating Junior Preferred Stock of the Corporation. (i) Relation to Other Preferred Classes of Stock. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Series, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to the shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. H-5 IN WITNESS WHEREOF, this Certificate has been made under the seal of Fleet Financial Group, Inc., and has been signed by the undersigned, William C. Mutterperl, its Senior Vice President, and Marc C. Leslie, its Assistant Secretary, respectively, this 21st day of February, 1996. FLEET FINANCIAL GROUP, INC. [SEAL] By ................................... (Senior Vice President) By ................................... (Assistant Secretary) STATE OF MASSACHUSETTS COUNTY OF SUFFOLK In said County and State on this 21st day of February, 1996, personally appeared before me William C. Mutterperl and Marc C. Leslie, the Senior Vice President and the Assistant Secretary, respectively, of Fleet Financial Group, Inc., to me known and known by me to be the parties executing the foregoing instrument, and they acknowledged said instrument by them executed to be their free act and deed and the free act and deed of said Fleet Financial Group, Inc. By ................................... Notary Public My Commission Expires: H-6 EXHIBIT I CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE ARTICLES OF INCORPORATION OR IN ANY AMENDMENT THERETO, OF THE SERIES VI 6.75% PERPETUAL PREFERRED STOCK OF FLEET FINANCIAL GROUP, INC. ------------------- PURSUANT TO SECTION 7-1.1-15 OF THE RHODE ISLAND BUSINESS CORPORATION ACT ------------------- We, the undersigned, William C. Mutterperl and Marc C. Leslie, the Senior Vice President and the Assistant Secretary, respectively, of FLEET FINANCIAL GROUP, INC., a Rhode Island corporation (hereinafter called the "Corporation"), DO HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of the Corporation at a meeting duly convened and held on February 21, 1996, at which a quorum was present and acting throughout. "RESOLVED, that pursuant to authority conferred upon the Board of Directors (the "Board") of Fleet Financial Group, Inc., a Rhode Island corporation (the "Corporation"), by the Restated Articles of Incorporation, as amended (the "Articles of Incorporation"), of the Corporation, the Board hereby creates a series of Preferred Stock of the Corporation to consist of 690,000 shares, and hereby fixes the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series (in addition to the designations, preferences and relative, participating, option or other special rights, and the qualifications, limitations or restrictions thereof, set forth in the Articles of Incorporation which are applicable to the Preferred Stock of all classes or series) as follows: (a) Designation. The designation of the series of Preferred Stock shall be "Series VI 6.75% Perpetual Preferred Stock" (hereinafter called this "Series") and the number of shares constituting this Series is Six Hundred Ninety Thousand (690,000). (b) Dividend Rate. (1) The holders of shares of this Series shall be entitled to receive dividends thereon at a rate of 6.75% per annum computed on the basis of an issue price thereof of $250 per share, and no more, payable quarterly out of the funds of the Corporation legally available for the payment of dividends. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when, as and if declared by the Board, on January 15, April 15, July 15 and October 15 of each year, commencing April 15, 1996 (a "Dividend Payment Date"). Each such dividend shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Corporation on such record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board. Dividends on account of arrears for any past quarters may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (2) If one or more amendments to the Internal Revenue Code of 1986, as amended (the "Code"), are enacted that change the percentage of the dividends received deduction (currently 70%) as specified in Section 243(a)(1) of the Code or any successor provision (the "Dividends I-1 Received Percentage"), the amount of each dividend payable per share of this Series for dividend payments made on or after the date of enactment of such change shall be adjusted by multiplying the amount of the dividend payable determined as described above (before adjustment) by a factor which shall be the number determined in accordance with the following formula (the "DRD Formula"), and rounding the result to the nearest cent: 1 - .35 (1 - .70) ------------------- 1 - .35 (1 - DRP) For the purposes of the DRD Formula, "DRP" means the Dividends Received Percentage applicable to the dividend in question. No amendment to the Code, other than a change in the percentage of the dividends received deduction set forth in Section 243(a)(1) of the Code or any successor provision, will give rise to an adjustment. Notwithstanding the foregoing provisions, in the event that, with respect to any such amendment, the Corporation shall receive either an unqualified opinion of independent recognized tax counsel or a private letter ruling or similar form of authorization from the Internal Revenue Service to the effect that such an amendment would not apply to dividends payable on shares of this Series, then any such amendment shall not result in the adjustment provided for pursuant to the DRD Formula. The Corporation's calculation of the dividends payable as so adjusted and as certified accurate as to calculation and reasonable as to method by the independent certified public accountants then regularly engaged by the Corporation shall be final and not subject to review. If any amendment to the Code which reduces the Dividends Received Percentage is enacted after a dividend payable on a Dividend Payment Date has been declared, the amount of dividend payable on such Dividend Payment Date will not be increased; but instead, an amount, equal to the excess of (x) the product of the dividends paid by the Corporation on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the reduced Dividends Received Percentage) and (y) the dividends paid by the Corporation on such Dividend Payment Date, will be payable to holders of record on the next succeeding Dividend Payment Date in addition to any other amounts payable on such date. In addition, if prior to May 16, 1996, an amendment to the Code is enacted that reduces the Dividends Received Percentage and such reduction retroactively applies to a Dividend Payment Date as to which the Corporation previously paid dividends on shares of this Series (each an "Affected Dividend Payment Date"), the Corporation will pay (if declared) additional dividends (the "Additional Dividends") on the next succeeding Dividend Payment Date (or if such amendment is enacted after the dividend payable on such Dividend Payment Date has been declared, on the second succeeding Dividend Payment Date following the date of enactment) to holders of record on such succeeding Dividend Payment Date in an amount equal to the excess of (x) the product of the dividends paid by the Corporation on each Affected Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the Dividends Received Percentage applied to each Affected Dividend Payment Date) and (y) the dividends paid by the Corporation on each Affected Dividend Payment Date. Additional Dividends will not be paid in respect of the enactment of any amendment to the Code on or after May 16, 1996 which retroactively reduces the Dividends Received Percentage, or if prior to May 16, 1996, such amendment would not result in an adjustment due to the Corporation having received either an opinion of counsel or tax ruling referred to in the third preceding paragraph. The Corporation will only make one payment of Additional Dividends. In the event that the amount of dividend payable per share of this Series shall be adjusted pursuant to the DRD Formula and/or Additional Dividends are to be paid, the Corporation will I-2 cause notice of each such adjustment and, if applicable, any Additional Dividends, to be sent to each holder of record of the shares of this Series at such holder's address as the same appears on the stock register of the Corporation. (3) No full dividends shall be declared or paid or set apart for payment on the Preferred Stock of any series ranking, as to dividends, on a parity with or junior to this Series for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all dividend payment periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and any other preferred stock ranking on a parity as to dividends with this Series, all dividends declared upon shares of this Series and any other class or series of preferred stock of the Corporation ranking on a parity as to dividends with this Series shall be declared pro rata so that the amount of dividends declared per share on this Series and such other preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other preferred stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stocks, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series which may be in arrears. (4) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation and other than as provided in subsection (3) of this Section (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to or on a parity with this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation) unless, in each case, the full cumulative dividends on all outstanding shares of this Series shall have been paid for all past dividend payment periods. (5) Dividends payable on this Series for any period, including the period from the original issue of such shares until April 15, 1996, shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (c) Redemption. (1) (A) The shares of this Series shall not be redeemable prior to April 15, 2006. On and after April 15, 2006, the Corporation, at its option, may redeem shares of this Series, in whole or in part, at any time or from time to time, at a redemption price of $250 per share, plus accrued and unpaid dividends thereon to the date fixed for redemption. (B) In the event that fewer than all the outstanding shares of this Series are to be redeemed pursuant to subsection (1)(A), the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. (2) (A) Notwithstanding subsection (1) above, if the Dividends Received Percentage is equal to or less than 40% and, as a result, the amount of dividends on the shares of this Series payable on any Dividend Payment Date will be or is adjusted upwards as described in Section (b)(2) above, the Corporation, at its option, may redeem all, but not less than all, of the outstanding shares of this I-3 Series; provided, that within sixty days of the date on which an amendment to the Code is enacted which reduces the Dividends Received Percentage to 40% or less, the Corporation sends notice to holders of shares of this Series of such redemption in accordance with subsection (3) below. (B) Any redemption of the Perpetual Preferred Stock in accordance with this subsection (2) shall be at the applicable redemption price set forth in the following table, in each case plus accrued and unpaid dividends (whether or not declared) thereon to the date fixed for redemption, including any changes in dividends payable due to changes in the Dividends Received Percentage and Additional Dividends, if any.
REDEMPTION PRICE --------------------------------- REDEMPTION PERIOD PER SHARE PER DEPOSITARY SHARE - ------------------------------------------------------------ --------- -------------------- February 21, 1996 to April 14, 1997......................... $262.50 $52.50 April 15, 1997 to April 14, 1998............................ 261.25 52.25 April 15, 1998 to April 14, 1999............................ 260.00 52.00 April 15, 1999 to April 14, 2000............................ 258.75 51.75 April 15, 2000 to April 14, 2001............................ 257.50 51.50 April 15, 2001 to April 14, 2002............................ 256.25 51.25 April 15, 2002 to April 14, 2003............................ 255.00 51.00 April 15, 2003 to April 14, 2004............................ 253.75 50.75 April 15, 2004 to April 14, 2005............................ 252.50 50.50 April 15, 2005 to April 14, 2006............................ 251.25 50.25 On or after April 15, 2006.................................. 250.00 50.00
(3) In the event the Corporation shall redeem shares of this Series pursuant to subsections (1) or (2) above, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (4) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption under either subsection (1) or (2) above shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the applicable redemption price. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (5) Notwithstanding the foregoing provisions of this Section (c), if any dividends on this Series are in arrears, no shares of this Series shall be redeemed unless all outstanding shares of this Series are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. I-4 (d) Liquidation Rights. (1) Upon the dissolution, liquidation or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive and be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the Common Stock or on any other class of stock ranking junior to the shares of this Series upon liquidation, the amount of $250 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) Neither the sale of all or substantially all the property or business of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Section (d). (3) After the payment to the holders of the shares of this Series of the full preferential amounts provided for in this Section (d), the holders of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. (4) In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (1) of this Section (d), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (e) Conversion or Exchange. The holders of shares of this Series shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation. (f) Voting. The shares of this Series shall not have any voting powers, either general or special, except that: (1) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series shall vote together as a separate class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, Optional or Other Special Rights, and the Qualifications, Limitations or Restrictions thereof, or any similar document relating to any series of Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of this Series; (2) Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66 2/3% of all of the shares of this Series and all other series of Preferred Stock ranking on a parity with shares of this Series, either as to dividends or upon liquidation, at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of this Series and such other series of Preferred Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting, increasing or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the shares of this Series I-5 as to dividends or upon liquidation, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issue of any obligation or security convertible into or evidencing the right to purchase any such prior shares. (3) If, at the time of any annual meeting of stockholders for the election of directors, a default in preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation (other than any other class or series of the Corporation's preferred stock expressly entitled to elect additional directors to the Board by a vote separate and distinct from the vote provided for in this paragraph (3) ("Voting Preferred")) shall exist, the number of directors constituting the Board shall be increased by two (without duplication of any increase made pursuant to the terms of any other class or series of the Corporation's preferred stock other than any Voting Preferred) and the holders of the Corporation's preferred stock of all classes and series (other than any such Voting Preferred) shall have the right at such meeting, voting together as a single class without regard to class or series, to the exclusion of the holders of Common Stock and the Voting Preferred, to elect two directors of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon shares of any class or series of the Corporation's preferred stock ranking prior to or on a parity with shares of this Series as to dividends (other than any Voting Preferred). Each director elected by the holders of shares of any series of the Preferred Stock or any other class or series of the Corporation's preferred stock in an election provided for by this paragraph (3) (herein called a "Preferred Director") shall continue to serve as such director for the full term for which he shall have been elected, notwithstanding that prior to the end of such term a default in preference dividends shall cease to exist. Any Preferred Director may be removed by, and shall not be removed except by, the vote of the holders of record of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for such director's election, voting together as a single class without regard to class or series, at a meeting of the stockholders, or of the holders of shares of the Corporation's preferred stock, called for that purpose. So long as a default in any preference dividends on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall exist (other than any Voting Preferred) (A) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (B)) by an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (B) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of the Corporation's preferred stock entitled to have originally voted for the removed director's election, voting together as a single class without regard to class or series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid shall be deemed for all purposes hereto to be a Preferred Director. Whenever the term of office of the Preferred Directors shall end and a default in preference dividends shall no longer exist, the number of directors constituting the Board shall be reduced by two. For purposes hereof, a "default in preference dividends" on any series of the Preferred Stock or any other class or series of preferred stock of the Corporation shall be deemed to have occurred whenever the amount of accrued dividends upon such class or series of the Corporation's preferred stock shall be equivalent to six full quarterly dividends or more, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all such shares of the Corporation's preferred stock of each and every series then outstanding (other than any Voting Preferred or shares of any class or series ranking junior to shares of this Series as to dividends) shall have been paid to the end of the last preceding quarterly dividend period. (g) Reacquired Shares. Shares of this Series which have been issued and reacquired through redemption or purchase shall, upon compliance with an applicable provision of the Rhode Island Business Corporation Act, have the status of authorized and unissued shares of Preferred Stock and may be reissued but only as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board. I-6 (h) Relation to Existing Preferred Classes of Stock. Shares of this Series are equal in rank and preference with all other series of the Preferred Stock outstanding on the date of original issue of the shares of this Series and are senior in rank and preference to the Common Stock and the Cumulative Participating Junior Preferred Stock of the Corporation. (i) Relation to Other Preferred Classes of Stock. For purposes of this resolution, any stock of any class or classes of the Corporation shall be deemed to rank: (1) prior to the shares of this Series, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of this Series; (2) on a parity with shares of this Series, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, be different from those of this Series, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the holders of shares of this Series; and (3) junior to the shares of this Series, either as to dividends or upon liquidation, if such class shall be Common Stock or if the holders of shares of this Series shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the holders of shares of such class or classes. IN WITNESS WHEREOF, this Certificate has been made under the seal of Fleet Financial Group, Inc., and has been signed by the undersigned, William C. Mutterperl, its Senior Vice President, and Marc C. Leslie, its Assistant Secretary, respectively, this 21st day of February, 1996. FLEET FINANCIAL GROUP, INC. [SEAL] By ................................... (Senior Vice President) By ................................... (Assistant Secretary) STATE OF MASSACHUSETTS COUNTY OF SUFFOLK In said County and State on this 21st day of February, 1996, personally appeared before me William C. Mutterperl and Marc C. Leslie, the Senior Vice President and Assistant Secretary, respectively, of Fleet Financial Group, Inc., to me known and known by me to be the parties executing the foregoing instrument, and they acknowledged said instrument by them executed to be their free act and deed and the free act and deed of said Fleet Financial Group, Inc. By ................................... Notary Public My Commission Expires: I-7 EX-3.(B) 3 EXHIBIT 3(b) FLEET FINANCIAL GROUP, INC. ------------------- BYLAWS ARTICLE 1. OFFICES. SECTION 1.01. Registered Office. The registered office of the Corporation in the State of Rhode Island shall be at No. 50 Kennedy Plaza, City of Providence, County of Providence. The name of the resident agent in charge thereof shall be William C. Mutterperl. SECTION 1.02. Other Offices. The Corporation may also have an office or offices in such other place or places either within or without the State of Rhode Island as the Board of Directors may from time to time determine or the business of the Corporation require. ARTICLE 2. MEETINGS OF STOCKHOLDERS. SECTION 2.01. Place of Meetings. All meetings of the stockholders of the Corporation shall be held at such place either within or without the State of Rhode Island as shall be fixed by the Board of Directors and specified in the respective notices or waivers of notice of said meetings. SECTION 2.02. Annual Meetings. (a) The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may come before the meeting shall be held at the principal office of the Corporation in the State of Rhode Island or such place as shall be fixed by the Board of Directors, as eleven o'clock in the forenoon, local time, on the second Wednesday in April in each year, if not a legal holiday at the place where such meeting is to be held, and, if a legal holiday, then on the next succeeding business day not a legal holiday at the same hour. (b) In respect of the annual meeting for any particular year the Board of Directors may, by resolution fix a different day, time or place (either within or without the State of Rhode Island) for the annual meeting. (c) If the election of directors shall not be held on the day designated herein or the day fixed by the Board, as the case may be, for any annual meeting, or on the day of any adjourned session thereof, the Board of Directors shall cause the election to be held at a special meeting as soon thereafter as conveniently may be. At such special meeting the stockholders may elect the directors and transact other business with the same force and effect as at an annual meeting duly called and held. SECTION 2.03. Special Meetings. A special meeting of the stockholders for any purpose or purposes properly brought before such meeting may be called at any time by the Chairman of the Board or President or by order of the Board of Directors pursuant to a resolution adopted by a majority of the Board. SECTION 2.04. Notice of Meetings. (a) Except as otherwise required by statute, notice of each annual or special meeting of the stockholders shall be given to each stockholder of record entitled to vote at such meeting not less than 10 days or more than 50 days before the day on which the meeting is to be held by delivering written notice thereof to him personally or by mailing such notice, postage prepaid, addressed to him at his post-office address last shown in the records of the Corporation or by transmitting notice thereof to him at such address by telegraph, cable or any other available method. Every such notice shall state the time and place of the meeting and, in case of a special meeting, shall state briefly the purposes thereof. (b) Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy or who shall, in person or by attorney thereunto authorized, waive such notice in writing or by telegraph, cable or any other available method either before or after such meeting. Notice of any adjourned meeting of the stockholders shall not be required to be given except when expressly required by law. SECTION 2.05. Quorum. (a) At each meeting of the stockholders, except where otherwise provided by statute, the Articles of Incorporation or these Bylaws, the holders of record of a majority of the issued and outstanding shares of stock of the Corporation entitled to vote at such meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business. (b) In the absence of a quorum a majority in interest of the stockholders of the Corporation entitled to vote, present in person or represented by proxy, or, in the absence of all such stockholders, any officer entitled to preside at, or act as secretary of, such meeting, shall have the power to adjourn the meeting from time to time, until stockholders holding the requisite amount of stock shall be present or represented. At any such adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting as originally called. SECTION 2.06. Organization. At each meeting of the stockholders the Chairman of the Board, the President, any Vice President, or any other officer designated by the Board of Directors, shall act as chairman, and the Secretary or an Assistant Secretary of the Corporation, or in the absence of the Secretary and all Assistant Secretaries, a person whom the chairman of such meeting shall appoint shall act as secretary of the meeting and keep the minutes thereof. SECTION 2.07. Voting. (a) Except as otherwise provided by law or by the Articles of Incorporation or these Bylaws, at every meeting of the stockholders each stockholder shall be entitled to one vote, in person or by proxy, for each share of capital stock of the Corporation registered in his name on the books of the Corporation: (i) on the date fixed pursuant to Section 9.03 of these Bylaws as the record date for the determination of stockholders entitled to vote at such meeting; or (ii) if no record date shall have been fixed, then the record date shall be at the close of business on the day next preceding the day on which notice of such meeting is given. (b) Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. In the case of stock held jointly by two or more executors, administrators, guardians, conservators, trustees or other fiduciaries, such fiduciaries may designate in writing one or more of their number to represent such stock and vote the shares so held, unless there is a provision to the contrary in the instrument, if any, defining their powers and duties. (c) Persons whose stock is pledged shall be entitled to vote thereon until such stock is transferred on the books of the Corporation to the pledgee, and thereafter only the pledgee shall be entitled to vote. (d) Any stockholder entitled to vote may do so in person or by his proxy appointed by an instrument in writing subscribed by such stockholder or by his attorney thereunto authorized, or by a telegram, cable or any other available method delivered to the secretary of the meeting; provided, however, that no proxy shall be voted after 11 months from its date, unless said proxy provides for a longer period. (e) At all meetings of the stockholders, all matters (except where other provision is made by law or by the Articles of Incorporation or these Bylaws) shall be decided by the vote of a majority in interest of the stockholders entitled to vote thereon, present in person or by proxy, at such meeting, a quorum being present. SECTION 2.08. Inspectors. The chairman of the meeting may at any time appoint two or more inspectors to serve at a meeting of the stockholders. Such inspectors shall decide upon the qualifications of voters, accept and count the vote for and against the questions presented, report the results of such 2 votes, and subscribe and deliver to the secretary of the meeting a certificate stating the number of shares of stock issued and outstanding and entitled to vote thereon and the number of shares voted for and against the questions presented. The inspectors need not be stockholders of the Corporation, and any director or officer of the Corporation may be an inspector on any question other an a vote for or against his election to any position with the Corporation or on any other question in which he may be directly interested. Before acting as herein provided each inspector shall subscribe an oath faithfully to execute the duties of an inspector with strict impartiality and according to the best of his ability. SECTION 2.09. List of Stockholders. (a) It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger to prepare and make, or cause to be prepared and made, at least 10 days before every meeting of the stockholders, a complete list of stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of stockholder. Such list shall be open during ordinary business hours to the examination of any stockholder for any purpose germane to the meeting for a period of at least 10 days prior to the election, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. (b) Such list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. (c) Upon the willful neglect or refusal of the directors to produce such list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. (d) The stock ledger shall be conclusive evidence as to who are the stockholders entitled to examine the stock ledger and the list of stockholders required by this Section 2.09 on the books of the Corporation or to vote in person or by proxy at any meeting of stockholders. SECTION 2.10. Introduction of Business at a Meeting of Stockholders. (a) At an annual or special meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before an annual or special meeting of stockholders. To be properly brought before an annual or special meeting of stockholders, business must be (i) in the case of a special meeting, specified in the notice of the special meeting (or any supplement thereto) given by the officer of the Corporation calling such meeting or by or at the direction of the Board, or (ii) in the case of an annual meeting, properly brought before the meeting by or at the director of the Board, or otherwise properly brought before the annual meeting by a stockholder. For business to be properly brought before an annual meeting of stockholders by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to the Secretary of the Corporation, or mailed to and received at the principal executive offices of the Corporation, or mailed to and received at the principal executive officers of the Corporation by the Secretary, not less than 30 days prior to the date of the annual meeting; provided, however, that if less than 40 days' notice or prior public disclosures of the date of the annual meeting is given or made to stockholders, notice by the stockholder to be timely must be so delivered or received not later than the close of business on the 7th day following the earlier of (i) the day on which such notice of the date of the meeting was mailed, or (ii) the day on which such public disclosure was made. (b) A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before an annual meeting stockholders (i) 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, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business and any other stockholders known by such stockholder to be supporting such proposal, (iii) the class and number of shares of the Corporation which are beneficially owned by such stockholder on the date of such stockholder's notice and by any other stockholders known by such stockholder to be supporting such proposal on the date of such stockholder's notice, and (iv) any material interest of the stockholder in such proposal. 3 (c) Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a meeting of stockholders except in accordance with the procedures set forth in this Section 2.10. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that the business was not properly brought before the meeting in accordance with the procedures prescribed by the Bylaws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. ARTICLE 3. BOARD OF DIRECTORS. SECTION 3.01. General Powers. The business, property and affairs of the Corporation shall be managed by the Board of Directors. SECTION 3.02. Number and Qualifications. (a) The number of directors of the Corporation, which shall constitute the whole Board of Directors, shall be determined in accordance with the provisions of Article SEVENTH of the Articles of Incorporation. (b) A director need not be a stockholder. (c) No person shall be elected a director who has attained the age of 68 and no person shall continue to serve as a director after the date of the first meeting of the stockholders of the Corporation held on or after the date on which such person attains the age of 68; provided, however, any director serving on the Board as of December 20, 1995 who has attained the age of 65 on or prior to such date shall be permitted to continue to serve as a director until the date of the first meeting of the stockholders of the Corporation held on or after the date on which such person attains the age of 70. SECTION 3.03. Classes, Elections and Term. The Board of Directors shall be divided into three classes, shall be nominated in accordance with the provisions of Section 3.15 of this Article 3, and shall be elected and shall serve terms in accordance with the provisions of Article SEVENTH of the Articles of Incorporation. SECTION 3.04. Quorum and Manner of Acting. (a) Except as otherwise provided by statute or by the Articles of Incorporation, a majority of the directors at the time in office shall constitute a quorum for the transaction of business at any meeting and the affirmative action of a majority of the directors present at any meeting at which a quorum is present shall be required for the taking of any action by the Board of Directors. (b) In the event the Secretary is informed that one or more of the directors shall be disqualified to vote at such meeting, then the required quorum shall be reduced by one for each such director so absent or disqualified; provided, however, that in no event shall the quorum as adjusted be less than one-third of the total number of directors. (c) In the absence of a quorum at any meeting of the Board such meeting need not be held; or a majority of the directors present thereat or, if no director be present, the Secretary may adjourn such meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. SECTION 3.05. Offices, Place of Meetings and Records. The Board of Directors may hold meetings, have an office or offices and keep the books and records of the Corporation at such place or places within or without the State of Rhode Island as the Board may from time to time determine. The place of meeting shall be specified or fixed in the respective notices or waivers of notice thereof, except where otherwise provided by statute by the Articles of Incorporation or these Bylaws. Meetings of the Board of Directors or any committee of Directors, including without limitation the Executive Committee, may be held by means of a telephone conference circuit and connection with such circuit shall constitute presence at such meetings. 4 SECTION 3.06. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable following each annual election of directors. Such meeting shall be called and held at the place and time specified in the notice or waiver of notice thereof as in the case of a special meeting of the Board of Directors. SECTION 3.07. Regular Meetings. Regular meetings of the Board of Directors shall be held at such places and at such times as the Board shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at said place at the same hour on the next succeeding business day. Notice of regular meetings need not be given. SECTION 3.08. Special Meetings; Notice. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board or the President or by any five of the directors. Notice of each said meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be sent to him at his residence or at such place of business by telegraph, cable or other available means, or shall be delivered personally or by telephone, not later than one day before the day on which the meeting is to be held. Each such notice shall state the time and place of the meeting but need not state the purposes thereof except as otherwise herein expressly provided. Notice of any such meeting need not be given to any director, however, if waived by him in writing or by telegraph, cable or otherwise, whether before or after such meeting shall be held, or if he shall be present at such meeting. SECTION 3.09. Organization. At each meeting of the Board of Directors, the Chairman of the Board or, in his absence, the President, or in the absence of each of them, a director chosen by a majority of the directors present shall act as chairman. The Secretary or, in his absence, an Assistant Secretary or, in the absence of the Secretary and all Assistant Secretaries, a person whom the chairman of such meeting shall appoint shall act as secretary of such meeting and keep the minutes thereof. SECTION 3.10. Order of Business. At all meetings of the Board of Directors business shall be transacted in the order determined by the Board. SECTION 3.11. Removal of Directors. Any one or more directors of the Corporation may be removed at any time, but only in accordance with the provisions of Article SEVENTH of the Articles of Incorporation. SECTION 3.12. Resignation. Any director of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, to the Chairman of the Board, the President, any Vice President or the Secretary of the Corporation. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, in acceptance of such resignation shall not be necessary to make it effective. SECTION 3.13. Vacancies and Newly Created Directorships. Vacancies and newly created directorships shall be filled only in accordance with the provisions of Article SEVENTH of the Articles of Incorporation. SECTION 3.14. Compensation. Each director, in consideration of his serving as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at directors' meetings, or both, as the Board of Directors shall from time to time determine, together with reimbursement for the reasonable expenses incurred by him in connection with the performance of his duties; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving proper compensation therefor. 5 SECTION 3.15. Nomination of Directors. (a) Only persons nominated in accordance with the procedures set forth in this Section shall be eligible for election as directors. Nominations of persons for election to the Board may be made at a meeting of stockholders (i) by or at the direction of the Board, or (ii) by any stockholder of the Corporation entitled to vote for the election of directors at such meeting who complies with the notice procedures set forth in this Section 3.15. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to the Secretary, or mailed to and received at the principal executive offices of the Corporation by the Secretary, not less than 30 days prior to the date of a meeting; provided, however, that if fewer than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so delivered or received not later than the close of business on the 7th day following the earlier of (i) the day on which such notice of the date of such meeting was mailed, or (ii) the day on which such public disclosure was made. (b) A stockholder's notice to the Secretary shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director (w) the name, age, business address and residence address of such person, (x) the principal occupation or employment of such person, (y) the class and number of shares of the Corporation which are beneficially owned by such person on the date of such stockholder's notice (z) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the stockholder giving the notice (x) the name and address, as they appear on the Corporation's books, of such stockholder and any other stockholders known by such stockholder to be supporting such nominees and (y) the class and number of shares of the Corporation which are beneficially owned by such stockholder on the date of such stockholder's notice and by any other stockholders known by such stockholder to be supporting such nominees on the date of such stockholder's notice. (c) No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.15. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE 4. COMMITTEES. SECTION 4.01. Executive Committee. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, appoint an Executive Committee to consist of not less than three nor more than ten members of the Board of Directors, including the Chairman of the Board and the President, and shall designate one of the members as its chairman. Notwithstanding any limitation on the size of the Executive Committee, the Committee may invite members of the Board to attend one at a time at its meetings. For the purpose of the meeting he so attends, the invited director shall be entitled to vote on matters considered at such meeting and shall receive the Executive Committee fee for such attendance. At any time one additional director may be invited to an Executive Committee meeting in addition to the rotational invitee and, in such case, such additional invitee shall also be entitled to vote on matters considered at such meeting and shall receive the Executive committee fee for such attendance. 6 Each member of the Executive Committee shall hold office, so long as he shall remain director, until the first meeting of the Board of Directors held after the next annual election of directors and until his successor is duly appointed and qualified. The chairman of the Executive Committee or, in his absence, a member of the Committee chosen by a majority of the members present shall preside at meetings of the Executive Committee and the Secretary or an Assistant Secretary of the Corporation, or such other person as the Executive Committee shall from time to time determine, shall act as secretary of the Executive Committee. The Board of Directors, by action of the majority of the whole Board, shall fill vacancies in the Executive Committee. SECTION 4.02. Powers. During the intervals between the meetings of the Board of Directors, the Executive Committee shall have and may exercise all of the powers of the Board of Directors in all cases in which specific directions shall not have been given by the Board of Directors. SECTION 4.03. Procedure; Meetings; Quorum. The Executive Committee shall fix its own rules of procedure subject to the approval of the Board of Directors, and shall meet at such times and at such place or places as may be provided by such rules. At every meeting of the Executive Committee the presence of a majority of all the members shall be necessary to constitute a quorum and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution. In the absence of a quorum at any meeting of the Executive Committee such meeting need not be held; or a majority of the members present thereat or, if no members be present, the secretary of the meting may adjourn such meeting from time to time until a quorum be present. SECTION 4.04. Compensation. Each member of the Executive Committee shall be entitled to receive from the Corporation such fee, if any, as shall be fixed by the Board of Directors, together with reimbursement for the reasonable expenses incurred by him in connection with the performance of his duties. SECTION 4.05. Other Board Committees. The Board of Directors may, from time to time, by resolution passed by a majority of the whole Board, designate one or more committees in addition to the Executive Committee, each committee to consist of two or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution or in the Bylaws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have power to change the members of any committee at any time, to fill vacancies and to discharge any such committee, either with or without cause, at any time. SECTION 4.06. Alternates. The Chairman of the Board or the President may designate one or more directors as alternate members of any committee who may act in the place and stead of members who temporarily cannot attend any such meeting. SECTION 4.07. Additional Committees. The Board of Directors may from time to time create such additional committees of directors, officers, employees or other persons designated by it (or any combination of such persons) for the purpose of advising the Board, the Executive Committee and the officers and employees of the Corporation in all such matters as the Board shall deem advisable and with such functions and duties as the Board shall by resolutions prescribe. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have power to change the members of any committee at any time, to fill vacancies and to discharge any such committee, either with or without cause, at any time. 7 ARTICLE 5 ACTIONS BY CONSENT. SECTION 5.01. Consent by Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if prior to such action a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the Board of such committee. SECTION 5.02. Consent by Stockholders. Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting upon the written consent of the holders of shares of stock entitled to vote who hold the number of shares which in the aggregate are at least equal to the percentage of the total vote required by statute or the Articles of Incorporation or these Bylaws for the proposed corporate action, and provided that prompt notice of such action shall be given to all stockholders who would have been entitled to vote upon the action if such meeting were held. ARTICLE 6. OFFICERS. SECTION 6.01. Number. The principal offices of the Corporation shall be a Chairman of the Board, a President, one or more Vice Presidents (the number thereof and variations in title to be determined by the Board of Directors), a Treasurer and a Secretary. In addition, there may be such other or subordinate officers, agents and employees as may be appointed in accordance with the provision of Section 6.03. Any two or more offices, except those of President and Secretary, may be held by the same person. SECTION 6.02. Election, Qualifications and Term of Office. Each officer of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 6.03, shall be elected annually by the Board of Directors and shall hold office until his successor shall have been duly elected and qualified, or until his death, or until he shall have resigned or shall have been removed in the manner herein provided. The Chairman of the Board and the President shall be and remain directors. SECTION 6.03. Other Officers. The Corporation may have such other officers, agents and employees as the Board of Directors may deem necessary, including a Controller, one or more Assistant Controllers, one or more Assistant Treasurers, and one or more Assistant Secretaries, each of whom shall hold office for such period, have such authority, and perform such duties as the Board of Directors or the President may from time to time determine. The Board of Directors may delegate to any principal officer the power to appoint or remove any such subordinate officers, agents or employees. SECTION 6.04. Mandatory Retirement. No officer of the Corporation shall continue to hold office beyond the first day of the month following or coinciding with his attaining age 65, unless the Board of Directors specifically authorizes such continuance on a year-to-year basis. SECTION 6.05. Removal. Any officer may be removed, either with or without cause, by a vote of a majority of the whole Board of Directors or, except in case of any officer elected by the Board of Directors, by any committee or officer upon whom the power of removal may be conferred by the Board of Directors. 8 SECTION 6.06. Resignation. Any officer may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board or the President. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6.07. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filed for the unexpired portion of the term in the manner prescribed in these Bylaws for regular election or appointment to such office. SECTION 6.08. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors. Subject to definition by the Board of Directors, he shall have general executive powers and such specific powers and duties as from time to time may be conferred upon or assigned to him by the Board of Directors. SECTION 6.09. President. The President shall preside at all meetings of the Board of Directors if there be no Chairman or if the Chairman be absent. Subject to the definition by the Board of Directors, he shall have general executive powers and such specific powers and duties as from time to time may be conferred upon or assigned to him by the Board of Directors. SECTION 6.10. Vice Presidents. Each Vice President shall have such powers and perform such duties as the Board of Directors or the Executive Committee may from time to time prescribe or as shall be assigned to him by the President. SECTION 6.11. Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation, and shall deposit all such funds to the credit of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of these Bylaws; he shall disburse the funds of the Corporation as may be ordered by the Board of Directors or the Executive Committee, making proper vouchers for such disbursements, and shall render to the Board of Directors or the stockholders, whenever the Board may require him so to do, a statement of all his transactions as Treasurer or the financial condition of the Corporation; and, in general, he shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors, any committee of the Board designated by it so to act or the President. SECTION 6.12. Secretary. The Secretary shall record or cause to be recorded in books provided for the purpose the minutes of the meetings of the stockholders, the Board of Directors, and all committees of which a secretary shall not have been appointed; shall see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law; shall be custodian of all corporate records (other than financial) and of the seal of the Corporation and see that the seal is affixed to all documents the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these Bylaws; shall keep, or cause to be kept, the list of stockholders as required by Section 2.09, which include post-office addresses of the stockholders and the number of shares held by them, respectively, and shall make or cause to be made, all proper changes therein, shall see that the books, reports, statements, certificates and all other documents and records required by law are properly kept and filed; and, in general, shall perform all duties incident to the office of Secretary and such other duties as may from time to time be assigned to him by the Board of Directors, the Executive Committee or the President. SECTION 6.13. Salaries. The salaries of the principal officers of the Corporation shall be fixed from time to time by the Board of Directors or a special committee thereof, and none of such officers shall be prevented from receiving a salary by reason of the fact that he is a director of the Corporation. 9 ARTICLE 7. INDEMNIFICATION SECTION 7.01. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter, a "proceeding"), by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director, officer, employee or agent of the Corporation or, while a director, officer, employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of any foreign or domestic corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, whether the basis of such proceeding is alleged action (or failure to act) in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the Rhode Island General Laws, as the same shall exist from time to time (but, in the case of an amendment to said General Laws, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said General Laws permitted the Corporation to provide prior to such amendment) against all expenses, liability and loss (including judgments, penalties, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees) actually incurred by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of such person's heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Such right shall be a contract right and shall include the right to be paid by the Corporation for expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Rhode Island General Laws so require, the payment of such expenses incurred by a director, officer, employee or agent in such person's capacity as a director, officer, employee or agent of the Corporation (and not in any other capacity in which service was or is rendered by such person while a director, officer, employee or agent, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the Corporation by the indemnified party of a written affirmation of such party's good faith belief that such party has met the applicable standards of conduct and of an undertaking, by or on behalf of such party, to repay all amounts so advanced if it shall ultimately be determined that such party is not entitled to be indemnified under this Section 7.01 or otherwise. Determinations and authorizations of payment under this Section 7.01 shall be made in the same manner as the determination that indemnification is permissible. SECTION 7.02. Right of Claimant to Bring Suit. If a claim under Section 7.01 is not paid in full by the Corporation within 90 days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce the claim for expenses incurred in defending any proceeding in advance of its final disposition where the required written affirmation and undertaking has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Rhode Island General Laws for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense by clear and convincing evidence shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its stockholders or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances, nor an actual determination by the Corporation (including its 10 Board of Directors, its stockholders or independent legal counsel) that the claimant has not met such applicable standards of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standards of conduct. SECTION 7.03. Non-Exclusivity of Rights. The rights conferred on any person by Sections 7.01 and 7.02 of this Article 7 shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provisions of the Articles of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 7.04. Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the Corporation, or who, while a director, officer, employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of any foreign or domestic corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, against any such expenses, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expenses, liability or loss under the Rhode Island General Laws. ARTICLE 8. CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 8.01. Execution of Contracts. Unless the Board of Directors or the Executive Committee shall otherwise determine, the Chairman of the Board, the President, any Vice President or Treasurer and the Secretary or any Assistant Secretary may enter into any contracts or execute any contract or other instrument, the execution of which is not otherwise specifically provided for, in the name and on behalf of the Corporation. The Board of Directors, or any committee designated thereby with power so to act, except as otherwise provided in these Bylaws, may authorize any other or additional officer or officers or agent or agents of the Corporation to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation, and such authorized may be general or confined to specific instances. Unless authorized so to do by these Bylaws or by the Board of Directors or by any such committee, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniary for any purpose or to any amount. SECTION 8.02. Loans. No loan shall be contracted on behalf of the Corporation, and no evidence of indebtedness shall be issued, endorsed or accepted by its name, unless authorized by the Board of Directors or Executive Committee or other committee designated by the Board so to act. Such authority may be general or confined to specific instances. When so authorized, the officer or officers thereunto authorized may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, executive and deliver promissory notes or other evidences of indebtedness and liabilities of the Corporation, may mortgage, pledge, hypothecate or transfer any real or personal property at any time owned or held by the Corporation, and to that end execute instruments of mortgage or pledge or otherwise transfer such property. SECTION 8.03. Checks, Drafts, Etc. All checks, drafts, bills of exchange or other orders for the payment of money, obligations, notes, or other evidence of indebtedness, bills of lading, warehouse receipts and insurance certificates of the Corporation, shall be signed or endorsed by such officer or officers, agent or agents, attorney or attorneys, employee or employees, of the Corporation as shall from time to time be determined by resolution of the Board of Directors or Executive Committee or other committee designated by the Board so to act. 11 SECTION 8.04. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors or Executive Committee or other committee designated by the Board so to act may from time to time designate, or as may be designated by any officer or officers or agent or agents of the Corporation to whom such power may be delegated by the Board of Directors or Executive Committee or other committee designated by the Board so to act and, for the purpose of such deposit and for the purposes of collection for the account of the Corporation, all checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by any officer, agent or employee of the Corporation or in such manner as may from time to time be designated or determined by resolution of the Board of Directors or Executive Committee or other committee designated by the Board so to act. SECTION 8.05. Proxies in Respect of Securities of Other Corporations. Unless otherwise provided by resolution adopted by the Board of Directors or the Executive Committee or other committee so designated to act by the Board, the Chairman of the Board or the President or any Vice President may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast votes which the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation, association or trust any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, association or trust, or to consent in writing, in the name of the Corporation as such holder to any action by such other corporation, association or trust, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises. ARTICLE 9. BOOKS AND RECORDS. SECTION 9.01. Place. The books and records of the Corporation may be kept at such places within or without the State of Rhode Island as the Board of Directors from time to time may determine. The stock record books and the blank stock certificate books shall be kept by the Secretary or by any other officer or agent designated by the Board of Directors. SECTION 9.02. Addresses of Stockholders. Each stockholder shall furnish to the Secretary of the Corporation or to the transfer agent of the Corporation an address at which notices of meetings and all other corporate notices may be served upon or mailed to him, and if any stockholder shall fail to designate such address, corporate notices may be served upon him by mail, postage prepaid, to him at his post-office address last known to the Secretary or to the transfer agent of the Corporation or by transmitting a notice thereof to him at such address by telegraph, cable or other available method. SECTION 9.03. Record Dates. The Board of Directors may fix in advance a date, not exceeding 60 days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of any rights, or the date when any change or conversion or exchange of capital stock of the Corporation shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting or any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect to any change, conversion or exchange of capital stock of the Corporation, or to give such consent, and in each case such stockholders of record on the date so fixed shall be entitled to notice of, or to vote at, such meeting and any adjournment thereof, or to 12 receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. SECTION 9.04. Audit of Books and Accounts. The books and accounts of the Corporation shall be audited at least once in each fiscal year by certified public accountants of good standing selected by the Board of Directors. ARTICLE 10. SHARES AND THEIR TRANSFER. SECTION 10.01. Certificates of Stock. Every owner of stock of the Corporation shall be entitled to have a certificate certifying the number of shares owned by him in the Corporation and designating the class of stock to which such shares belong, which shall otherwise be in such form as the Board of Directors shall prescribe. Each such certificate shall be signed by the Chairman of the Board or the President or a Vice President and the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Corporation; provided, however, that where such certificate is signed or countersigned by a transfer agent or registrar the signatures of such officers of the Corporation and the seal of the Corporation may be in facsimile form. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered by the Corporation as though the person or persons who signed such certificate or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Corporation. SECTION 10.02. Record. A record shall be kept of the name of the person, firm or corporation owning the stock represented by each certificate for stock of the Corporation issued, the number of shares represented by each such certificate, the date thereof, and, in the case of cancellation, the date of cancellation. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards to the Corporation. SECTION 10.03. Transfer of Stock. Transfer of shares of stock of the Corporation shall be made on the books of the Corporation only by the registered holder thereof, or by his attorney thereunto authorized, and on the surrender of the certificate or certificates for such shares properly endorsed. SECTION 10.04. Transfer Agent and Registrar; Regulations. The Corporation shall, if and whenever the Board of Directors or Executive Committee shall so determine, maintain one or more transfer offices or agencies, each in charge of a transfer agent designated by the Board of Directors, where the shares of the capital stock of the Corporation shall be directly transferable, and also if and whenever the Board of Directors shall so determine, maintain one or more registry offices, each in charge of a registrar designated by the Board of Directors, where such shares of stock shall be registered. The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificate for shares of the capital stock of the Corporation. SECTION 10.05. Lost, Destroyed or Mutilated Certificates. In case of the alleged loss or destruction or the mutilation of a certificate representing capital stock of the Corporation, a new certificate may be issued in place thereof, in the manner and upon such terms as the Board of Directors may prescribe. 13 ARTICLE 11. SEAL. The Board of Directors shall provide a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and the words and figures "Incorporated 1970, Rhode Island". ARTICLE 12 FISCAL YEAR. The fiscal year of the Corporation shall be the calendar year. ARTICLE 13. WAIVER OF NOTICE. Whenever any notice whatever is required to be given by statute, these Bylaws or the Articles of Incorporation, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time state therein, shall be deemed equivalent thereto. ARTICLE 14. AMENDMENTS. These Bylaws may be altered, amended or repeated in whole or in part, and new Bylaws may be adopted in whole or in part, only by the affirmative vote of 80% of the Board of Directors and a majority of the Continuing Directors (as defined in Article SEVENTH of the Articles of Incorporation) or by the stockholders as provided in the Articles of Incorporation and applicable law. No amendment may be made unless the Bylaw, as amended, is consistent with the requirements of law and the Articles of Incorporation. 14 EX-10.(A) 4 EXHIBIT 10(a) FLEET FINANCIAL GROUP, INC. Schedule of Persons who have entered into Change in Control Contracts A. Benefit - 3x Base Plus Bonus: David L. Eyles Robert J. Higgins Eugene M. McQuade Terrence Murray William C. Mutterperl Thomas O'Neill John B. Robinson H. Jay Sarles M. Anne Szostak Michael R. Zucchini B. Benefit - 2x Base Plus Bonus: Anne Finucane Peter C. Fitts Richard Higginbotham Anne M. Slattery Robert B. Hedges AMENDED AND RESTATED AGREEMENT AMENDED AND RESTATED AGREEMENT by and between FLEET FINANCIAL GROUP, INC., a Rhode Island corporation (the "Company"), and _______________ (the "Executive"), dated as of the _____ day of ____________, 199__. WHEREAS, the Board of Directors of the Company (the "Board") previously determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined in Section 2) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other bank holding companies. Therefore, in order to accomplish these objectives, the Board caused the Company to enter into an Agreement with the Executive dated as of ______________, 199__ (the "Original Agreement"). WHEREAS, the Human Resources and Planning Committee of the Board of Directors has approved certain amendments to the Original Agreement, and the parties hereto desire to amend and restate the Original Agreement in its entirety. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section 1(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Company is terminated or the Executive ceases to be an officer of the Company prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (2) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" is the period commencing on the date hereof and ending on the earlier to occur of (x) the third anniversary of such date and (y) the Executive's normal retirement under the Fleet Financial Group, Inc. Pension Plan ("Normal Retirement Date"); provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and 2 each annual anniversary thereof is hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be automatically extended without any further action by the Company or the Executive so as to terminate three years from such Renewal Date; provided, however, that if either the Company or the Executive shall give notice in writing to the other, 120 days prior to the Renewal Date, stating that the Change of Control Period shall not be extended, then the Change of Control Period shall expire three years from the last effective Renewal Date. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock"); provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries, of 25% or more of the Outstanding Company Common Stock shall not constitute a Change of Control; and provided, further that any acquisition by a corporation with respect to which, following such acquisition, more than 50% of the then outstanding shares of common stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such acquisition in substantially the same proportion as their ownership immediately prior to such acquisition of the Outstanding Company Common Stock, shall not constitute a Change of Control; or (b) Individuals who, as of the date of this Agreement, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (c) Consummation of a reorganization, merger, consolidation, sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, more than 50% of the 3 then outstanding shares of common stock of the corporation resulting from such a Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries). (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a Change of Control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a corporation or other entity in which the Executive has a greater than ten percent (10%) direct or indirect equity interest, such event shall not constitute a Change of Control. 3. Employment Period. Subject to the terms and conditions hereof, the Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the period commencing on the Effective Date and ending on the earlier to occur of (x) the last day of the twenty-fourth month following the month in which the Effective Date occurs, and (y) the Executive's Normal Retirement Date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's 4 responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a bi-weekly rate, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" includes any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the average annualized (for any fiscal year consisting of less than twelve full months or with respect to which the Executive has been employed by the Company for less than twelve full months) bonus (the "Average Annual Bonus") paid or payable to the Executive by the Company and its affiliated companies in respect of the three fiscal years immediately preceding the fiscal year in which the Effective Date occurs. Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to deferral plans of the Company. (iii) Incentive, Savings and Retirement Plans. In addition to Annual Base Salary and Annual Bonus payable as hereinabove provided, the Executive shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans, practices, policies and programs applicable to other peer executives of the Company and its affiliated companies, 5 but in no event shall such plans, practices, policies and programs provide the Executive with incentive, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the one-year period immediately preceding the Effective Date. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) and applicable to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect at any time during the one-year period immediately preceding the Effective Date. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect at any time during the one-year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect at any time during the one-year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the one-year period immediately preceding the Effective Date or, if more favorable to the Executive, as provided at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 6 (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect at any time during the one-year period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability" set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Executive's employment during the Employment Period for "Cause". For purposes of this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Company, (ii) repeated violations by the Executive of the Executive's obligations under Section 4(a) of this Agreement which are demonstrably willful and deliberate on the Executive's part and which are not remedied in a reasonable period of time after receipt of written notice from the Company or (iii) the conviction of the Executive of a felony involving moral turpitude. (c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which 7 results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) hereof; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30 day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) Notice of Termination. Any termination by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing the Executive's rights hereunder. (e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; provided, however, that (i) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (ii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 8 6. Obligations of the Company Upon Termination. (a) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than the sum of the following obligations: (i) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (ii) the product of (A) the greater of (x) the Annual Bonus paid or payable (and annualized for any fiscal year consisting of less than 12 full months or for which the Executive has been employed for less than 12 full months) to the Executive for the most recently completed fiscal year during the Employment Period, if any, and (y) the Average Annual Bonus (such greater amount hereafter referred to as the "Highest Annual Bonus") and (B) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (iii) any accrued vacation pay not yet paid by the Company (the amounts described in subparagraphs (i), (ii) and (iii) are hereafter referred to as "Accrued Obligations"). All Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company and any of its affiliated companies to surviving families of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to family death benefits, if any, as in effect with respect to other peer executives and their families at any time during the one-year period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their families. (b) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations. All Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect with respect to other peer executives and their families at any time during the one-year period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families. (c) Cause; Other Than for Good Reason. If the Executive's employment shall be terminated for Cause or other than for Good Reason during the 9 Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination to the extent theretofore unpaid. In such case, such amounts shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. (d) Good Reason; Other Than for Cause or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability, or if the Executive shall terminate employment under this Agreement for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. all Accrued Obligations; and B. an amount equal to the product of (x) [three][two] and (y) the sum of (i) Annual Base Salary and (ii) the Highest Annual Bonus; and C. a lump sum retirement benefit equal to the difference between (a) the actuarial equivalent of the benefit under the Fleet Financial Group, Inc. Pension Plan (the "Pension Plan"), as supplemented by the Retirement Income Assurance Plan or any successor to such plan (the "RIAP") and the Supplemental Executive Retirement Plan or any successor to such plan (the "SERP"; and together with the RIAP and the Pension Plan, collectively referred to as the "Retirement Plans"), which the Executive would receive if the Executive was fully vested in the Retirement Plans and the Executive's employment continued for [three][two] years after the Date of Termination, provided, however, that the [three][two] additional years shall be credited to the Executive solely for purposes of calculating years of service accrued under the Retirement Plans, but shall not be included for purposes of determining the Executive's age and final average salary under the Retirement Plans, and (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plans; and D. the Executive shall be entitled to receive a lump-sum payment equal to (i) the employer matching contributions that the Company would have made on the Executive's behalf to the Fleet Financial Group, Inc. Savings Plan or other similar or successor plan (the "Savings Plan") and the Executive Supplemental Plan (assuming the maximum employer matching contribution permitted under each of the Savings Plan and Executive Supplemental Plan) if the Executive's 10 employment continued at the compensation level provided for in Section 4(b)(i) for [three][two] years, plus (ii) the amount, if any, of his account in the Savings Plan which is forfeitable on the Date of Termination; and (ii) for [three][two] years after the Executive's Date of Termination, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided in accordance with the applicable plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement as if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families. For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until [three][two] years after the Date of Termination and to have retired on the last day of such period; and 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices, provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other agreements with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement. 8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to Section 9 of this Agreement), plus in each case interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended (the "Code"). 11 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to the Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG Peat Marwick unless such firm shall be the accounting firm of the Company or any affiliate of the Company at the Date of Termination, in which case such determinations shall be made by an accounting firm of national standing agreed to by the Company and the Executive (which may be KPMG Peat Marwick if agreed to by the Executive), or, if the Company does not so agree within 10 days of the Date of Termination, such an accounting firm shall be selected by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the date such firm is selected or such earlier time as is reasonably requested by the Company. All fees and expenses to the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the 12 application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by an Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive receives written notification of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, provided, however, that the Company's selection of one or more attorneys to provide legal representation with respect to such claim shall be subject to the Executive's prior written approval; (iii) cooperate with the Company in good faith in order to contest such claim effectively; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole 13 option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive' s employment with the Company, the Executive shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 14 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Rhode Island, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: [Executive's Name] [Address] If to the Company: Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, RI 02903 Attention: General Counsel or such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. 15 (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (f) This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof and by entering into this Agreement the Executive waives all rights he may have under the Company's separation policy. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. _____________________________ [Executive's Name] FLEET FINANCIAL GROUP, INC. By___________________________ 16 EX-10.(B) 5 EXHIBIT 10(b) FLEET FINANCIAL GROUP, INC. 50 Kennedy Plaza Providence, Rhode Island 02903 February 20, 1995 Mr. Joel B. Alvord Chairman Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Dear Mr. Alvord: Fleet Financial Group, Inc. (together with its subsidiaries, hereinafter referred to as the "Company"), considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of the Company's management personnel to the detriment of the Company and its shareholders. The Company further recognizes that the financial services industry is currently undergoing structural and legislative changes, with the expectation of further changes in the future. These changes would tend to exacerbate the uncertainty among management that a change of control might create. Accordingly, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including yourself, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a change in control. In order to induce you to remain in the employ of the Company after consummation of the Merger of Shawmut National Corporation ("Shawmut") with and into the Company pursuant to the Agreement and Plan of Merger, dated as of February 20, 1995 (the "Merger Agreement"), and in consideration of your agreement set forth in Section 2(ii) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Company terminates subsequent to a "change in control" (as defined in Section 2 hereof) under the circumstances set forth below. 1. TERM. This Agreement shall commence on the date on which the Effective Time (as defined in the Merger Agreement) occurs (the "Effective Date") and shall continue until December 31, 1997; provided, however, that commencing on January 1, 1997 and each January 1st thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 30 days prior to such January 1st, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further, that the term of this Agreement shall expire on your 65th birthday; and provided, further, that if a change in control (as defined in Section 2) occurs during the term provided herein, this Agreement shall remain in effect for an additional two years from the date of such change in control (but not later than your 65th birthday). It is understood that this Agreement does not prohibit the Company from terminating your employment at any time, subject to providing the severance benefits hereinafter specified in accordance with the terms hereof. Notwithstanding the foregoing, if the Effective Time does not occur, this Agreement shall be of no force or effect. 2 2. CHANGE IN CONTROL. (i) For purposes of this Agreement, a "change in control" shall mean (A) the acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock"); provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the corporation or its subsidiaries of 25% or more of Outstanding Company Common Stock shall not constitute a Change in Control; and provided, further, that any acquisition by a corporation with respect to which, following such acquisition, more than 50% of the then outstanding shares of common stock of such corporation, is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition of the Outstanding Company Common Stock, shall not constitute a Change of Control; or (B) persons who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such 3 individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (C) approval by the stockholders of the Company of (i) a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock of the corporation resulting from such a reorganization, merger or consolidation, (ii) a complete liquidation or dissolution of the Company or (iii) the sale or other disposition of all or substantially all of the assets of the Company. Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a change of control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a corporation or other entity in which the Executive has a greater than ten percent (10%) direct or indirect equity interest, such event shall not constitute a change of control. (ii) For purposes of this Agreement, a "potential change in control" shall be deemed to have occurred if (A) the Company enters into an agreement, the consummation of which would result in the occurrence of a change in control; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if 4 consummated would constitute a change in control; (C) any person (other than the Company) becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the combined voting power of the Outstanding Company Common Stock; or (D) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control has occurred. You agree that, subject to the terms and conditions of this Agreement, in the event of a potential change in control, you will remain in the employ of the Company for a period of at least six (6) months from the occurrence of such potential change in control or, if earlier, until a change in control. 3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events described in Section 2 hereof constituting a change in control shall have occurred and if your employment subsequently terminates at any time within two years from the date of such change in control, you shall be entitled to the benefits provided in Section 4 hereof unless such termination is (A) because of your death, (B) by the Company for Cause or Disability, or (C) by you other than for Good Reason. The following definitions shall apply in connection with a termination of your employment: (i) Disability. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from your duties with the Company on a full time basis for six consecutive months, and within 30 days after written Notice of Termination (as defined in Section 3(iv) hereof) is given you shall not have returned to the performance of your duties on a full time basis, the Company shall be entitled to terminate your employment for "Disability." 5 (ii) Cause. The Company shall be entitled to terminate your employment for Cause. for the purposes of this Agreement, the Company shall have "Cause" to terminate your employment hereunder upon (A) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure resulting from your termination for Good Reason), for a period of at lest ten days after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the board believes that you have not substantially performed your duties, or (B) the willful engaging by you in gross misconduct which is demonstrably and substantially injurious to the Company. For purposes of this subsection, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you (i) a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding you in the event you are a member of the Board) at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the 6 first sentence of this subsection and specifying the particulars thereof in detail; and (ii) an affidavit sworn to by the Assistant Secretary of the Company stating that such resolution was in fact adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding you in the event you are a member of the Board) and that you were found guilty of conduct set forth in clauses (A) or (B) of the first sentence of this subsection and specifying the particulars thereof in detail. (iii) Good Reason. You shall be entitled to terminate your employment for Good Reason at any time within two years from the date of a change in control. For purposes of this Agreement, "Good Reason" shall exist if you shall determine that due to a change in control you are not able effectively to discharge your duties. Your right to terminate your employment pursuant to this subsection shall not be affected by your incapacity due to physical or mental illness. (iv) Notice of Termination. Any termination by the Company pursuant to Section 3(i) or 3(ii) hereof or by you pursuant to Section 3(iii) hereof shall be communicated by written Notice of Termination to the other party hereto; provided that, in the case of a termination for Cause, there shall also have been delivered to you the other documents required to be delivered pursuant to Section 3(ii) above. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and 7 circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (v) Date of Termination, Etc. "Date of Termination" shall mean (A) if this Agreement terminates for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such 30 day period), (B) if your employment terminates for Good Reason, the date specified in the Notice of Termination, and (C) if your employment terminates pursuant to subsection 3(ii) hereof or for any other reason, the date on which a Notice of Termination is given; provided that, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected); and provided, further, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary and payments under the Company's short-term incentive plan or any similar 8 plans then in effect (the "Short-Term Plan") or the Company's long-term incentive equity plan or any similar plans then in effect (the "Long-Term Incentive Plan") and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Section. Amounts paid under this Section are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement, except as required by Section 4(iii) (C) hereof. 4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. (i) During any period that you fail to perform the duties of your employment as a result of incapacity due to physical or mental illness, you shall continue to receive your full base salary at the rate then in effect and any bonuses with respect to any completed period which pursuant to the Short-Term Plan or Long-Term Incentive Plan have been earned by or awarded to you but which have not yet been paid to you, until your employment is terminated pursuant to Section 3(i) hereof. Thereafter, your benefits shall be determined in accordance with the Company's long term disability plan, executive supplemental retirement plan and split-dollar life insurance plan (the "Supplemental Plans"), the Company's employees' retirement plan and other employee benefit plans of the Company in which you participate (or any substitute plans then in effect). (ii) If your employment shall be terminated for Cause, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and you shall receive the accrued benefits to which you otherwise 9 would have been entitled through the date of such termination, and the Company shall have no further obligations to you under this Agreement. (iii) If the Company shall terminate your employment other than pursuant to Section 3(i) or 3(ii) hereof or if you shall terminate your employment for Good Reason pursuant to Section 3(iii) hereof, then you shall be entitled to the benefits set forth below, which benefits shall be paid to you in a lump sum no later than the fifth day following the Date of Termination. (A) The Company shall pay to you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the bonuses, if any, with respect to any completed period which pursuant to the Short Term Plan or the Long-Term Incentive Plan have been earned by or awarded to you but which have not yet been paid to you; (B) In lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay to you a lump sum severance payment (together with the payments provided in Section 4(v) below, the "Severance Payments") in the following amounts: (1) an amount equal to (a) the sum of (i) your annual base salary at the rate in effect as of the Date of Termination, and (ii) the amount awarded you (whether or not fully paid) under the Short-Term Plan for the year immediately preceding the Date of Termination (or, if greater, preceding the change in control), multiplied by (b) the lesser of (x) the number three or (y) the number of full and fractional years to your 65th birthday; and 10 (2) notwithstanding any limiting provision to the contrary contained in the Long-Term Incentive Plan, a pro rata portion of any outstanding award granted under such plan pursuant to any uncompleted performance award period, calculated by multiplying the award which you would have earned on the last day of the performance award period, assuming individual and corporate performance goals established with respect to such award were 100% met, by the fraction obtained by dividing the number of full months and any fractional portion of a month worked during such performance award period by the number of months contained in such performance award period. (C) (i) If any of the payments provided for hereinabove (the "Contract Payments") or other portion of the Total Payments (as defined below) will be subject to the tax (the "Excise Tax") imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company shall pay to you, no later than the fifth day following the Date of Termination, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Contract Payments and such other Total Payments and any federal and state and local income tax and Excise Tax upon the payment provided for by this subsection, shall be equal to the Contract Payments and such other Total Payments. (ii) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) any payments or benefits received or to be received by you in connection with an event described in section 280(G) (b) (2) (A) (i) of the Code (hereinafter, a "change in control"), or your termination of employment payable 11 pursuant to the terms of any plan, arrangement or agreement (other than this Agreement) with the Company, its successors, any person whose actions result in a change in control or any person affiliated with the Company or such person (together with the Contract Payments, the "Total Payments"), shall be treated as "parachute payments" within the meaning of section 280G(b) (2) of the Code except to the extent that, in the opinion of tax counsel selected by the Company's independent auditors and acceptable to you, the Total Payments do not constitute parachute payments, (B) all "excess parachute payments" within the meaning of section 280G(b) (1) shall be treated as subject to the Excise Tax except to the extent that, in the opinion of such tax counsel, such excess parachute payments represent reasonable compensation for services actually rendered within the meaning of section 280G(b) (4) (B) of the Code in excess of the base amount within the meaning of section 280G(b) (3) of the Code, or are otherwise not subject to the Excise Tax, and (C) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d) (3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (3) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of 12 the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in section 1274(b) (2) (B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of your employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. (iv) If the Company shall terminate your employment other than pursuant to subsection 3(i) or 3(ii) hereof or if you shall terminate your employment for Good Reason pursuant to subsection 3(iii) hereof, the Company shall maintain in full force and effect, for your continued benefit for a three-year period after the Date of Termination (or such lesser period to the earlier of your 65th birthday or your reemployment and eligibility for coverage under a plan or arrangement of your new employer providing the same type of benefits (although not necessarily at the same level)), all employee life, health, accident, disability, medical and other employee welfare benefit plans, programs or arrangements in which you were participating immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such plans, programs, and arrangements. In the event that your participation in any such plan, program or arrangement is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such 13 plan, program or arrangement. At the end of the period of coverage, you shall have the option to have assigned to you at no cost and with no apportionment of prepaid premiums any assignable insurance policy owned by the Company which relates specifically to you; provided, however, that you shall not have such option with respect to any such policy under which the Company is the beneficiary. (v) If the Company shall terminate your employment other than pursuant to Section 3(i) or 3(ii) hereof or if you shall terminate your employment for Good Reason pursuant to Section 3(iii) hereof, then in addition to the retirement benefits to which you are entitled under the Supplemental Plans or any successor plans thereto, the Company shall pay you a lump sum amount, in cash, no later than the fifth day following the Date of Termination, equal to the actuarial equivalent of the excess of (x) the retirement pension (determined under the normal form of benefit commencing at the most valuable retirement age) which you would have accrued under the terms of the Supplemental Plans (without regard to any amendment to the Supplemental Plans made subsequent to a change in control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if you were fully vested thereunder and had accumulated (after the Date of Termination) thirty-six (36) additional months of service thereunder (but in no event shall you be deemed to have accumulated additional service after your 65th birthday) at, to the extent relevant under any of the Supplemental Plans, your highest annual rate of compensation during the twelve (12) months immediately preceding the Date of Termination (or, if greater, preceding the change in control), plus the most recent short-term incentive award granted to you prior to the Date of Termination (or, if greater, prior to the change in control), over (y) the retirement pension (determined 14 under the normal form of benefit commencing at the most valuable retirement age) which you had then accrued pursuant to the provisions of the Supplemental Plans. For purposes of this Section 4(v), "actuarial equivalent" shall be determined using the assumptions set forth on Schedule B, item I (as from time to time amended), of the trust agreement entered into by Shawmut and The Chase Manhattan Bank, N.A., dated as of August 31, 1987, and last restated as of January 1, 1992 (the "secular" trust). (vi) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor, except as required by Section 4(iv) hereof, shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. (vii) The Company shall also pay to you all legal fees and related expenses incurred by you as a result of a termination of your employment by the Company or a termination of your employment for Good Reason pursuant to Section 3(iii) hereof (including all such fees and expenses, if any, incurred in contesting or disputing (other than in bad faith) any such termination, in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code). 5. FUNDING. This Agreement shall constitute a Plan for purposes of Section 1.01 of the so-called rabbi trust entered into by Shawmut prior to the Effective Date and assumed by the Company pursuant to the Merger Agreement; provided, however, that nothing contained herein shall require the Company to make additional contributions to such trust. 15 6. SUCCESSORS: BINDING AGREEMENT. (i) This Agreement shall be binding on the successors and assigns of the Company, and the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason pursuant to Section 3 (iii), except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee, or other designee or, if there be no such designee, to your estate. 16 7. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. COORDINATION WITH EMPLOYMENT AGREEMENT. The terms of this Agreement shall be coordinated with and applied in conjunction with the terms of any employment agreement in effect between you and the Company during the term of this Agreement. In general, it is the intent of the parties that, subsequent to a change in control and during the term of this Agreement, the provisions of this Agreement shall supersede and substitute for those provisions of the employment agreement relating to your entitlement to benefits in connection with any termination of your employment. Nothing in this Agreement shall be construed to be a commitment or guarantee of future employment with the Company. Except for circumstances relating to a termination of employment following a change in control of the Company during the term of this Agreement, as provided for herein, all terms and conditions of your employment with the Company shall be governed by the terms of any such employment agreement. 9. MISCELLANEOUS. As of the Effective Date, this Agreement supersedes the letter agreement, dated as of February 23, 1988, as amended as of June 27, 17 1989, between you and Shawmut, as well as any prior communications, agreements and understandings, written or oral, between you and the Company covering the subject matter hereof. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Massachusetts, without giving effect to the principles of conflicts of laws thereof. 10. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 12. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Boston, Massachusetts, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to 18 seek specific performance of your right, during the pendency of any dispute or controversy arising under or in connection with this Agreement, to be paid until the Date of Termination. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company at 50 Kennedy Plaza, Providence, Rhode Island 02903 (Attention: Director of Human Resources) the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, FLEET FINANCIAL GROUP, INC. By__________________________________ AGREED TO AS OF THE 20TH DAY OF FEBRUARY, 1995 ___________________________________ Executive 19 FLEET FINANCIAL GROUP, INC. 50 Kennedy Plaza Providence, Rhode Island 02903 February 20, 1995 Mr. Gunnar S. Overstrom Vice Chairman Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Dear Mr. Overstrom: Fleet Financial Group, Inc. (together with its subsidiaries, hereinafter referred to as the "Company"), considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of the Company's management personnel to the detriment of the Company and its shareholders. The Company further recognizes that the financial services industry is currently undergoing structural and legislative changes, with the expectation of further changes in the future. These changes would tend to exacerbate the uncertainty among management that a change of control might create. Accordingly, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including yourself, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a change in control. In order to induce you to remain in the employ of the Company after consummation of the Merger of Shawmut National Corporation ("Shawmut") with and into the Company pursuant to the Agreement and Plan of Merger, dated as of February 20, 1995 (the "Merger Agreement"), and in consideration of your agreement set forth in Section 2(ii) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Company terminates subsequent to a "change in control" (as defined in Section 2 hereof) under the circumstances set forth below. 1. TERM. This Agreement shall commence on the date on which the Effective Time (as defined in the Merger Agreement) occurs (the "Effective Date") and shall continue until December 31, 1997; provided, however, that commencing on January 1, 1997 and each January 1st thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 30 days prior to such January 1st, the Company shall have given notice that it does not wish to extend this Agreement; and provided, further, that the term of this Agreement shall expire on your 65th birthday; and provided, further, that if a change in control (as defined in Section 2) occurs during the term provided herein, this Agreement shall remain in effect for an additional two years from the date of such change in control (but no later than your 65th birthday). It is understood that this Agreement does not prohibit the Company from terminating your employment at any time, subject to providing the severance benefits hereinafter specified in accordance with the terms hereof. Notwithstanding the foregoing, if the Effective Time does not occur, this Agreement shall be of no force or effect. 2. CHANGE IN CONTROL. (i) For purposes of this Agreement, a "change in control" shall mean: 2 (A) the acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock"); provided, however, that any acquisition by the Company or ;its subsidiaries, or any employee benefit plan (or related trust) of the corporation or its subsidiaries of 25% or more of Outstanding Company Common Stock shall not constitute a Change in Control; and provided, further, that any acquisition by a corporation with respect to which, following such acquisition, more than 50% of the then outstanding shares of common stock of such corporation, is then beneficially owned, directly or indirectly, by all or substantial all of the individuals and entities who were the beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition of the Outstanding Company Common Stock, shall not constitute a Change of Control; or (B) persons who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or 3 (C) approval by the stockholders of the Company of (i) a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock of the corporation resulting from such a reorganization, merger or consolidation, (ii) a complete liquidation or dissolution of the Company (iii) the sale or other disposition of all or substantial all of the assets of the Company. Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a change of control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a corporation or other entity in which the Executive has a greater than ten percent (10%) direct or indirect equity interest, such event shall not constitute a change of control. (ii) For purposes of this Agreement, a "potential change in control" shall be deemed to have occurred if (A) the Company enters into an agreement, the consummation of which would result in the occurrence of a change in control; (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control; (C) any person (other than the Company) becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the combined voting power of the Outstanding Company Common Stock; or (D) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control has occurred. You agree that, subject to the terms and conditions of this Agreement, in the event of a potential change in control, you will remain in the employ of the Company for a period of at least six (6) months from the occurrence of such potential change in control or, if earlier, until a change in control. 4 3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events described in Section 2 hereof constituting a change in control shall have occurred and if your employment subsequently terminates at any time within two years from the date of such change in control, you shall be entitled to the benefits provided in Section 4 hereof unless such termination is (A) because of your death, (B) by the Company for Cause or Disability, or (C) by you other than for Good Reason. The following definitions shall apply in connection with a termination of your employment: (i) Disability. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from your duties with the Company on a full time basis for six consecutive months, and within 30 days after written Notice of Termination (as defined in Section 3(iv) hereof) is given you shall not have returned to the performance of your duties on a full time basis, the Company shall be entitled to terminate your employment for "Disability." (ii) Cause. The Company shall be entitled to terminate your employment for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate your employment hereunder upon (A) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure resulting from your termination for Good Reason), for a period of at least ten days after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (B) the willful engaging by you in gross misconduct which is 5 demonstrably and substantially injurious to the Company. For purposes of this subsection, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you (i) a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding you in the event you are a member of the Board) at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this subsection and specifying the particulars thereof in detail; and (ii) an affidavit sworn to by the Assistant Secretary of the Company stating that such resolution was in fact adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding you in the event you are a member of the Board) and that you were found guilty of conduct set forth in clauses (A) or (B) of the first sentence of this subsection and specifying the particulars thereof in detail. (iii) Good Reason. You shall be entitled to terminate your employment for Good Reason at any time within two years from the date of a change in control. For purposes of this Agreement, "Good Reason" shall exist if you shall determine that due to a change in control you are not able effectively to 6 discharge your duties. Your right to terminate your employment pursuant to this subsection shall not be affected by your incapacity due to physical or mental illness. (iv) Notice of Termination. Any termination by the Company pursuant to Section 3(i) or 3(ii) hereof or by you pursuant to Section 3(iii) hereof shall be communicated by written Notice of Termination to the other party hereto; provided that, in the case of a termination for Cause, there shall also have been delivered to you the other documents required to be delivered pursuant to Section 3(ii) above. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (v) Date of Termination, Etc. "Date of Termination" shall mean (A) if this Agreement terminates for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such 30 day period), (B) if your employment terminates for Good Reason, the date specified in the Notice of Termination, and (C) if your employment terminates pursuant to subsection 3(ii) hereof or for any other reason, the date on which a Notice of Termination is given; provided that, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected); and provided, further, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any 7 such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary and payments under the Company's short term incentive plan or any similar plans then in effect (the "Short-Term Plan") or the Company's long-term incentive equity plan or any similar plans then in effect (the "Long-Term Incentive Plan")) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Section. Amounts paid under this Section are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement, except as required by Section 4(iii) (C) hereof. 4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. (i) During any period that you fail to perform the duties of your employment as a result of incapacity due to physical or mental illness, you shall continue to receive your full base salary at the rate then in effect and any bonuses with respect to any completed period which pursuant to the Short-Term Plan or Long-Term Incentive Plan have been earned by or awarded to you but which have not yet been paid to you, until your employment is terminated pursuant to Section 3(i) hereof. Thereafter, your benefits shall be determined in accordance with the Company's long term disability plan, executive supplemental retirement plan and split-dollar life insurance plan (the "Supplemental Plans") , the Company's employees' retirement plan and other employee benefit plans of the Company in which you participate (or any substitute plans then in effect). (ii) If your employment shall be terminated for Cause, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and you shall receive the 8 accrued benefits to which you otherwise would have been entitled through the date of such termination, and the Company shall have no further obligations to you under this Agreement. (iii) If the Company shall terminate your employment other than pursuant to Section 3(i) or 3(ii) hereof or if you shall terminate your employment for Good Reason pursuant to Section 3(iii) hereof, then you shall be entitled to the benefits set forth below, which benefits shall be paid to you in a lump sum no later than the fifth day following the Date of Termination. (A) The Company shall pay to you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the bonuses, if any, with respect to any completed period which pursuant to the Short Term Plan or the Long-Term Incentive Plan have been earned by or awarded to you but which have not yet been paid to you; (B) In lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay to you a lump sum severance payment (together with the payments provided in Section 4(v) below, the "Severance Payments") in the following amounts: (1) an amount equal to (a) the sum of (i) your annual base salary at the rate in effect as of the Date of Termination, and (ii) the amount awarded you (whether or not fully paid) under the Short-Term Plan for the year immediately preceding the Date of Termination (or, if greater, preceding the change in control), multiplied by (b) the lesser of (x) the number three or (y) the number of full and fractional years to your 65th birthday; and (2) notwithstanding any limiting provision to the contrary contained in the Long-Term Incentive Plan, a pro rata portion of any outstanding award granted under such plan pursuant to any uncompleted performance award period, calculated by multiplying the award which you would have earned on the last day 9 of the performance award period, assuming individual and corporate performance goals established with respect to such award were 100% met, by the fraction obtained by dividing the number of full months and any fractional portion of a month worked during such performance award period by the number of months contained in such performance award period. (C) (i) If any of the payments provided for hereinabove (the "Contract Payments") or other portion of the Total Payments (as defined below) will be subject to the tax (the "Excise Tax") imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company shall pay to you, no later than the fifth day following the Date of Termination, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, after deduction of any Excise Tax on the Contract Payments and such other Total Payments and any federal and state and local income tax and Excise Tax upon the payment provided for by this subsection, shall be equal to the Contract Payments and such other Total Payments. (ii) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) any payments or benefits received or to be received by you in connection with an event described in section 280(G) (b) (2) (A) (i) of the Code (hereinafter, a "change in control"), or your termination of employment payable pursuant to the terms of any plan, arrangement or agreement (other than this Agreement) with the Company, its successors, any person whose actions result in a change in control or any person affiliated with the Company or such person (together with the Contract Payments, the "Total Payments"), shall be treated as "parachute payments" within the meaning of section 280G(b) (2) of the Code except to the extent that, in the opinion of tax counsel selected by the Company's independent auditors and 10 acceptable to you, the Total Payments do not constitute parachute payments, (B) all "excess parachute payments" within the meaning of section 280G(b) (1) shall be treated as subject to the Excise Tax except to the extent that, in the opinion of such tax counsel, such excess parachute payments represent reasonable compensation for services actually rendered within the meaning of section 280G(b) (4) (B) of the Code in excess of the base amount within the meaning of section 280G(b) (3) of the Code, or are otherwise not subject to the Excise Tax, and (C) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d) (3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (3) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of your employment, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by you if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in 11 section 1274(b) (2) (B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of your employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. (iv) If the Company shall terminate your employment other than pursuant to subsection 3(i) or 3(ii) hereof or if you shall terminate your employment for Good Reason pursuant to subsection 3(iii) hereof, the Company shall maintain in full force and effect, for your continued benefit for a three-year period after the Date of Termination (or such lesser period to the earlier of your 65th birthday or your reemployment and eligibility for coverage under a plan or arrangement of your new employer providing the same type of benefits (although not necessarily at the same level)), all employee life, health, accident, disability, medical and other employee welfare benefit plans, programs or arrangements in which you were participating immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such plans, programs, and arrangements. In the event that your participation in any such plan, program or arrangement is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plan, program or arrangement. At the end of the period of coverage, you shall have the option to have assigned to you at no cost and with no apportionment of prepaid premiums any assignable insurance policy owned by the Company which relates specifically 12 to you; provided, however, that you shall not have such option with respect to any such policy under which the Company is the beneficiary. (v) If the Company shall terminate your employment other than pursuant to Section 3(i) or 3 (ii) hereof or if you shall terminate your employment for Good Reason pursuant to Section 3(iii) hereof, then in addition to the retirement benefits to which you are entitled under the Supplemental Plans or any successor plans thereto, the Company shall pay you a lump sum amount, in cash, no later than the fifth day following the Date of Termination, equal to the actuarial equivalent of the excess of (x) the retirement pension (determined under the normal form of benefit commencing at the most valuable retirement age) which you would have accrued under the terms of the Supplemental Plans (without regard to any amendment to the Supplemental Plans made subsequent to a change in control and on or prior to the date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if you were fully vested thereunder and had accumulated (after the Date of Termination) thirty-six (36) additional months of service thereunder (but in no event shall you be deemed to have accumulated additional service after your 65th birthday) at, to the extent relevant under any of the Supplemental Plans, your highest annual rate of compensation during the twelve (12) months immediately preceding the Date of Termination (or, if greater, preceding the change in control), plus the most recent short-term incentive award granted to you prior to the Date of Termination (or, if greater, prior to the change in control), over (y) the retirement pension (determined under the normal form of benefit commencing at the most valuable retirement age) which you had then accrued pursuant to the provisions of the Supplemental Plans. For purposes of this Section 4(v), "actuarial equivalent" shall be determined using 13 the assumptions set forth on Schedule B, item I (as from time to time amended), of the trust agreement entered into by Shawmut and The Chase Manhattan Bank, N.A., dated as of August 31, 1987, and last restated as of January 1, 1992 (the "secular" trust). (vi) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor, except as required by Section 4(iv) hereof, shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. (vii) The Company shall also pay to you all legal fees and related expenses incurred by you as a result of a termination of your employment by the Company or a termination of your employment for Good Reason pursuant to Section 3(iii) hereof (including all such fees and expenses, if any, incurred in contesting or disputing (other than in bad faith) any such termination, in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code). 5. FUNDING. This Agreement shall constitute a Plan for purposes of Section 1.01 of the so-called rabbi trust entered into by Shawmut prior to the Effective Date and assumed by the Company pursuant to the Merger Agreement; provided, however, that nothing contained herein shall require the Company to make additional contributions to such trust. 6. SUCCESSORS; BINDING AGREEMENT. (i) This Agreement shall be binding on the successors and assigns of the Company, and the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the 14 Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason pursuant to Section 3 (iii), except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee, or other designee or, if there be no such designee, to your estate. 7. NOTICE.For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing 15 in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. COORDINATION WITH EMPLOYMENT AGREEMENT. The terms of this Agreement shall be coordinated with and applied in conjunction with the terms of any employment agreement in effect between you and the Company during the term of this Agreement. In general, it is the intent of the parties that, subsequent to a change in control and during the term of this Agreement, the provisions of this Agreement shall supersede and substitute for those provisions of the employment agreement relating to your entitlement to benefits in connection with any termination of your employment. Nothing in this Agreement shall be construed to be a commitment or guarantee of future employment with the Company. Except for circumstances relating to a termination of employment following a change in control of the Company during the term of this Agreement, as provided for herein, all terms and conditions of your employment with the Company shall be governed by the terms of any such employment agreement. 9. MISCELLANEOUS.As of the Effective Date, this Agreement supersedes the letter agreement, dated as of February 23, 1988, as amended as of June 27, 1989, between you and Shawmut, as well as any prior communications, agreements and understandings, written or oral, between you and the Company covering the subject matter hereof. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, 16 construction and performance of this Agreement shall be governed by the laws of the State of Massachusetts, without giving effect to the principles of conflicts of laws thereof. 10. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 12. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Boston, Massachusetts, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right, during the pendency of any dispute or controversy arising under or in connection with this Agreement, to be paid until the Date of Termination. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company at 50 Kennedy Plaza, Providence, Rhode Island 02903 (Attention: Director of Human Resources) the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, FLEET FINANCIAL GROUP, INC. By:_____________________________ Title: AGREED TO AS OF THE 20TH DAY OF FEBRUARY, 1995 _____________________________ Executive EX-10.(J) 6 EXHIBIT 10(j) EMPLOYMENT AGREEMENT by and between FLEET FINANCIAL GROUP, INC. and JOEL B. ALVORD TABLE OF CONTENTS SECTION PAGE - ------- ---- 1. Employment.......................................................1 2. Term.............................................................1 3. Position and Duties..............................................1 4. Place of Performance.............................................2 5. Compensation and Related Matters.................................2 (a) Base Salary................................................2 (b) Bonuses....................................................2 (c) Equity-Based Compensation..................................2 (d) Expenses...................................................3 (e) Other Benefits.............................................3 (f) Vacation...................................................4 (g) Services Furnished.........................................4 6. Offices..........................................................4 7. Termination......................................................5 (a) Death......................................................5 (b) Disability.................................................5 (c) Cause......................................................5 (d) Good Reason................................................6 8. Termination Procedure............................................6 (a) Notice of Termination......................................6 (b) Date of Termination........................................6 (c) Compensation During Dispute................................6 9. Compensation upon Termination or During Disability ..............7 (a) Disability; Death..........................................7 (b) By Corporation without Cause or by the Executive...........7 (c) By Corporation for Cause...................................8 (d) Compensation Plans.........................................8 (e) Mitigation.................................................8 10. Confidential Information; Nonsolicitation Requirement............9 (a) Confidential Information...................................9 (b) Nonsolicitation Requirement................................9 SECTION PAGE - ------- ---- 11. Indemnification; Legal Fees......................................9 12. Successors; Binding Agreement....................................9 (a) Corporation's Successors...................................9 (b) The Executive's Successors................................10 13. Notice..........................................................10 14. Additional Payment..............................................10 15. Amendment or Modification; Waiver...............................12 16. Funding.........................................................12 17. Arbitration.....................................................12 18. Governing Law...................................................12 19. Miscellaneous...................................................12 20. Severability....................................................12 21. Counterparts....................................................13 22. Entire Agreement................................................13 ii INDEX OF DEFINED TERMS Term Where Defined - ---- ------------- Actual Date.................................................Sec. 5(e) (ii) Annual Bonus.....................................................Sec. 5(b) Base Salary......................................................Sec. 5(a) Board ........................................................Introduction Cause ...........................................................Sec. 7(c) Code .............................................................Sec. 11 Contract Payments...............................................Sec. 14(a) Corporation...................................................Introduction Date of Termination..............................................Sec. 8(b) Disability.......................................................Sec. 7(b) Disability Period................................................Sec. 9(a) EGLIP ......................................................Sec. 5(e) (iv) Earliest Date...............................................Sec. 5(e) (ii) Effective Date......................................................Sec. 2 Effective Time................................................Introduction Excise Tax......................................................Sec. 14(a) Executive.....................................................Introduction Good Reason......................................................Sec. 7(d) Gross-Up Payment................................................Sec. 14(a) Long-Term Bonus..................................................Sec. 5(b) Merger........................................................Introduction Notice of Termination............................................Sec. 8(a) Shawmut.......................................................Introduction Prior Agreement...............................................Introduction SDLIP ......................................................Sec. 5(e) (ii) SERP .....................................................Sec. 5(e) (iii) Severance Agreement................................................Sec. 22 Term ..............................................................Sec. 2 Total Payments..................................................Sec. 14(b) iii EMPLOYMENT AGREEMENT AGREEMENT, dated as of February 20, 1995, by and between Joel B. Alvord (the "Executive") and Fleet Financial Group, Inc., a Rhode Island corporation (the "Corporation") The Executive was formerly employed by Shawmut National Corporation, a Delaware corporation ("Shawmut"), as Chairman and Chief Executive Officer pursuant to an employment agreement (the "Prior Agreement") effective as of February 24, 1994. Pursuant to the Agreement and Plan of Merger, dated as of February 20, 1995 (the "Merger Agreement"), by and between the Company and Shawmut, Shawmut will merge with and into the Company as of the "Effective Time" (as defined in the Merger Agreement). The Board of Directors of the Corporation (the "Board") recognizes that the Executive can contribute significantly to the growth and success of the Corporation. The Board desires to provide for the employment of the Executive and to encourage the attention and dedication to the Corporation of the Executive as a member of the Corporation's management, in the best interests of the Corporation and its shareholders. The Executive is willing to commit himself to serve the Corporation, on the terms and conditions herein provided. In order to effect the foregoing, the Corporation and the Executive wish to enter into an employment agreement on the terms and conditions set forth below. This Agreement shall become effective only at the Effective Time. If the Effective Time does not occur, this Agreement shall be of no force and effect. Accordingly, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Employment. The Corporation hereby agrees to employ the Executive, and the Executive hereby accepts such employment, on the terms and conditions hereinafter set forth. 2. Term. The period of employment of the Executive by the Corporation hereunder (the "Term") shall commence on the date (the "Effective Date") on which the Effective Time occurs and shall end on the Executive's 60th birthday, unless sooner terminated as provided in Section 7. 3. Position and Duties. During the Term, the Executive shall serve as Chairman of the Corporation. The Executive shall be responsible for the business banking function, the consumer and investment management functions and the operational, data processing, and other fee businesses of the Corporation and/or shall have such other responsibilities and authority as may from time to time be assigned to the Executive by the Chief Executive Officer of the Corporation or the Board, provided that such other responsibilities and authority are acceptable to the Executive. The Corporation agrees to sponsor the Executive's election and reelection to the Board during the Term and thereafter until his attainment of age 65. Upon the expiration of the Term and until the Executive's attainment of age 65, the Executive shall also serve as Chairman of the Executive Committee of the Board or in such other capacity as the Executive and the Corporation shall mutually agree. The Executive agrees to devote substantially all of his working time and efforts to the performance of his duties for the Corporation; provided, however, that the Executive may (i) serve on the boards of directors of other organizations to the extent such service is permitted by applicable law and would not subject the Corporation to any liability with respect to its business activities under such law, and (ii) may devote a reasonable amount of time to charitable and community services. 4. Place of Performance. In connection with the Executive's employment by the Corporation, the Executive shall be based at the headquarters of the Corporation in Boston, Massachusetts, except for required travel on the Corporation's business to an extent substantially consistent with the Executive's business travel obligations with Shawmut prior to the Effective Date. 5. Compensation and Related Matters. (a) Base Salary. During the Term, the Corporation shall pay the Executive a base salary ("Base Salary") at a rate no less than 90% of the base salary in effect from time to time for the Chief Executive Officer of the Corporation. Base Salary shall be paid in approximately equal installments in accordance with the Corporation's customary payroll practices. Base Salary may be increased from time to time in accordance with the normal business practices of the Corporation and, if so increased, shall not thereafter during the Term be decreased. The salary payments (including any increased salary payments) hereunder shall not in any way limit or reduce any other obligation of the Corporation hereunder, and no other compensation, benefit or payment hereunder shall in any way limit or reduce the obligation of the Corporation to pay the Executive's salary hereunder. (b) Bonuses. During the Term, and with respect to calendar year 1995, the Executive shall receive annual bonuses (each, an "Annual Bonus"), each of which shall be at least equal to 90% of the annual bonus awarded to the Chief Executive Officer of the Corporation and the Executive shall be eligible to receive such other non-equity-based bonuses and awards (each, a "Long-Term Bonus") as may be provided pursuant to the terms of the long-term incentive plans of the Corporation applicable to similarly situated executive officers of the Corporation, as such plans may from time to time be revised, each of which shall be at least equal to 90% of the long-term bonus awarded to the Chief Executive Officer of the Corporation. The Annual Bonus and the Long-Term Bonus shall each be paid at a time and in a manner consistent with the time and manner in which the Annual Bonus and the Long-Term Bonus are paid to the Chief Executive Officer of the Corporation in accordance with the terms of such plans. (c) Equity-Based Compensation. During each year of the Term, the Executive shall be entitled to receive equity-based compensation awards, including without limitation awards of stock options and restricted stock, each of which shall be 2 at least equal to 90% of each such award made to the Chief Executive Officer of the Corporation, and on the same terms and conditions as each award made to the Chief Executive Officer of the Corporation; provided, however, that, notwithstanding any other provision of this Agreement to the contrary, for purposes of the vesting of such awards and the time at which such awards first become exercisable, the Executive shall continue to be treated as an employee of the Corporation until his 65th birthday. (d) Expenses. The Corporation shall promptly reimburse the Executive for all reasonable business expenses incurred during the Term by the Executive in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Corporation, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Corporation. (e) Other Benefits. (ii) The Executive shall be entitled to participate in all of the employee benefit plans and arrangements made available by the Corporation to its similarly situated executive officers, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements; provided, however, that the Executive shall be entitled to participate in such plans and arrangements only to the extent that the benefits provided thereunder do not duplicate, in type, the benefits provided under paragraphs (ii)-(vi) of this Section 5(e). Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to subsection (a) of this Section 5. The Board shall from time to time by resolution provide the Executive with additional, individual benefits, which shall not thereafter during the term be decreased or discontinued. (ii) Notwithstanding any amendment or termination of Shawmut's Split-Dollar Life Insurance Plan (the "SDLIP") following the Effective Time, the Executive shall be entitled to receive all benefits to which he would have been entitled (including both death benefits and supplemental retirement benefits) had he continued to participate in such plan (as in effect immediately prior to the Effective Time) after the Effective Time for three (3) years. (iii)Notwithstanding any amendment or termination of Shawmut's Executive Supplemental Retirement Plan (the "SERP") following the Effective Time, the Executive shall be entitled to continue to accrue, during the period beginning at the Effective Time and ending upon his Date of Termination, a benefit thereunder (or under a substitute or alternative plan) at a rate at least equal to the greater of (A) the rate provided under the SERP as in effect immediately prior to the Effective Time and (B) the rate provided under any supplemental retirement plan maintained by the Corporation or any of its subsidiaries. 3 (iv) Notwithstanding any amendment or termination of Shawmut's Executive Group Life Insurance Plan (the "EGLIP") following the Effective Time, the Executive shall (A) continue to be provided with life insurance benefits no less favorable than the benefits provided under the EGLIP immediately prior to the Effective Time for three (3) years subsequent to the Effective Time and (B) following his Date of Termination, be provided with retiree life insurance benefits no less favorable than the retiree life insurance benefits to which the participant would have been entitled under the EGLIP (as in effect immediately prior to the Effective Time) had he continued to be employed by Shawmut after the Effective Time for three (3) years. (v) Notwithstanding anything in this Section 5(d) of this Agreement to the contrary, during the Term, (A) the Corporation shall make available to the Executive long-term disability coverage providing a maximum monthly benefit of $15,000 at a monthly cost to the Executive no greater than the monthly cost paid by the Executive immediately prior to the Effective Date with respect to such coverage provided by Shawmut; and (B) the Corporation shall pay or reimburse the Executive for the premiums incurred by the Executive for the personal long-term disability insurance policy maintained by the Executive as of February 20, 1995. The reimbursement and payment of amounts described in clause (v) (B) above, as well as payments made under this sentence, shall be "grossed-up" to compensate the Executive for the tax consequences associated with such reimbursement and payment. (vi) In addition to the foregoing, the Corporation shall provide to the Executive retiree medical benefits no less favorable than those to which he would have been entitled had he retired from Shawmut immediately prior to the Effective Date. (f) Vacation. The Executive shall be entitled to (i) the number of vacation days in each calendar year, (ii) compensation in respect of earned but unused vacation days, and (iii) all paid holidays, in each case as the same may be provided by the Corporation to its similarly situated executive officers. (g) Services Furnished. During the Term, the Corporation shall furnish the Executive with office space, stenographic assistance and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of his duties as set forth in Section 3. Upon the expiration of the Term and until the Executive's attainment of age 65, the Corporation shall furnish him with office space at a location selected by him and stenographic assistance and such other facilities and services as shall be suitable to his position and adequate for his performance of his duties as a member of the Board. 6. Offices. Subject to Sections 3 and 4, the Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of the Corporation or any of its subsidiaries and as a member of any committees of the board of directors of any such corporations, and in one or more executive 4 positions of any of the Corporation's subsidiaries, provided that the Executive is indemnified for serving in any and all such capacities on a basis no less favorable than is currently or may be provided to any other director of the Corporation, any of its subsidiaries, or in connection with any such executive position, as the case may be. 7. Termination. The Executive's employment hereunder may be terminated without any breach of this Agreement only under the circumstances set forth in subsections (a), (b), (c) and (d) of this Section 7. In the event of a termination pursuant to subsection (a), (b) or (c) of this Section 7, the Term shall end on the Executive's Date of Termination (as defined in Section 8(b)). (a) Death. The Executive's employment hereunder shall terminate upon his death. (b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of his duties hereunder for the entire period of six consecutive months, and within thirty (30) days after written Notice of Termination (as defined in Section 8) is given shall not have returned to the performance of his duties hereunder on a full-time basis, the Corporation may terminate the Executive's employment hereunder for "Disability." (c) Cause. The Corporation may terminate the Executive's employment hereunder for Cause. For purposes of this Agreement, the Corporation shall have "Cause" to terminate the Executive's employment hereunder upon the occurrence of any of the following events: (i) the conviction of the Executive for the commission of a felony involving dishonesty with respect to the Corporation; or (ii) the willful misconduct by the Executive (including, but not limited to, breach by the Executive of the provisions of Section 10) that is demonstrably and materially injurious to the Corporation or its subsidiaries, whether monetarily or otherwise. Cause shall not exist unless and until the Corporation has delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive was guilty of the conduct set forth in this Section 7(c) and specifying the particulars thereof in detail. For purposes of this Section 7(c), no act or failure to act on the Executive's part shall be considered "willful" unless done or failed to be done by the Executive in bad faith and without reasonable belief that the Executive's action or omission was in the best interest of the Corporation. 5 (d) Good Reason. The Executive may terminate his employment during the Term hereunder for "Good Reason." The Executive shall be deemed to have terminated his employment for Good Reason if his employment terminates for any reason other than death, Disability or by the Corporation for Cause. 8. Termination Procedure. (a) Notice of Termination. Any termination of the Executive's employment by the Corporation or by the Executive (other than termination pursuant to Section 7(a) hereof) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 13. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (b) Date of Termination. "Date of Termination" shall mean (i) if the Executive's employment is terminated pursuant to Section 7(a) above, (ii) if the Executive's employment is terminated pursuant to Section 7(b) above, thirty (30) days after Notice of Termination (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period), (iii) if the Executive's employment is terminated pursuant to Section 7(c) above, the date specified in the Notice of Termination, and (iv) if the Executive's employment is terminated pursuant to Section 7(d) above, the date on which a Notice of Termination is given or any later date (within 30 days) set forth in such Notice of Termination; provided, however, that, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). (c) Compensation During Dispute. If a purported termination occurs during the Term, and such termination is disputed in accordance with subsection (b) of this Section 8, the Corporation shall continue to pay the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which Executive was participating when the notice giving rise to the dispute was given, until the Date of Termination, determined in accordance with subsection (b) of this Section 8. Amounts paid under this Section 8(c) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 6 9. Compensation upon Termination or During Disability. (a) Disability; Death. During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness ("Disability Period"), the Executive shall continue to receive his full Base Salary at the rate in effect at the beginning of such period until his employment is terminated pursuant to Section 7 (b), provided that payments so made to the Executive during the disability period shall be reduced by the sum of the amounts, if any, payable to the Executive with respect to such period under the disability benefit plans of the Corporation then in effect or under the Social Security disability insurance program, which amounts were not previously applied to reduce any such payment. Subsequent to the termination of the Executive's employment pursuant to Section 7(b), or in the event the Executive's employment is terminated by reason of his death, the Corporation shall pay to the Executive, his legal representative or his successors (as described in Section 12(b)) his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given. The Corporation shall have no further obligations to the Executive under this Agreement, except as set forth in this subsection (a) of Section 9, and the Executive's benefits shall be determined under the Corporation's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (b) By the Corporation without Cause or by the Executive. If during the Term the Executive's employment is terminated by the Corporation other than for Cause or Disability or by the Executive, then -- (i) the Corporation shall pay the Executive his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and an amount equal to all bonuses and awards that would have been earned by the Executive upon completion of each award cycle that began during the Term but had not been completed as of the Date of Termination, assuming the full achievement of all goals and targets relating thereto, in the case of each such bonus and award multiplied by a fraction, the numerator of which shall be the number of days from the beginning of the applicable bonus or award cycle to and including the Date of Termination and the denominator of which shall be the number of days in such cycle; (ii) in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Corporation shall pay as liquidated damages to the Executive an aggregate amount equal to the product of (A) the number of years (including fractions thereof) remaining in the Term as of the Date of Termination and (B) the sum of (1) the Executive's annual salary rate in effect as of the Date of Termination, (2) the highest Annual Bonus awarded to and earned by the Executive pursuant to either Section 5(b) of this Agreement or Section 5(b) of the Prior Agreement in respect of any fiscal year during the three fiscal 7 years completed prior to the Date of Termination, and (3) the highest Long-Term Bonus awarded to and earned by the Executive pursuant to either Section 5(b) of this Agreement or Section 5(b) of the Prior Agreement in respect of any performance cycle ending during the three fiscal years completed prior to the Date of Termination or, if no performance cycle has ended during such three fiscal years, then the highest Long-Term Bonus awarded to the Executive with respect to a performance cycle in effect but not yet ended on the Date of Termination, such amount to be paid in a cash lump sum within five (5) days following the Date of Termination, unless the Executive elects, prior to the beginning of the calendar year in which occurs the Date of Termination, to have such amount paid in substantially equal monthly installments during the period commencing with the month immediately following the month in which the Date of Termination occurs and ending with the month corresponding to the end of the Term hereunder; and (iii) the Corporation shall (A) continue to provide to the Executive the benefits described in Section 5(e) (v) hereof for the remainder of the Term, and (B) provide the benefits to which the Executive would have been entitled pursuant to Shawmut's Executive Supplemental Retirement Plan, Shawmut's Executive Group Life Insurance Plan and Shawmut's Split Dollar Life Insurance Plan (each, as in effect immediately prior to the Effective Date), in each case had his employment continued at the rate of compensation specified herein for the remainder of the Term, notwithstanding the Executive's election, if any, to commence receiving benefits under such plan, agreement or arrangement prior to the end of the Term. Benefits otherwise receivable by the Executive pursuant to clause (A) of this Section 9(b) (iv) shall be reduced to the extent comparable benefits are actually received by the Executive from a subsequent employer during the period during which the Corporation is required to provide such benefits, and the Executive shall report any such benefits actually received to the Corporation. (c) By Corporation for Cause. If the Executive's employment shall be terminated by the Corporation for Cause, then the Corporation shall pay the Executive his Base Salary (at the rate in effect at the time Notice of Termination is given) through the Date of Termination, and the Corporation shall have no additional obligations to the Executive under this Agreement except as set forth in subsection (d) of this Section 9. (d) Compensation Plans. Following any termination of the Executive's employment, the Corporation shall pay the Executive all unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination under any compensation plan or program of the Corporation, including, but not limited to, any deferred compensation plan or program, at the time such payments are due. (e) Mitigation. Except as is specifically provided in subsection (b) (iv) of this Section 9, the Executive shall not be required to mitigate the amount of any payment provided herein by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided hereunder be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Corporation, or otherwise. 8 10. Confidential Information; Nonsolicitation Requirement. (a) Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Corporation all trade secrets, confidential information, and knowledge or data relating to the Corporation and its businesses, which shall have been obtained by the Executive during the Executive's employment by the Corporation and which shall not have been or now or hereafter have become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). The Executive shall not, without the prior written consent of the Corporation or as may otherwise be required by law or legal process, communicate or divulge any such trade secrets, information, knowledge or data to anyone other than the Corporation and those designated by the Corporation. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 10(a). (b) Nonsolicitation Requirement. During any period that the Executive is performing services hereunder or the Executive is entitled to payment pursuant to Section 9, and for a period of one (1) year following a termination of the Executive's employment by the Corporation for Cause, the Executive shall not induce any employee of the Corporation or its subsidiaries to terminate employment with the Corporation or its subsidiaries in order to obtain employment with any person, firm or corporation affiliated with the Executive. 11. Indemnification; Legal Fees. The Corporation shall indemnify the Executive to the full extent permitted by law and the by-laws of the Corporation for all expenses, costs, liabilities and legal fees that the Executive may incur in the discharge of his duties hereunder, including any legal fees and expenses incurred by the Executive in contesting or disputing any termination of the Executive's employment or in seeking to obtain or enforce any right or benefit provided by this Agreement (or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), to any payment or benefit provided hereunder) other than for any such expenses, costs, liabilities or legal fees incurred as a result of the Executive's bad faith or gross negligence. Such payments shall be made within five (5) days after the Executive's request for payment accompanied with such evidence of fees and expenses incurred as the Corporation reasonably may require. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 11. 12. Successors; Binding Agreement. (a) Corporation's Successors. The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption 9 and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation in the same amount and on the same terms as he would be entitled to hereunder if he terminated his employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Corporation" shall mean the Corporation as herein before defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) The Executive's Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate. 13. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Joel B. Alvord 86 Chestnut Hill Road Glastonbury, Connecticut 06033 If to the Corporation: Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Attention: General Counsel or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 14. Additional Payment. (a) If any of the payments provided for in this Agreement (the "Contract Payments") or other portion of the Total Payments (as defined below) will be 10 subject to the tax (the "Excise Tax") imposed by section 4999 of the Code, the Corporation shall pay to the Executive, no later than the fifth day following the Date of Termination, an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Contract Payments and such other Total Payments and any federal and state and local income tax and Excise Tax upon the payment provided for by this subsection, shall be equal to the Contract Payments and such other Total Payments. (b) For purposes of determining whether any of Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any payments or benefits received or to be received by the Executive in connection with an event described in section 280(G) (b) (2) (A) (i) of the Code (hereinafter, a "change in control"), or the Executive's termination of employment pursuant to the terms of any plan, arrangement or agreement (other than this Agreement) with the Corporation, its successors, any person whose actions result in a change in control or any person affiliated with the Corporation or such person (together with the Contract Payments, the "Total Payments"), shall be treated as "parachute payments" within the meaning of section 280G(b) (2) of the Code except to the extent that, in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to the Executive, the Total Payments do not constitute parachute payments, (b) all "excess parachute payments" within the meaning of section 280G(b) (1) shall be treated as subject to the Excise Tax except to the extent that, in the opinion of such tax counsel, such excess parachute payments represent reasonable compensation for services actually rendered within the meaning of section 280G(b) (4) (B) of the Code in excess of the base amount within the meaning of section 280G(b) (3) of the Code, or are otherwise not subject to the Excise Tax, and (c) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Corporation's independent auditors in accordance with the principles of sections 280G(d) (3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive's employment, the Executive shall repay to the Corporation at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by the Executive if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in section 1274(b) (2) (B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of the Executive's employment (including by reason of any payment the existence or amount of which cannot be 11 determined at the time of the Gross-Up Payment), the Corporation shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. 15. Amendment or Modification: Waiver. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer of the Corporation as may be specifically designated by the Board or its compensation committee. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in Agreement. 16. Funding. This Agreement shall constitute a Plan for purposes of Section 1.01 of the so-called rabbi trust entered into by Shawmut prior to the Effective Date and assumed by the Corporation pursuant to the Merger Agreement; provided, however, that nothing contained herein shall require the Corporation to make additional contributions to such trust. 17. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Boston, Massachusetts, in accordance with the rules of the American Arbitration Association then in effect or of such similar organization as the parties hereto may mutually agree. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The expense of such arbitration shall be borne by the Corporation. 18. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Massachusetts without regard to its conflicts of law principles. 19. Miscellaneous. All references to sections of any statute shall be deemed also to refer to any successor provisions to such sections. The obligations of the Corporation under Section 9 shall survive the expiration of the term of this Agreement. The compensation and benefits payable to the Executive under this Agreement shall be in lieu of any other severance benefits to which the Executive may otherwise be entitled upon his termination of employment under any severance plan, program, policy or arrangement of the Corporation (other than the Severance Agreement, as defined in Section 22). 20. Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect throughout the Term. 12 21. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 22. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and, as of the Effective Date, supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and, as of the Effective Date, the Prior Agreement and any prior agreement of the parties hereto in respect of the subject matter contained herein are hereby terminated and canceled; provided, however, that this Agreement shall not supersede or in any way affect the validity of any other agreement setting forth the rights of the Executive following a change in control of the Corporation (the "Severance Agreement"). IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. FLEET FINANCIAL GROUP, INC. By:______________________________ Name: Title: _________________________________ Joel B. Alvord 13 EX-10.(K) 7 EXHIBIT 10(k) EMPLOYMENT AGREEMENT by and between FLEET FINANCIAL GROUP, INC. and GUNNAR S. OVERSTROM TABLE OF CONTENTS SECTION PAGE - ------- ---- 1. Employment.......................................................1 2. Term.............................................................1 3. Position and Duties..............................................1 4. Place of Performance.............................................2 5. Compensation and Related Matters.................................2 (a) Base Salary................................................2 (b) Bonuses....................................................2 (c) Expenses...................................................3 (d) Other Benefits.............................................3 (e) Vacation...................................................3 (f) Services Furnished.........................................3 6. Offices..........................................................3 7. Termination......................................................3 (a) Death......................................................3 (b) Disability.................................................4 (c) Cause......................................................4 (d) Good Reason................................................4 8. Termination Procedure............................................4 (a) Notice of Termination......................................4 (b) Date of Termination........................................5 (c) Compensation During Dispute................................5 9. Compensation upon Termination or During Disability...............5 (a) Disability; Death..........................................5 (b) By Corporation without Cause or by the Executive...........6 (c) By Corporation for Cause...................................7 (d) Compensation Plans.........................................7 (e) Mitigation.................................................7 10. Confidential Information; Nonsolicitation Requirement............7 (a) Confidential Information...................................7 (b) Nonsolicitation Requirement................................8 11. Indemnification; Legal Fees......................................8 12. Successors; Binding Agreement....................................8 (a) Corporation's Successors...................................8 (b) The Executive's Successors.................................9 13. Notice...........................................................9 14. Additional Payment...............................................9 15. Amendment or Modification; Waiver...............................11 16. Funding.........................................................11 17. Arbitration.....................................................11 18. Governing Law...................................................11 19. Miscellaneous...................................................11 20. Severability....................................................11 21. Counterparts....................................................11 22. Entire Agreement................................................12 ii INDEX OF DEFINED TERMS ---------------------- Term Where Defined - ---- ------------- Annual Bonus.....................................................Sec. 5(b) Base Salary......................................................Sec. 5(a) Board.........................................................Introduction Cause............................................................Sec. 7(c) Code...............................................................Sec. 11 Contract Payments...............................................Sec. 14(a) Corporation...................................................Introduction Date of Termination..............................................Sec. 8(b) Disability.......................................................Sec. 7(b) Disability Period................................................Sec. 9(a) Effective Date......................................................Sec. 2 Effective Time................................................Introduction Excise Tax......................................................Sec. 14(a) Executive.....................................................Introduction Good Reason......................................................Sec. 7(d) Gross-Up Payment................................................Sec. 14(a) Long-Term Bonus..................................................Sec. 5(b) Merger Agreement..............................................Introduction Notice of Termination............................................Sec. 8(a) Shawmut.......................................................Introduction Prior Agreement...............................................Introduction Renewal Date........................................................Sec. 2 Severance Agreement................................................Sec. 21 Term................................................................Sec. 2 Total Payments..................................................Sec. 14(b) iii EMPLOYMENT AGREEMENT AGREEMENT, dated as of February 20, 1995, by and between Gunnar S. Overstrom (the "Executive") and Fleet Financial Group, Inc., a Rhode Island corporation (the "Corporation"). The Executive was formerly employed by Shawmut National Corporation, a Delaware corporation ("Shawmut"), as President and Chief Operating Officer pursuant to an employment agreement (the "Prior Agreement") effective as of February 24, 1994. Pursuant to the Agreement and Plan of Merger, dated as of February 20, 1995 (the "Merger Agreement") by and between the Company and Shawmut, Shawmut will merge with and into the Company as of the "Effective Time" (as defined in the Merger Agreement). The Board of Directors of the Corporation (the "Board") recognizes that the Executive can contribute significantly to the growth and success of the Corporation. The Board desires to provide for the employment of the Executive and to encourage the attention and dedication to the Corporation of the Executive as a member of the Corporation's management, in the best interest of the Corporation and its shareholders. The Executive is willing to commit himself to serve the Corporation, on the terms and conditions herein provided. In order to effect the foregoing, the Corporation and the Executive wish to enter into an employment agreement on the terms and conditions set forth below. This Agreement shall become effective only at the Effective Time. If the Effective Time does not occur, this Agreement shall be of no force or effect. Accordingly, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Employment. The Corporation hereby agrees to employ the Executive, and the Executive hereby accepts such employment, on the terms and conditions hereinafter set forth. 2. Term. The period of employment of the Executive by the Corporation hereunder (the "Term") shall commence on the date (the "Effective Date") on which the Effective Time occurs and shall end on the second anniversary thereof unless further extended as provided in this Section 2 or sooner terminated as provided in Section 7. Notwithstanding the foregoing, on the first anniversary of the Effective Date and on each anniversary of the Effective Date thereafter (a "Renewal Date"), the term of the Executive's employment shall be automatically extended for one (l) additional year unless, at least sixty (60) days prior to such Renewal Date, the Corporation shall have delivered to the Executive or the Executive shall have delivered to the Corporation written notice that the term of the Executive's employment hereunder will not be extended. 3. Position and Duties. During the Term, the Executive shall serve as Vice Chairman of the Corporation. The Executive shall be responsible for the consumer banking and investment management operations of the Corporation and shall have such additional responsibilities and authority as may from time to time be assigned to the Executive by the Chairman or Chief Executive Officer of the Corporation, provided that such responsibilities and authority are consistent with the Executive's position with the Corporation. The Executive agrees to devote substantially all of his working time and efforts to the performance of his duties for the Corporation; provided, however, that the Executive may (i) serve on the boards of directors of other organizations to the extent such service is permitted by applicable law and would not subject the Corporation to any liability with respect to its business activities under such law, and (ii) may devote a reasonable amount of time to charitable and community services. 4. Place of Performance. In connection with the Executive's employment by the Corporation, the Executive shall be based at the headquarters of the Corporation in Boston, Massachusetts and in Hartford, Connecticut except for required travel on the Corporation's business to an extent substantially consistent with the Executive's business travel obligations with Shawmut prior to the Effective Date. 5. Compensation and Related Matters. (a) Base Salary. During the Term, the Corporation shall pay the Executive a base salary (the "Base Salary") at a rate no less than the rate in effect from time to time for other Vice Chairmen of the Corporation. Notwithstanding the foregoing, the Corporation shall pay the Executive as additional Base Salary with respect to 1995 (whether or not the Effective Time occurs during 1995) an amount equal to the excess of the highest base salary earned by any executive officer of the Corporation (other than the Chairman or Chief Executive Officer of the Corporation) during 1995 over the base salary earned by the Executive during 1995 with Shawmut. Base Salary shall be paid in approximately equal installments in accordance with the Corporation's customary payroll practices. Base Salary may be increased from time to time in accordance with the normal business practices of the Corporation and, if so increased, shall not thereafter during the Term be decreased. The salary payments (including any increased salary payments) hereunder shall not in any way limit or reduce any other obligation of the Corporation hereunder, and no other compensation, benefit or payment hereunder shall in any way limit or reduce the obligation of the Corporation to pay the Executive's salary hereunder. (b) Bonuses. During the Term, the Executive shall be eligible to receive an annual bonus (the "Annual Bonus"). For each year during the Term, the Executive shall be eligible to receive such Annual Bonus, and other awards (the "Long-Term Bonus") as may be provided pursuant to the terms of the incentive plans of the Corporation applicable to other Vice Chairmen of the Corporation as such plans may from time to time be revised. Notwithstanding the foregoing, the Corporation shall pay the Executive an Annual Bonus with respect to 1995 (whether or not the Effective time occurs during 1995) in an amount equal to the excess of the highest Annual Bonus earned by any executive officer of the Corporation (other than the Chairman or Chief Executive Officer of the Corporation) during 1995 over the annual bonus earned by the Executive during 1995 with Shawmut. The Annual Bonus and the Long-Term Bonus shall be paid in accordance with the terms of such plans. 2 (c) Expenses. The Corporation shall promptly reimburse the Executive for all reasonable business expenses incurred during the Term by the Executive in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Corporation, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Corporation. (d) Other Benefits. The Executive shall be entitled to participate in all of the employee benefit plans and arrangements made available by the Corporation to its similarly situated executive officers, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements and subject to offset for benefits earned under Shawmut employee benefit plans, where applicable. Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to subsection (a) of this Section 5. The Corporation understands and agrees that the benefit payable to the Executive pursuant to Shawmut's Executive Supplemental Retirement Plan shall be determined by giving effect to Schedule A hereto. (e) Vacation. The Executive shall be entitled to (i) the number of vacation days in each calendar year, (ii) compensation in respect of earned but unused vacation days, and (iii) all paid holidays, in each case as the same may be provided by the Corporation to its similarly situated executive officers. (f) Services Furnished. During the Term, the Corporation shall furnish the Executive with office space, stenographic assistance and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of his duties as set forth in Section 3. 6. Offices. Subject to Sections 3 and 4, the Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of the Corporation or any of its subsidiaries and as a member of any committees of the board of directors of any such corporations, and in one or more executive positions of any of the Corporation's subsidiaries, provided that the Executive is indemnified for serving in any and all such capacities on a basis no less favorable than is currently or may be provided to any other director of the Corporation, any of its subsidiaries, or in connection with any such executive position, as the case may be. 7. Termination. The Executive's employment hereunder may be terminated without any breach of this Agreement only under the circumstances set forth in subsections (a), (b), (c) and (d) of this Section 7. In the event of a termination pursuant to subsection (a), (b) or (c) of this Section 7, the Term shall end on the Executive's Date of Termination (as defined in Section 8(b)). (a) Death. The Executive's employment hereunder shall terminate upon his death. 3 (b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of his duties hereunder for the entire period of six consecutive months, and within thirty (30) days after written Notice of Termination (as defined in Section 8) is given shall not have returned to the performance of his duties hereunder on a full-time basis, the Corporation may terminate the Executive's employment hereunder for "Disability." (c) Cause. The Corporation may terminate the Executive's employment hereunder for Cause. For purposes of this Agreement, the Corporation shall have "Cause" to terminate the Executive's employment hereunder upon the occurrence of any of the following events: (i) the conviction of the Executive for the commission of a felony involving dishonesty with respect to the Corporation; or (ii) the willful misconduct by the Executive (including, but not limited to, breach by the Executive of the provisions of Section 10) that is demonstrably and materially injurious to the Corporation or its subsidiaries, whether monetarily or otherwise. Cause shall not exist unless and until the Corporation has delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive was guilty of the conduct set forth in this Section 7(c) and specifying the particulars thereof in detail. For purposes of this Section 7(c), no act or failure to act on the Executive's part shall be considered "willful" unless done or failed to be done by the Executive in bad faith and without reasonable belief that the Executive's action or omission was in the best interest of the Corporation. (d) Good Reason. The Executive may terminate his employment during the Term hereunder for "Good Reason." The Executive shall be deemed to have terminated his employment for Good Reason if his employment terminates for any reason other than death, Disability or by the Corporation for Cause. 8. Termination Procedure. (a) Notice of Termination. Any termination of the Executive's employment by the Corporation or by the Executive (other than termination pursuant to Section 7(a) hereof) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 13. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts 4 and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (b) Date of Termination. "Date of Termination" shall mean (i) if the Executive's employment is terminated pursuant to Section 7(a) above, (ii) if the Executive's employment is terminated pursuant to Section 7(b) above, thirty (30) days after Notice of Termination (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period), (iii) if the Executive's employment is terminated pursuant to Section 7(c) above, the date specified in the Notice of Termination, and (iv) if the Executive's employment is terminated pursuant to Section 7(d) above, the date on which a Notice of Termination is given or any later date (within 30 days) set forth in such Notice of Termination; provided, however, that, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). (c) Compensation During Dispute. If a purported termination occurs during the Term, and such termination is disputed in accordance with subsection (b) of this Section 8, the Corporation shall continue to pay the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which Executive was participating when the notice giving rise to the dispute was given, until the Date of Termination, determined in accordance with subsection (b) of this Section 8. Amounts paid under this Section 8(c) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 9. Compensation upon Termination or During Disability. (a) Disability; Death. During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness ("Disability Period"), the Executive shall continue to receive his full Base Salary at the rate in effect at the beginning of such period until his employment is terminated pursuant to Section 7 (b), provided that payments so made to the Executive during the disability period shall be reduced by the sum of the amounts, if any, payable to the Executive with respect to such period under the disability benefit plans of the Corporation then in effect or under the Social Security disability insurance program, which amounts were not previously applied to reduce any such payment. Subsequent to the termination of the Executive's employment pursuant to Section 7(b), or in the event the Executive's employment is 5 terminated by reason of his death, the Corporation shall pay to the Executive, his legal representative or his successors (as described in Section 12(b)) his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given. The Corporation shall have no further obligations to the Executive under this Agreement, except as set forth in this subsection (a) of Section 9, and the Executive's benefits shall be determined under the Corporation's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (b) By the Corporation without Cause or by the Executive. If during the Term the Executive's employment is terminated by the Corporation other than for Cause or Disability or by the Executive, then -- (i) the Corporation shall pay the Executive his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; (ii) in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Corporation shall pay as liquidated damages to the Executive an aggregate amount equal to the product of (A) the sum of (1) the Executive's annual salary rate in effect as of the Date of Termination (or, if greater, as in effect immediately prior to the Effective Time), (2) the highest Annual Bonus awarded to and earned by the Executive pursuant to either Section 5(b) of this Agreement or Section 5(b) of the Prior Agreement in respect of any fiscal year during the three fiscal years completed prior to the Date of Termination (or, if greater, any fiscal year during the three fiscal years completed prior to the Effective Time) and (3) the highest Long-Term Bonus awarded to and earned by the Executive pursuant to either Section 5(b) of this Agreement or Section 5(b) of the Prior Agreement in respect of any performance cycle ending during the three fiscal years completed prior to the Date of Termination or, if no performance cycle has ended during such three fiscal years, then the highest Long-Term Bonus awarded to the Executive with respect to a performance cycle in effect but not yet ended on the Date of Termination, and (B) three (3), such amount to be paid in a cash lump sum within five (5) days following the Date of Termination, unless the Executive elects, prior to the beginning of the calendar year in which occurs the Date of Termination, to have such amount paid in substantially equal monthly installments during the period commencing with the month immediately following the month in which the Date of Termination occurs and ending with the month corresponding to the end of the Term hereunder; and (iii) the Corporation shall (A) continue coverage for the Executive under the Corporation's life insurance, medical, health, disability and similar welfare benefit plans (or, if continued coverage is barred under such plans, the Corporation shall provide to the Executive substantially similar benefits) for the 6 remainder of the Term, and (B) provide the benefits or additional benefits to which the Executive would have been entitled pursuant to Shawmut's Executive Supplemental Retirement Plan, Executive Group Life Insurance Plan and Split-Dollar Life Insurance Plan (each as in effect immediately prior to the Effective Date), in each case had his employment continued at the rate of compensation specified herein, or if higher, his compensation for calendar year 1994, in each case for three (3) years, notwithstanding the Executive's election, if any, to commence receiving benefits under such plan, agreement or arrangement prior to the end of the Term. Benefits otherwise receivable by the Executive pursuant to clause (A) of this Section 9(b) (iv) shall be reduced to the extent comparable benefits are actually received by the Executive from a subsequent employer during the period during which the Corporation is required to provide such benefits, and the Executive shall report any such benefits actually received to the Corporation. In addition to the foregoing, the Corporation shall provide to the Executive Retiree medical benefits no less favorable than those to which he would have been entitled under the Shawmut retiree medical plan immediately prior to the Effective Date. (c) By Corporation for Cause. If the Executive's employment shall be terminated by the Corporation for Cause, then the Corporation shall pay the Executive his Base Salary (at the rate in effect at the time Notice of Termination is given) through the Date of Termination, and the Corporation shall have no additional obligations to the Executive under this Agreement except as set forth in subsection (d) of this Section 9. (d) Compensation Plans. Following any termination of the Executive's employment, the Corporation shall pay the Executive all unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination under any compensation plan or program of the Corporation, including, but not limited to, any deferred compensation plan or program at the time such payments are due. (e) Mitigation. Except as is specifically provided in subsection (b) (iv) of this Section 9, the Executive shall not be required to mitigate the amount of any payment provided herein by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided hereunder be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Corporation, or otherwise. 10. Confidential Information; Nonsolicitation Requirement. (a) Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Corporation all trade secrets, confidential information, and knowledge or data relating to the Corporation and its businesses, which shall have been obtained by the Executive during the Executive's employment by the Corporation and which 7 shall not have been or now or hereafter have become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). The Executive shall not, without the prior written consent of the Corporation or as may otherwise be required by law or legal process, communicate or divulge any such trade secrets, information, knowledge or data to anyone other than the Corporation and those designated by the Corporation. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 10(a). (b) Nonsolicitation Requirement. During any period that the Executive is performing services hereunder or the Executive is entitled to payment pursuant to Section 9, and for a period of one (1) year following a termination of the Executive's employment by the Corporation for Cause, the Executive shall not induce any employee of the Corporation or its subsidiaries to terminate employment with the Corporation or its subsidiaries in order to obtain employment with any person, firm or corporation affiliated with the Executive. 11. Indemnification; Legal Fees. The Corporation shall indemnify the Executive to the full extent permitted by law and the by-laws of the Corporation for all expenses, costs, liabilities and legal fees that the Executive may incur in the discharge of his duties hereunder, including any legal fees and expenses incurred by the Executive in contesting or disputing any termination of the Executive's employment or in seeking to obtain or enforce any right or benefit provided by this Agreement (or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), to any payment or benefit provided hereunder) other than for any such expenses, costs, liabilities or legal fees incurred as a result of the Executive's bad faith or gross negligence. Such payments shall be made within five (5) days after the Executive's request for payment accompanied with such evidence of fees and expenses incurred as the Corporation reasonably may require. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 11. 12. Successors; Binding Agreement. (a) Corporation's Successors. The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Corporation in the same amount and on the same terms as he would be entitled to hereunder if he terminated his employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this 8 Agreement, "Corporation" shall mean the Corporation as herein before defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) The Executive's Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate. 13. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Gunnar S. Overstrom One Squirrel Hill Road West Hartford, Connecticut 06107 If to the Corporation: Fleet Financial Group, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Attention: General Counsel or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 14. Additional Payment. (a) If any of the payments provided for in this Agreement (the "Contract Payments") or other portion of the Total Payments (as defined below) will be subject to the tax (the "Excise Tax") imposed by section 4999 of the Code, the Corporation shall pay to the Executive, no later than the fifth day following the Date of Termination, an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Contract Payments and such other Total Payments and any federal and state and local income tax 9 and Excise Tax upon the payment provided for by this subsection, shall be equal to the Contract Payments and such other Total Payments. (b) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any payments or benefits received or to be received by the Executive in connection with an event described in section 280G(b) (2) (A) (i) of the Code (hereinafter, a "change in control"), or the Executive's termination of employment pursuant to the terms of any plan, arrangement or agreement (other than this Agreement) with the Corporation, its successors, any person whose actions result in a change in control or any person affiliated with the Corporation or such person (together with the Contract Payments, the "Total Payments"), shall be treated as "parachute payments" within the meaning of section 280G(b) (2) of the Code except to the extent that, in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to the Executive, the Total Payments do not constitute parachute payments, (b) all "excess parachute payments" within the meaning of section 280G(b) (1) shall be treated as subject to the Excise Tax except to the extent that, in the opinion of such tax counsel, such excess parachute payments represent reasonable compensation for services actually rendered within the meaning of section 280G(b) (4) (B) of the Code in excess of the base amount within the meaning of section 280G(b) (3) of the Code, or are otherwise not subject to the Excise Tax, and (c) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Corporation's independent auditors in accordance with the principles of sections 280G(d) (3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive's employment, the Executive shall repay to the Corporation at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by the Executive if such repayment results in a reduction in Excise Tax and/or a federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in section 1274(b) (2) (B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time, of the termination of the Executive's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Corporation shall make an additional gross-up payment in respect of such 10 excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. 15. Amendment or Modification: Waiver. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer of the Corporation as may be specifically designated by the Board or its compensation committee. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. 16. Funding. This Agreement shall constitute a Plan for purposes of Section 1.01 of the so-called rabbi trust entered into by Shawmut prior to the Effective Date and assumed by the Corporation pursuant to the Merger Agreement; provided, however, that nothing contained herein shall require the Corporation to make additional contributions to such trust. 17. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Boston, Massachusetts in accordance with the rules of the American Arbitration Association then in effect or of such similar organization as the parties hereto may mutually agree. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The expense of such arbitration shall be borne by the Corporation. 18. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Rhode Island without regard to its conflicts of law principles. 19. Miscellaneous. All references to sections of any statute shall be deemed also to refer to any successor provisions to such sections. The obligations of the Corporation under Section 9 shall survive the expiration of the term of this Agreement. The compensation and benefits payable to the Executive under this Agreement shall be in lieu of any other severance benefits to which the Executive may otherwise be entitled upon his termination of employment under any severance plan, program, policy or arrangement of the Corporation (other than the Severance Agreement, as defined in Section 22). 20. Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect throughout the Term. 21. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11 22. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and, as of the Effective Date, supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and, as of the Effective Date, the Prior Agreement and any prior agreement of the parties hereto in respect of the subject matter contained herein are hereby terminated and canceled; provided, however, that this Agreement shall not supersede or in any way affect the validity of any other agreement setting forth the rights of the Executive following a change in control of the Corporation (the "Severance Agreement"). IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. FLEET FINANCIAL GROUP, INC. By:________________________________ Name: Title: ___________________________________ Gunnar S. Overstrom 12 Schedule A II. Resolution With Respect to Messrs. Alvord and Overstrom ------------------------------------------------------- Pursuant to the provisions of the Hartford National Corporation Executive Supplemental Retirement Plan (the "Plan"), the Committee hereby grants to Messrs. Joel B. Alvord and Gunnar S. Overstrom (i) an additional five years of service to be added to their respective Years of Service as defined in the Plan; and (ii) the option to have the payment of Retirement Benefits under the Plan commence at any time after the Participant shall have attained age 50. No action is required to ensure that the 3% per year reduction in benefits applicable to commencement of payments before age 62 applies to payments commencing as early as age 50. As written, the Plan would require a 36% reduction in benefits for one whose payments commence at age 50. 13 EX-10.(M) 8 EXHIBIT 10(m) SHAWMUT NATIONAL CORPORATION SECONDARY STOCK OPTION AND RESTRICTED STOCK AWARD PLAN As Amended and Restated as of June 1, 1994 1. Purposes The purposes of the Shawmut National Corporation Stock Option and Restricted Stock Award Plan (the "Plan") are to further the long-term growth in earnings of Shawmut National Corporation (the "Corporation") by providing incentives to eligible employees who contribute, or are expected to contribute, to such growth; to facilitate the ownership of Corporation stock by such employees, thereby increasing the identity of their interests with those of the Corporation's stockholders; and to assist the Corporation in attracting and retaining employees with experience and ability. 2. Administration The Plan shall be administered and interpreted by a committee (the "Committee") of at least two persons who may, but need not, be members of the Board of Directors of the Corporation (the "Board"). The Committee shall have full authority to establish regulations for the administration of the Plan, to select the employees who shall be granted stock options (sometimes hereinafter referred to as "options"), stock appreciation rights (sometimes hereinafter referred to as "rights") or restricted stock awards or units (sometimes hereinafter referred to collectively as "restricted awards") under the Plan, to determine the number of options, rights or shares or units of restricted stock to be granted to each such employee, to interpret the Plan and to make any other determination it deems necessary to administer the Plan, which determinations shall be binding and conclusive on all parties. The Committee may delegate to the Chairman or other specified persons the authority to take specified actions. No member of the Committee shall be liable for any action or determination taken or made in good faith with respect to this Plan or any option, right or restricted award granted hereunder. 3. Eligibility Any full-time employee of the Corporation or its subsidiaries whose salary grade is 24 or below ("Employee") and who is determined by the Committee to be in a position to contribute to the long-term growth in earnings of the Corporation shall be eligible to receive grants of stock options, rights or restricted awards under this Plan. For the purposes of this Plan, any corporation of which the Corporation owns directly or indirectly fifty percent (50%) or more of such corporation's outstanding voting stock shall be deemed to be a "subsidiary." 4. Employee rights Nothing in the Plan or in any instrument executed pursuant thereto shall confer upon any employee any right to continue in the employ of the Corporation or a subsidiary or shall affect the right of the Corporation or of a subsidiary to terminate the employment of any employee with or without cause. Nothing in this Plan is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice or arrangement for the payment of compensation or fringe benefits to employees generally, or to any class or group of employees, which the Corporation or any subsidiary now has or may hereafter lawfully put into effect, including, without limitation, any retirement, pension, insurance, stock option, stock award, stock purchase, incentive compensation or bonus plan. The Corporation shall not be obligated to issue stock pursuant to an option or award if such issuance would constitute a violation of any applicable law. The Committee may postpone any exercise of an option, right or expiration of any restrictions for such time as the Committee may deem necessary in order to permit the Corporation, with reasonable diligence, to obtain an exemption from, or complete any necessary registration of stock under the Securities Act of 1933, as amended. While the Committee may, in its sole discretion, extend the period of exercise of such option or right for a period not in excess of the time of such postponement, the Committee shall not be obligated to do so, and neither the Corporation nor the Committee shall have any obligation or liability to the grantee of an option or right if such option or right lapses because of such postponement. 5. Stock subject to this plan (a) The maximum number of shares of the common stock of the Corporation to be reserved for issuance in accordance with the terms of the Plan is 3,806,928, including the shares subject to outstanding options ("replacement options") or warrants ("replacement warrants") granted under the New Dartmouth Bank 1992 Stock Option Plan, the Gateway Bank Amended and Restated 1985 Stock Option and Incentive Plan and the New Dartmouth Bank Amended and Restated 1991 Management Warrant Plan and, if so determined by the Committee, similar equity compensation plans of companies or other entities acquired by the Corporation, such plans being hereinafter referred to as the "Replaced Plans." Such reserved shares may be authorized but unissued shares or any issued shares which have been acquired by the Corporation and are held in its treasury, as the Corporation may from time to time determine. (b) The number and kind of shares reserved for options, rights and restricted awards, the number and kind of shares subject to outstanding options, rights and restricted awards, and/or the option price of such optioned shares shall be adjusted equitably to reflect any change in the issued and outstanding 2 shares of the Corporation's common stock, through declaration of stock dividends or distributions with respect to such shares, through restructuring, recapitalization or other similar event or through stock splits, change in par value, combination or exchange of shares, or the like, occurring or effective while such shares are being held in such reserve or are subject to outstanding options, rights and restricted awards; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. (c) If options or rights granted under this Plan are surrendered or for any other reason cease to be exercisable in whole or in part, or if any shares or units of restricted stock awarded under the Plan are forfeited, then the shares which were subject to such options or rights, but as to which the options or rights cease to be exercisable, and the shares or units of restricted stock which were forfeited shall again be available for the purposes of this Plan. 6. Granting of options (a) The Committee may grant only options that do not qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). (b) The option price per share for each option granted shall be determined by the Committee and shall not be less than the Fair Market Value of the shares on the date the option is granted. For purposes of this Plan, the Fair Market Value of such shares on any given day shall be the closing price per share of common stock as reported on the New York Stock Exchange Composite Tape for such date, or, if there was no trading of such common stock on such date, for the next preceding date on which there was such trading. (c) Grants shall be authorized by the Committee and shall be evidenced by written agreements in such form as the Committee shall from time to time approve. 7. Exercise of option (a) Each option shall be granted for, and by its terms shall not be exercisable after, the expiration of a period of ten years from the date the option is granted or such lesser period as the Committee may determine. (b) No optioned shares shall be issued or transferred to an optionee until purchased as provided in Subsection (f) of this Section 7, and an optionee shall have none of the rights of a stockholder with respect to such optioned shares until the certificates therefor are registered in the name of such optionee upon exercise of the option. (c) An option may be exercised in cumulative installments as designated by the Committee, but no portion of the option shall be exercisable 3 before one year from the date of grant, unless otherwise determined by the Committee. Notwithstanding the foregoing, an option shall be exercisable in full from and after the Acceleration Date (as defined in Section 9(e) (ii)). To the extent an option is not exercised for the total number of shares with respect to which such option becomes exercisable, the number of unexercised shares shall accumulate and the option shall be exercisable, to such extent, at any time thereafter, but in no event after the expiration of such period as the Committee may have established with respect to such option pursuant to Subsection (a) of this Section 7. (d) Except as provided in Subsection (e) of this Section 7, no option granted under this Plan may be exercised after the holder thereof has ceased to be employed by the Corporation or a subsidiary. For purposes of this Subsection (d) and Subsection (e) of this Section 7, with respect to an Employee who has ceased to perform services for the Corporation by reason of disability (within the meaning of the Shawmut National Corporation Long-Term Disability Plan) ("Disability"), references to cessation of employment shall be deemed to include such cessation of the provision of services. (e) (i) If an Employee ceases to be employed by the Corporation or a subsidiary for any reason other than death, Disability or termination of his employment by the Corporation or a subsidiary for cause (as determined by the Committee in its sole discretion), he or his legal representative may, at any time within three months after such cessation of employment, exercise any option granted under this Plan to the extent that the Employee was entitled to exercise it on the date of his cessation of employment. (ii) If any Employee ceases to be employed by the Corporation or a subsidiary by reason of his death or Disability, he or his legal representative may, at any time within one year after such cessation of employment, exercise any option granted under this Plan to the extent that the Employee was entitled to exercise it on the date of his cessation of employment. (iii) The Committee may, in its sole discretion, in the instrument evidencing the grant of an option to the Employee or on or before the date such Employee ceases to be employed by the Corporation or a subsidiary, provide that the option may be exercised subsequent to specified cessations of employment (A) even though the option was not otherwise exercisable at the time of such cessation of employment and/or (B) for specified periods in excess of those set forth in Paragraphs (i) and (ii) of this Section 7(e). (iv) Notwithstanding anything to the contrary in this Section 7 (e), no option granted hereunder shall be exercisable after the expiration of such period as the Committee may have established with respect to such option pursuant to Subsection (a) of this Section 7. 4 (f) An Employee who desires to exercise an option, in whole or in part, shall submit to the Corporation a notice in writing, accompanied by one of the following: (i) payment in cash of the full option price of the shares purchased; (ii) if authorized by the Committee, the delivery of shares of common stock of the Corporation owned by the purchaser ("Appreciated Stock"), accompanied by the certificates therefor registered in the name of such purchaser and properly endorsed for transfer, having a Fair Market Value equal to the option price; (iii)if authorized by the committee, the delivery to the Corporation of restricted shares or units awarded to the Employee pursuant to Section 9 or Section 10 ("Appreciated Restricted Stock") with respect to which the Restricted Period or deferral periods, as the case may be, have not lapsed, having a Fair Market Value equal to the option price, provided that the shares thereby purchased equal in number to the number of restricted shares or units delivered shall be subject to the same restrictions as the delivered shares or units; (iv) if authorized by the Committee, any combination of cash and Appreciated Stock and Appreciated Restricted Stock such that the sum of the amount of cash and the Fair Market Value of the Appreciated Stock and Appreciated Restricted Stock (as of the date of exercise) is equal to the option price; or (v) instructions to a broker promptly to deliver to the Corporation the amount of sale proceeds sufficient to pay the option price. (g) Except as otherwise provided herein, replacement options and replacement warrants shall be exercisable upon the same terms and conditions as those under which such options and warrants were granted pursuant to the respective Replaced Plan, the applicable provisions of which, as determined by the Committee, are hereby incorporated herein by reference thereto; provided, however, that in the case of replacement options granted in compliance with Section 422 of the Internal Revenue Code of 1986, as amended, such terms and conditions shall be adjusted as necessary to comply with the requirements of such Section. 8. Stock appreciation rights (a) The Committee shall have authority to grant stock appreciation rights ("Rights") to the holder of any option granted under the Plan (the "Related SAR Option") with respect to all or some of the shares of stock covered by such Related SAR Option. A Right may be granted either at the time of grant of the Related SAR Option or any time thereafter during its term (except as otherwise provided in Section 15). Each Right shall be exercisable only if, and 5 to the extent that, the Related SAR Option is exercisable. Upon the exercise of a Right, the Related SAR Option shall cease to be exercisable to the extent of the shares of common stock with respect to which such Right is exercised, but shall be considered to have been exercised to that extent for purposes of determining the number of shares available for the grant of further awards under the Plan. Upon the exercise or termination of a Related SAR Option, the Right with respect to such Related SAR Option shall terminate to the extent of the shares of common stock with respect to which the Related SAR Option was exercised or terminated. (b) Upon the exercise of a Right, the holder thereof, subject to Subsection (d) of this Section 8, shall be entitled at the holder's election to receive either - (i) that number of shares of common stock equal to the quotient computed by dividing the Spread (as defined in Subsection (c) of this Section 8) by the Fair Market Value per share of common stock on the date of exercise of the Right; provided, however, that in lieu of fractional shares, the Corporation shall pay cash equal to the same fraction of the Fair Market Value per share of common stock on the date of exercise of the Right, or (ii) an amount in cash equal to the Spread, or (iii) a combination of cash and a number of shares calculated as provided in Paragraph (i) of this Subsection (b) (after reducing the Spread by such cash amount), plus cash in lieu of any fractional shares as above provided. (c) The term "Spread" as used in this Section 8 shall mean an amount equal to the product computed by multiplying (i) the excess of (A) the Fair Market Value per share of common stock on the date the Right is exercised over (B) the option price per share at which the Related SAR Option is exercisable, by (ii) the number of shares with respect to which such Right is exercised. (d) Notwithstanding the provisions of Subsection (b) of this Section 8, the Committee shall have sole discretion to consent to or disapprove an election to receive cash in whole or in part ("Cash Election") upon the exercise of a Right. (e) Each Right shall be granted on such terms and conditions not inconsistent with the Plan as the Committee may determine. (f) To exercise a Right, the optionee shall (i) give written notice thereof to the Committee in form satisfactory to the Committee specifying (A) the number of shares of common stock with respect to which the Right is being exercised and (B) the amount the optionee elects to receive in cash and shares of common stock with respect to the exercise of the Right, and (ii) if requested by the Committee, deliver the option agreement to the Committee, who shall endorse thereon a notation of such exercise and return the option agreement to the optionee. The date of exercise of a Right that is validly exercised shall be 6 deemed to be the date on which there shall have been delivered the instruments referred to in the first sentence of this Subsection (f). 9. Restricted stock The Committee may make awards of restricted stock to any Employee. Each award of restricted stock under the Plan (a "Restricted Stock Award") shall be evidenced by an instrument in such form as the Committee shall prescribe from time to time in accordance with the Plan and shall comply with the following terms and conditions (and with such other terms and conditions not inconsistent with the terms of this Plan as the Committee, in its discretion, shall establish): (a) The Committee shall determine the number of shares of the common stock of the Corporation to be issued to an Employee pursuant to the award. (b) Except as set forth in Section 7(f), shares of stock issued to an Employee in accordance with a Restricted Stock Award may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, for a period of ten years, or such shorter period as the Committee shall determine, from the date on which the award is granted (the "Restricted Period"). The Committee may also impose such other restrictions and conditions on the shares as it deems appropriate. Certificates for shares of stock issued pursuant to a Restricted Stock Award may bear an appropriate legend referring to such restrictions, and any attempt to dispose of any such shares of stock in contravention of such restrictions shall be null and void and without effect. Such certificates may be retained by the Corporation during the Restricted Period. In determining the Restricted Period of an award, the Committee may provide that the foregoing restrictions shall lapse with respect to specified percentages of the awarded shares on successive anniversaries of the date of such award. In no event shall the Restricted Period end with respect to a Restricted Stock Award prior to the satisfaction by the Employee of any liability arising under Section 11. (c) If the Employee's continuous employment with the Corporation or any of its subsidiaries shall terminate for any reason prior to the expiration of the restricted Period of an award, or if any other conditions established by the Committee are not met, any shares remaining subject to restrictions (after taking into account the provisions of Subsections (e) and (f) of this Section 9) shall thereupon be forfeited by the Employee and transferred to, and reacquired by, the Corporation or a subsidiary at no cost to the Corporation or subsidiary. In such event, the Employee, or in the event of his death, his personal representative, shall forthwith deliver to the Secretary of the Corporation any certificates in his or and his representative's possession for the shares of stock remaining subject to such restrictions, accompanied by such instruments of transfer, if any, as may reasonably be required by the Secretary of the Corporation. (d) Upon receipt by an Employee of a Restricted Stock Award, the Employee shall possess all incidents of ownership of such shares (subject to 7 Subsection (b) of this Section 9), including the right to receive or reinvest dividends with respect to such shares and to vote such shares. (e) (i) Upon the occurrence of a "change in control of Corporation," as defined in paragraph (ii) of this Section 9(e), all restrictions then outstanding with respect to a Restricted Stock Award shall automatically expire and be of no further force and effect. (ii) For purposes of the Plan, a "change in control of the Corporation" shall mean a change in control of the Corporation or any successor or assign thereof of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A, promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"), whether or not the Corporation is subject to such reporting requirements, or the acquisition of control (within the meaning of Section 2(a) (2) of the Bank Holding Company Act of 1956, as amended, 12 U.S.C. ss. 1841 or Section 602 of the Change in Bank Control Act of 1978, l2 U.S.C. ss. 1817(J)) of the Corporation by any person, company or other entity; provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" or "group" (as such terms are used in Sections 13(d) (3) and 14(d) (2) of the Exchange Act) (a "Person") other than the Corporation is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 25% or more of the combined voting power of the Corporation's then outstanding securities; (B) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination of election by the Corporation's stockholders, of each new director was approved by a vote of at least two-thirds of the directors of the Corporation then still in office who were directors of the Corporation at the beginning of the period; (C) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, at least 60% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no Person acquires more than 50% of the combined voting power of the Corporation's then outstanding securities; or (D) the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets. "Acceleration Date" shall mean the date on which public announcement of the acquisition of the percentage set forth above 8 shall have been made, the date on which the change in the composition of the Board set forth above shall have occurred, or the date on which approval of the merger, plan or agreement set forth above is obtained, whichever is applicable. (f) The Committee shall have the authority (and the instrument evidencing a Restricted Stock Award may so provide) to cancel all or any portion of any outstanding restrictions prior to the expiration of the Restricted Period with respect to all or part of a Restricted Stock Award on such terms and conditions as the Committee may deem appropriate. 10. Restricted stock units (a) The Committee may make awards of restricted stock units ("Restricted Stock Units") to any Employee, independent of, in addition to or in tandem with other grants or awards made under the Plan. The Committee may make such awards at any time, in such number, and subject to deferral for such period (the "Deferral Period") as the Committee shall in its discretion determine in connection with each award. The Committee may specify that such awards shall be subject to forfeiture for all or part of the Deferral Period. Each award of Restricted Stock Units under the Plan shall be evidenced by an instrument in such form as the Committee shall from time to time prescribe and be made in accordance with the following terms and conditions (and such other terms and conditions not inconsistent with the terms of the Plan as the Committee, in its discretion, shall establish): (b) No shares of the common stock of the Corporation shall be issued in connection with the award of Restricted Stock Units until the close of the Deferral Period and any subsequent Elective Deferral Period, as defined in Subsection (g) of this Section 10. Upon the expiration of such periods, certificates for shares of the common stock of the Corporation shall be delivered to the Employee, or his legal representative, in number equal to the number of Restricted Stock Units subject to the award. (c) The Deferral Period shall be a period of ten years, or such shorter period as the Committee shall determine, from the date on which the award is granted. In determining the Deferral Period of an award, the Committee may provide that the Deferral Period shall expire with respect to specified percentages of the awarded Restricted Stock Units on successive anniversaries of the date of such award or on other specified dates. The Committee may also impose such other restrictions and conditions on Restricted Stock Units as it deems appropriate. In no event shall the Deferral Period end with respect to Restricted Stock Units prior to the satisfaction by the Employee of any liability arising under Section 11 hereof. (d) Prior to the transfer to an Employee of shares of the common stock of the Corporation, the Employee shall not possess the incidents of ownership of such shares; provided, however, that unless otherwise determined by the Committee at grant, amounts equal to any dividends declared during the 9 Deferral Period or Elective Deferral Period with respect to shares of common stock of the Corporation equal in number to the number of Restricted Stock Units awarded and outstanding at the time of such declaration ("Dividend Equivalents") shall be paid to the Employee at the time dividends are paid to the stockholders of the Corporation, or deferred and deemed to be reinvested in additional Restricted Stock Units, or otherwise reinvested, all as determined by the Committee in the instrument evidencing the award or at a subsequent time. (e) If the Employee's continuous employment with the Corporation or any of its subsidiaries shall terminate for any reason, or upon the occurrence of such other event as the Committee may select, prior to the expiration of the Deferral Period of an award, any outstanding Restricted Stock Units remaining thereunder (after taking into account the provisions of Subsections (f) and (h) of this Section 10) shall thereupon be forfeited by the Employee (or shall mature) as determined by the Committee in the instrument evidencing the award or at a subsequent time. (f) Unless waived by the Employee, the Deferral Period shall lapse upon the occurrence of a "change in control of the Corporation," as defined in Section 9(e) (ii) hereof. (g) An Employee may elect to further defer receipt of shares of common stock of the Corporation subject to an award (or an installment of an award) or Dividend Equivalents for a specified period or until a specified event (the "Elective Deferral Period"), subject in each case to the Committee's approval and to such terms as are determined by the Committee. (h) The Committee shall have the authority (in the instrument evidencing an award or at a subsequent time) to accelerate the expiration of the Deferral Period or any period or conditions of forfeiture established pursuant to Subsection (e) of this Section 10 with respect to any or all of the Restricted Stock Units awarded to an Employee hereunder on such terms and conditions as the Committee may deem appropriate. 11. Laws and regulations No shares of the Corporation's common stock shall be issued under this Plan unless and until all legal requirements applicable to the issuance of such shares have been complied with. The Corporation shall have the right to condition any issuance of shares to any employee hereunder on such Employee's undertaking in writing to comply with such restrictions on the subsequent disposition of such shares as the Corporation shall deem necessary or advisable as a result of any applicable law or regulation. The Corporation shall have the right to withhold from any cash payment made pursuant to the terms of the Plan the amount of any taxes which the Corporation or a subsidiary is required to withhold with respect to such stock. In the case of Corporation stock issued upon exercise of options or in connection with restricted awards the Employee or other person receiving such stock shall be required to pay to the Corporation or 10 a subsidiary the amount of any taxes which the Corporation or a subsidiary is required to withhold with respect to such stock. An Employee or other person to whom such stock shall be issued may pay all or part of the amount of any federal, state, or local tax liability that will result from the exercise of an option, or, with respect to a restricted award, the expiration of the Restricted Period or deferral periods, as the case may be, by electing one of the following methods: (a) by delivering to the Corporation that number of shares of Corporation stock, when multiplied by the Fair Market Value of such shares on the date of such exercise or expiration, as the case may be, which equals the amount of the portion of such tax liability to be paid by this method, assuming for this purpose a tax rate up to the maximum combined marginal federal, state and local tax rates applicable to such Employee or other person; or (b) by instructing the Corporation to withhold from the shares of Corporation stock that would otherwise be issued that number of shares of Corporation stock, when multiplied by the Fair Market Value of such shares on the date of such exercise or expiration, as the case may be, which equals the amount of the portion of such tax liability to be paid by this method, assuming for this purpose a tax rate up to the maximum combined marginal federal, state and local tax rates applicable to such Employee or other person; provided, however, that, with respect to any Employee or other person, shares in excess of the minimum number necessary to fulfill the Corporation's liability under the Code shall be withheld pursuant to this clause (b) only with the consent of the Committee. 12. Vested rights To the extent that an Employee's rights under the Plan have become vested in accordance with the provision hereof, such Employee may not be deprived of such rights in any manner by any action of the Corporation or the Committee. 13. Nontransferability Awards under the Plan shall not be transferable other than by will or the laws of descent and distribution, and shall be exercisable during the lifetime of an Employee only by him or his guardian or legal representative. 14. Amendment or termination of the plan; interpretation The Board may at any time, and from time to time, terminate, modify or amend the Plan in any respect, including modifications or amendments to comply with or take advantage of changes in federal tax laws or regulations, except that the termination, modification or amendment of the Plan shall not, without the consent of an Employee, adversely affect his rights under any award previously made to him. 15. Effective date and term of the plan The Plan shall become effective as of October 5, 1993. No option, right or restricted award shall be granted pursuant to this Plan later than 11 October 4, 2003, but options, rights or restricted awards theretofore granted may extend beyond that date in accordance with the terms of the Plan. 12 EX-10.(O) 9 EXHIBIT 10(o) FLEET FINANCIAL GROUP, INC. 1995 RESTRICTED STOCK PLAN 1. Purpose The purpose of the 1995 Restricted Stock Plan is to promote the interests of the Corporation and its Subsidiaries by providing long-term incentive awards and stock ownership opportunities to certain executive officers and other key employees in order to: (i) support the execution of the Corporation's business and human resources strategies and the achievement of its goals and (ii) associate the interests of such officers and employees with those of the Corporation's stockholders. 2. Definitions The following terms shall have the meanings described below when used in the Plan: "Board" shall mean the Board of Directors of the Corporation. "Change of Control" shall have the meaning specified in Section 7. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Committee" shall mean the Human Resources and Planning Committee of the Board, or such other committee of the Board which shall succeed to the functions and responsibilities, in whole or in part, of said Human Resources and Planning Committee. "Common Stock" shall mean the common stock of the Corporation, par value $1.00 per share. "Corporation" shall mean Fleet Financial Group, Inc. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean the average of the high and low quoted selling prices for shares of Common Stock as reported on the New York Stock Exchange Composite Transactions Tape on the relevant valuation date or, if there were no Common Stock transactions on the valuation date, on the next preceding date on which there were Common Stock transactions; provided, however, that the -------- ------- Committee may specify such other definition of Fair Market Value as the Committee shall deem appropriate. "Participant" shall mean an eligible employee who has been granted a Restricted Stock Award under the Plan. "Plan" shall mean this Fleet Financial Group, Inc. 1995 Restricted Stock Plan. "Restricted Period" shall have the meaning specified in Section 6(b). "Restricted Stock" shall have the meaning specified in Section 6(a). "Restricted Stock Award" shall mean an award granted under Section 6. "Restricted Stock Agreement" shall have the meaning specified in Section 6(a). "Subsidiary" shall mean any corporation, whether domestic or foreign, in which the Corporation has or obtains, directly or indirectly, 50% or more of the total combined voting power of all classes of stock. If an entity ceases to be a Subsidiary, each employee of that entity shall no longer be deemed employed by the Corporation or a Subsidiary under the Plan (unless the employee continues to be employed by the Corporation or another entity which is a Subsidiary). 3. Administration and Interpretation (a) Administration. The administration and operation of the Plan shall -------------- be vested in the Committee. The Committee shall have full power and authority, consistent with the provisions of the Plan and subject to such orders or resolutions as may from time to time be issued or adopted by the Board, to determine the provisions of the Restricted Stock Awards to be granted under the Plan, to interpret the Plan and any Restricted Stock Award granted under the Plan, to adopt, amend and rescind rules and regulations for the administration of the Plan and the Restricted Stock Awards granted under the Plan, and to make all determinations in connection therewith which may be necessary or advisable. The Committee at any time may designate one or more officers of the Corporation to act in place of the Committee in make any determination or taking any action under the Plan. The routine day-to-day administration of the Plan shall be carried out by officers and employees of the Corporation's Human Resources Department or such other department which shall succeed to the functions and responsibilities, in whole or in part, of said Human Resources Department or such other department which shall succeed to the functions and responsibilities, in whole or in part, of said Human Resources Department. (b) Interpretation. The interpretation and construction by the -------------- Committee (or by such officers designated by the Committee pursuant to Subsection 3(a)) of any provisions of the Plan, any orders of the Board, or any award granted under the Plan shall be within the absolute discretion of the Committee (or its designee(s)), and any determination by the Committee (or its designee(s)) of any provision of the Plan, any orders of the Board, or any award shall be final, conclusive and binding. (c) Limitation on Liability. Neither the Board nor the Committee, nor ----------------------- any member of either (nor any officer or employee designated by the Committee pursuant to Section 3(a)) shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan in good faith, and shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted under the Corporation's Restated Articles of Incorporation and By-Laws and under any directors and officers liability insurance coverage which may be in effect from time to time. 4. Shares Subject to Restricted Stock Awards under the Plan (a) Limitation on Number of Shares. Shares of Common Stock subject to ------------------------------ the provisions of this Plan shall be either shares of authorized but unissued Common Stock or shares of Common Stock held as treasury stock. The total number of shares of Common Stock available for grants of Restricted Stock Awards shall not exceed 250,000. If any Restricted Stock granted under the Plan is forfeited or terminated for any reason prior to the end of the period during which Restricted Stock Awards may be issued under this Plan, the shares of Common Stock allocable to the forfeited or terminated portion of such Restricted Stock Award may again be available for other Restricted Stock Awards to the same Participant or other eligible employees under this Plan. (b) Adjustments of Number of Shares. The number of shares available for ------------------------------- grants of Restricted Stock Awards as provided in Section 4(a) shall be subject to appropriate adjustment, from time to time, in accordance with the provisions of Section 8. In the event of a change in the Common Stock resulting from (i) a change in the designation thereof to "Capital Stock" or other similar designation, (ii) a change in the par value thereof, or (iii) a change from par value to no par value, in each case without any increase or decrease in the number of issued shares, the shares resulting from any such change shall be deemed to be Common Stock within the meaning of the Plan. 5. Eligibility The individuals who shall be eligible to receive Restricted Stock Awards shall be such salaried officers and key employees of the Corporation, or of any Subsidiary, as the Committee from time to time shall determine; provided that any such Restricted Stock Award hereunder shall be made on a basis consistent with, if appropriate, the accounting rules applicable to pooling of interests transactions; and provided, further, that in the case of any Restricted Stock Awards made to any officer of the Corporation, such awards shall be made only to officers not previously employed by the Corporation as an inducement essential to such officer becoming employed by the Corporation and on a basis consistent with such other rules promulgated by the New York Stock Exchange with respect to stock awards to officers under plans or arrangements not approved by the stockholders of the issuing company. Directors of the Corporation shall not be eligible to receive awards under this Plan. 6. Restricted Stock Awards (a) Grant of Restricted Stock Awards. Subject to the limitations of the -------------------------------- Plan, the Committee may, after such consultation with and consideration of the recommendations of management as the Committee considers desirable, select from eligible employees those Participants to be granted Restricted Stock Awards and determine the time when each award shall be granted, the vesting date or vesting dates for each award, the time or times as of which vested awards shall be paid, the number of shares of Common Stock subject to each award and such other terms and conditions consistent with the purposes of the Plan as the Committee may deem advisable. The Common Stock subject to the Restricted Stock Awards ("Restricted Stock") shall be evidenced by a stock certificate of the Corporation, registered in the name of the Participant, and accompanied by an agreement in such form as the Committee shall prescribe from time to time in accordance with the Plan ("Restricted Stock Agreement"). Restricted Stock Awards may be amended or supplemented from time to time as approved by the Committee, provided that the terms of such awards after being amended or supplemented conform to the terms of the Plan. (b) Restrictions. Restricted Stock may not be sold, exchanged, ------------ assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of, except by will or the laws of decent and distribution, for such period as the Committee shall determine, beginning on the date on which the award is granted (the "Restricted Period"). The Committee also may impose such other restrictions and conditions on the shares of Restricted Stock or the release of the restrictions thereon as it deems appropriate. In determining the Restricted Period of an award, the Committee may provide that the foregoing restrictions shall lapse with respect to specified percentages of the Restricted Stock shares on successive anniversaries of the date of such award and/or upon satisfaction of such other restrictions and conditions on the shares or the release of the restrictions thereon as may be specified by the Committee. The remaining shares of Restricted Stock issued with respect to such award, if any, shall either be canceled or, if appropriate under the terms of the award applicable to such shares, shall continue to be subject to the restrictions, terms and conditions set by the Committee at the time of the award. The stock certificate evidencing Restricted Stock shall (i) bear an appropriate legend referring to such restrictions, and any attempt to dispose of such shares of Restricted Stock in contravention of such restrictions shall be null and void and without effect, and (ii) be held by the Corporation during the Restricted Period and until any additional restrictions or conditions are satisfied. Any new, additional or different securities that a Participant may become entitled to receive with respect to any shares of Restricted Stock by virtue of a stock dividend, stock split, recapitalization, reorganization, merger, consolidation, split-up, or any similar change affecting the Common Stock shall be subject to the same restrictions, terms and conditions as apply to such shares of Restricted Stock. After the satisfaction of the terms and conditions and lapse of all restrictions set by the Committee at the time of a Restricted Stock Award, a new certificate, without the legend referred to above, for the number of shares which are no longer subject to such restrictions, terms and conditions shall be delivered to the Participant. (c) Death, Disability, and Termination of Employment. If a ------------------------------------------------ Participant's continuous employment by the Corporation or any of its Subsidiaries shall terminate by reason of death, or the Participant becomes disabled as determined pursuant to the applicable provisions of the plans of the Corporation regarding disability, the Restricted Period shall be deemed to lapse as of the date of death or disability on that portion of the Restricted Stock Award which equals the portion of the Restricted Period measured in full or partial months completed before the date of death or disability. In the event of restrictions lapsing on specified percentages of the award over a period of time, that portion of the Restricted Stock Award which has not had the Restricted Period theretofore lapse shall be forfeited. Except as otherwise may be provided in a Participant's Restricted Stock Agreement, if the Participant's continuous employment with the Corporation or any of its Subsidiaries shall terminate for any reason other than death or disability prior to the expiration of the Restricted Period of an award, or if any other conditions established by the Committee are not met, any shares remaining subject to restrictions (after taking into account Subsection (e) of this Section 6 and Section 7) shall thereupon be forfeited by the Participant and transferred to, and reacquired by, the Corporation at no cost to the Corporation or Subsidiary. In such event, the Participant, or in the event of his death, his personal representative, shall forthwith deliver to the Secretary of the Corporation such instruments of transfer, if any, as may reasonably be required by the Secretary of the Corporation. Whether an authorized leave of absence or absence on military or government service or for other reasons shall constitute termination of employment for purposes of the Restricted Stock Award shall be determined by the Committee in accordance with applicable law, which determination shall be final and conclusive. (d) Rights as a Stockholder. Upon receipt by a Participant of a ----------------------- Restricted Stock Award, the Participant shall possess all incidents of ownership of the Restricted Stock subject to such award (subject to Subsection (b) of this Section 6), including the right to receive or reinvest dividends with respect to such Restricted Stock and to vote such Restricted Stock, except that the Participant shall not be entitled to delivery of a stock certificate evidencing the Restricted Stock until the Restricted Period has lapsed and any additional restrictions or conditions are satisfied. (e) Termination of Restrictions by Committee. The Committee shall have the ---------------------------------------- authority (and the Restricted Stock Agreement may so provide) to cancel all or any portion of any outstanding restrictions with respect to any or all of the Restricted Stock granted to a Participant hereunder on such terms and conditions as the Committee may deem appropriate. (f) Cash Payment. In the Committee's sole discretion, a Restricted Stock ------------ Agreement may provide for a cash payment to a Participant in an amount equal to the Fair Market Value of any Restricted Stock that may be forfeited in connection with the termination of a Participant's continuous employment by the Corporation or a Subsidiary. 7. Change of Control (a) Notwithstanding anything contained in this Plan or any Restricted Stock Agreement to the contrary, in the event of a change of control (as defined in Subsection (c) below), or an offer to effect a change of control, of the Corporation, each Restricted Stock Award shall (unless the Committee determines otherwise in its sole discretion) immediately be fully vested and nonforfeitable and all shares of Restricted Stock shall be delivered to the Participant. (b) Any determination by the Committee made pursuant to this Section 7 may be made as to all outstanding Restricted Stock Awards or only as to certain Restricted Stock Awards specified by the Committee. (c) For purposes of this Section 7, a "change of control" shall mean either of the following events: (i) the acquisition of the beneficial ownership (as that term is defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act) of 20 percent or more of the voting securities of the Corporation by purchase, merger, consolidation or otherwise by any person or by persons acting as a group within the meaning of Section 13(d) of the Exchange Act; provided, however, a change of control shall not be deemed to have occurred if the acquisition of such securities is by one or more employee benefit plans of the Corporation, or (ii) in any two year period, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority of the Board at, or at any time prior to, the conclusion of, such two year period. The term "person" refers to any individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein. The decision as to whether a change of control or offer to effect a change of control has occurred shall be made by a majority of the Continuing Directors (as defined in the Restated Articles of Incorporation of the Corporation as in effect on August 16, 1995) and shall be conclusive and binding. Notwithstanding Section 13 of this Plan, this provision shall not be amended or revoked in any manner without the affirmative vote of 80 percent of the Board and a majority of the Continuing Directors (as defined above). 8. Adjustment for Changes in Capitalization The aggregate number of shares of Common Stock as to which Restricted Stock Awards may be granted to persons participating under the Plan and the number of shares thereof covered by each outstanding Restricted Stock Award shall be proportionately adjusted by the Committee for any increase or decrease in the number of issued shares of Common Stock resulting from the subdivision or consolidation of shares or other capital adjustments, the payment of a stock dividend, or any other increase or decrease in such shares effected without receipt of consideration by the Corporation or a Subsidiary; provided, -------- however, that no such adjustment shall be made unless and until the aggregate - ------- effect of all such increases and decreases accruing after the effective date of the Plan shall have increased or decreased the number of issued shares of Common Stock by five percent or more; and provided, further, that any fractional -------- ------- shares resulting from any such adjustment shall be eliminated. Any such determination by the Committee shall be final, conclusive and binding. Any shares of Common Stock or other securities received by a holder of a Restricted Stock Award with respect to such award by reason of any such change shall be subject to the same restrictions as the initial Restricted Stock Award, unless otherwise determined by the Committee. 9. Withholding The Corporation shall have the right to withhold from amounts due Participants, or to collect from Participants directly, the amount which the Corporation deems necessary to satisfy any taxes required by law to be withheld by reason of participation in the Plan. There is no obligation under this Plan that any Participant be advised of the existence of the tax or the amount required to be withheld. The Participant may, prior to the payment of any Restricted Stock Award, pay such amounts to the Corporation in cash or in shares of Common Stock already owned (which shall be valued at their Fair Market Value on the date of payment). The Corporation may also require, or grant Participants the right to elect, subject to such terms and conditions as the Committee may establish, that shares be withheld to satisfy tax withholding requirements arising from the vesting of a Restricted Stock Award. Notwithstanding any other provision of this Plan, the Committee may impose such conditions on the payment of any withholding obligation as may be required to satisfy applicable regulatory requirements. 10. Effect of Attempted Transfer No benefit payable or interest in any Restricted Stock Award shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and any such attempted action shall be void and no such interest in a Restricted Stock Award shall be in any manner liable for or subject to debts, contracts, liabilities, engagements or torts of a Participant or his beneficiary. If any Participant or beneficiary shall become bankrupt or shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any benefit payable under or interest in any award, then the Committee, in its discretion and if permitted under applicable law, may hold or apply such benefit or interest or any part thereof to or for the benefit of such Participant or such Participant's beneficiary, spouse, children, blood relatives or other dependents, or any of them, in any such manner and such proportions as the Committee may consider appropriate. 11. Effect on Employment Nothing herein shall be construed to limit or restrict the right of the Corporation or any of its Subsidiaries to terminate the employment of any Participant in the Plan, at any time, with or without cause, or to increase or decrease the compensation of such Participant from the rate of compensation in existence at the time the employee became a Participant. 12. Legality of a Grant The granting of a Restricted Stock Award under this Plan and the issuance or transfer of shares of Common Stock pursuant hereto are subject to all applicable federal and state laws, rules and regulations and to such approvals by any regulatory or government agency (including, without limitation, no-action positions of the Securities and Exchange Commission) which may, in the opinion of counsel for the Corporation, be necessary or advisable in connection therewith. Without limiting the generality of the foregoing, no awards may be granted under this Plan and no shares shall be issued by the Corporation, nor cash payments made by the Corporation pursuant to or in connection with any such award unless and until in any such case all legal requirements applicable with the issuance or payment have, in the opinion of counsel for the Corporation, been complied with. In connection with any stock issuance or transfer, the person acquiring the shares shall, if requested by the Corporation, give assurance satisfactory to counsel to the Corporation with respect to such matters as the Corporation may deem desirable to assure compliance with all applicable legal requirements. 13. Amendment The Board may alter, amend or suspend the Plan at any time or alter and amend all Restricted Stock Agreements entered into hereunder; provided, however, -------- ------- that no amendment of the Plan or any agreement may, without the consent of any Participant to whom a Restricted Stock Award shall theretofore have been issued adversely affect the right of such Participant under such award. 14. Construction of Plan It is the intent of the Corporation that this Plan and the Restricted Stock Awards granted hereunder satisfy and be interpreted in a manner that satisfies the requirements of (a) the accounting rules applicable to pooling of interests transactions, when and if the Corporation may be engaged in such a transaction, and (b) the New York Stock Exchange rule regarding stock awards to officers pursuant to a plan or arrangement which has not been approved by the stockholders of the issuing corporation, as described in Section 5 hereof. 15. Effective Date and Termination of Plan This Plan was adopted by the Board as of August 16, 1995 and shall be effective upon filing with the Securities and Exchange Commission. This Plan shall terminate 10 years from the effective date; provided, however, that the Board may terminate the Plan at any prior time in its absolute discretion. No such termination shall in any way affect any Restricted Stock Awards then outstanding. EX-11 10 EXHIBIT 11 FLEET FINANCIAL GROUP, INC. COMPUTATIONS OF EQUIVALENT SHARES AND PER SHARE EARNINGS Dollars in thousands, except per share data
For the Twelve months Ended December 31 --------------------------------------------------------------------------------------- 1995 1994 1993 --------------------------- --------------------------- --------------------------- Fully Fully Fully Primary Diluted Primary Diluted Primary Diluted ------------ ------------ ------------ ------------ ------------ ------------ Equivalent shares: Average shares outstanding ...... 243,796,880 243,796,880 243,027,593 243,027,593 236,177,416 236,177,416 Additional shares due to: Stock options ............... 1,415,727 2,074,661 1,952,805 1,952,805 1,895,439 1,967,364 Warrants .................... 3,549,616 3,980,828 3,814,077 3,814,077 2,996,091 3,062,547 Series I preferred stock .... -- -- -- -- -- 31,977 Series II preferred stock ... -- -- -- -- -- 99,775 Dual convertible preferred stock ................... 16,033,994 16,033,994 16,033,994 16,033,994 16,033,994 16,033,994 ------------ ------------ ------------ ------------ ------------ ------------ Total equivalent shares ......... 264,796,217 265,886,363 264,828,469 264,828,469 257,102,940 257,373,073 ============ ============ ============ ============ ============ ============ Earnings per share: Net income ...................... $ 609,953 $ 609,953 $ 848,875 $ 848,875 $ 817,049 $ 817,049 Less: Preferred stock dividends ............... 36,618 36,618 30,557 30,557 37,558 37,558 Exchange of KKR preferred stock ................... 156,965 156,965 -- -- -- -- Cumulative effect of change in method of accounting . -- -- -- -- 53,200 53,200 ------------ ------------ ------------ ------------ ------------ ------------ Adjusted net income ............. $ 416,370 $ 416,370 $ 818,318 $ 818,318 $ 726,291 $ 726,291 ============ ============ ============ ============ ============ ============ Total equivalent shares ......... 264,796,217 265,886,363 264,828,469 264,828,469 257,102,940 257,373,073 ============ ============ ============ ============ ============ ============ Earnings per share on adjusted net income ...... $ 1.57 $ 1.57 $ 3.09 $ 3.09 $ 2.82 $ 2.82 ============ ============ ============ ============ ============ ============
EX-12.(A) 11 EXHIBIT 12(a) EXHIBIT 12(a) FLEET FINANCIAL GROUP, INC. COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS EXCLUDING INTEREST ON DEPOSITS (thousands)
------------ ------------ ------------ ------------ ------------ 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ Earnings: Income (loss) before income taxes, extraordinary credit and cumulative effect of change in method of accounting charges $ 1,033,756 $ 1,379,639 $ 1,094,456 $ 617,369 $ (16,375) Adjustments: (a) Fixed Charges: (1) Interest on borrowed funds 1,278,598 990,395 751,754 638,430 728,337 (2) 1/3 of Rent 49,921 50,597 52,254 49,197 42,524 (b) Preferred dividends 62,064 48,859 60,365 65,658 24,220 ------------ ------------ ------------ ------------ ------------ (c) Adjusted earnings $ 2,424,339 $ 2,469,490 $ 1,958,829 $ 1,370,654 $ 778,706 ============ ============ ============ ============ ============ Fixed charges and preferred dividends $ 1,390,583 $ 1,089,851 $ 864,373 $ 753,285 $ 795,081 ============ ============ ============ ============ ============ Adjusted earnings/fixed charges 1.74x 2.27x 2.27x 1.82x 0.98x * ============ ============ ============ ============ ============ INCLUDING INTEREST ON DEPOSITS ------------ ------------ ------------ ------------ ------------ 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ Earnings: Income (loss) before income taxes, extraordinary credit and cumulative effect of change in method of accounting charges $ 1,033,756 $ 1,379,639 $ 1,094,456 $ 617,369 $ (16,375) Adjustments: (a) Fixed Charges: (1) Interest on borrowed funds 1,278,598 990,395 751,754 638,430 728,337 (2) 1/3 of Rent 49,921 50,597 52,254 49,197 42,524 (3) Interest on deposits 1,726,403 1,170,532 1,165,046 1,698,804 2,414,060 (b) Preferred dividends 62,064 48,859 60,365 65,658 24,220 ------------ ------------ ------------ ------------ ------------ (c) Adjusted earnings $ 4,150,742 $ 3,640,022 $ 3,123,875 $ 3,069,458 $ 3,192,766 ============ ============ ============ ============ ============ Fixed charges and preferred dividends $ 3,116,986 $ 2,260,383 $ 2,029,419 $ 2,452,089 $ 3,209,141 ============ ============ ============ ============ ============ Adjusted earnings/fixed charges 1.33x 1.61x 1.54x 1.25x 0.99x * ============ ============ ============ ============ ============
*Note that adjusted earnings are inadequate to cover fixed charges, the deficiency being $16,375 for both the ratio excluding and including interest on deposits. EX-12.(B) 12 EXHIBIT 12(b) EXHIBIT 12(b) FLEET FINANCIAL GROUP, INC. COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS (thousands)
------------ ------------ ------------ ------------ ------------ 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ Earnings: Income (loss) before income taxes, extraordinary credit and cumulative effect of change in method of accounting $ 1,033,756 $ 1,379,639 $ 1,094,456 $ 617,369 $ (16,375) Adjustments: (a) Fixed Charges: (1) Interest on borrowed funds 1,278,598 990,395 751,754 638,430 728,337 (2) 1/3 of Rent 49,921 50,597 52,254 49,197 42,524 ----------- ----------- ----------- ----------- ----------- (b) Adjusted earnings $ 2,362,275 $ 2,420,631 $ 1,898,464 $ 1,304,996 $ 754,486 =========== =========== =========== =========== =========== Fixed Charges $ 1,328,519 $ 1,040,992 $ 804,008 $ 687,627 $ 770,861 =========== =========== =========== =========== =========== Adjusted earnings/fixed charges 1.78 x 2.33 x 2.36 x 1.90 x 0.98 x * =========== =========== =========== =========== ===========
INCLUDING INTEREST ON DEPOSITS
------------ ------------ ------------ ------------ ------------ 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ Earnings: Income (loss) before income taxes, extraordinary credit and cumulative effect of change in method of accounting $ 1,033,756 $ 1,379,639 $ 1,094,456 $ 617,369 $ (16,375) Adjustments: (a) Fixed Charges: (1) Interest on borrowed funds 1,278,598 990,395 751,754 638,430 728,337 (2) 1/3 of Rent 49,921 50,597 52,254 49,197 42,524 (3) Interest on deposits 1,726,403 1,170,532 1,165,046 1,698,804 2,414,060 ----------- ----------- ----------- ----------- ----------- (c) Adjusted earnings $ 4,088,678 $ 3,591,163 $ 3,063,510 $ 3,003,800 $ 3,168,546 =========== =========== =========== =========== =========== Fixed Charges $ 3,054,922 $ 2,211,524 $ 1,969,054 $ 2,386,431 $ 3,184,921 =========== =========== =========== =========== =========== Adjusted earnings/fixed charges 1.34 x 1.62 x 1.56 x 1.26 x 0.99 x * =========== =========== =========== =========== ===========
* Note that adjusted earnings are inadequate to cover fixed charges, the deficiency being $16,375 for both the ratio excluding and including interest on deposits. EX-13 13 EXHIBIT 13 FLEET FINANCIAL GROUP 1995 ANNUAL REPORT [PICTURE] [FRONT COVER] WHEN ALL THE ENTRANTS ARE SWIFT, THE RACE BELONGS TO SKILL, FOCUS AND COURAGE. SO IT IS IN THE COMPETITION FOR LEADERSHIP IN THE FAST-CHANGING FINANCIAL SERVICES INDUSTRY. FLEET SAILS CONFIDENTLY, STRATEGICALLY FOCUSED, ADEPTLY CHARTING THE COURSE FOR FULL FINANCIAL PARTNERSHIP WITH ITS CUSTOMERS. Selected Financial Highlights(a) Dollars in millions, except per share data
December 31 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------- . For the Year Interest income .............................. $6,069 $5,260 $5,086 $5,318 $5,425 Interest expense ............................. 3,005 2,161 1,917 2,337 3,142 Net interest income .......................... 3,064 3,099 3,169 2,981 2,283 Provision for credit losses .................. 101 65 327 728 995 Securities gains (losses) .................... 32 (1) 295 301 253 Noninterest income ........................... 1,850 1,555 1,883 1,897 1,627 Noninterest expense .......................... 3,735 3,145 3,579 3,479 2,864 Net income (loss) ............................ 610(b) 849 817 366 (76) . Per Common Share Earnings (loss) .............................. $1.57(b) $3.09 $3.03 $1.40 $(0.44) Market value (year end) ...................... 40.75 32.38 33.38 32.75 24.88 Cash dividends declared ...................... 1.63 1.40 1.025 0.825 0.80 Book value (year end) ........................ 22.71 20.68 21.76 17.65 16.81 . At Year End Assets ....................................... $84,432 $81,026 $79,250 $76,188 $72,323 Securities ................................... 19,331 21,141 24,839 19,936 16,505 Loans and leases ............................. 51,525 46,035 43,713 43,722 43,700 Reserve for credit losses .................... 1,321 1,496 1,669 1,937 2,065 Deposits ..................................... 57,122 55,528 49,827 52,729 55,489 Short-term borrowings ........................ 12,569 12,586 16,376 11,446 7,516 Long-term debt ............................... 6,481 5,931 5,217 5,007 3,917 Total stockholders' equity ................... 6,365 5,471 5,965 4,735 3,779 . Operating Ratios Return on average common equity .............. 9.32%(b) 15.66% 17.11% 9.12% (2.73)% Return on average assets ..................... 0.74(b) 1.07 1.09 0.51 (0.12) Common dividends declared as a percentage of earnings per share ...................... 103.8 45.3 33.8 58.9 N/A Net interest margin .......................... 4.12 4.30 4.63 4.57 3.85 Efficiency ratio ............................. 62.5 63.8 68.8 70.6 72.4 Common stockholders' equity-to-assets (year end) 7.07 6.06 6.65 5.15 4.69 Average total stockholders' equity-to-assets . 7.91 7.27 7.05 6.14 5.52 - -----------------------------------------------------------------------------------------------
(a) This schedule is prepared on a fully taxable equivalent (FTE) basis. (b) Includes impact of the loss on assets held for sale or accelerated disposition ($112 million, after-tax), merger-related charges ($317 million, after-tax), and the conversion of the dual convertible preferred stock recorded in 1995. Excluding these special charges, return on average common equity and return on average assets would have been 16.29% and 1.26%, respectively, while earnings and earnings per share would have been $1,039 million and $3.77, respectively. FLEET FINANCIAL GROUP AT A GLANCE Map does not include pending acquisition of NatWest and excludes Fleet Finance [MAP OF U.S.] CONSUMER/INVESTMENT SERVICES CONSUMER BANKING - - 3.3 million households - 35% market penetration - - #1 deposits in New England - 21% share - - #1 branches/ATMs in New England - 947 branches, 1,510 ATMs SMALL BUSINESS BANKING - - 265,000 Northeast customers - 23% market penetration (36% in New England) - - 3rd largest small-business lender in U.S. - - Northeast's leading small-business lender INVESTMENT SERVICES - - 25,000 high net worth clients - - 140,000 retail mutual fund customers - - 150,000 401(k) participants - - $45 billion in assets under management - - #1 personal trust in New England - - #1 private banking in New England COMMERCIAL FINANCIAL SERVICES 37% of loan portfolio outside of Northeast - operate in 22 states COMMERCIAL LENDING - - 13,000 credit customers - - 25,000 noncredit customers - - Top 5 middle-market lender in U.S. - - #1 middle-market lender in New England SPECIALIZED LENDING - - Leading national asset-based lending company - - Top 5 bank lessor - - Leading positions in media & communications, commercial real estate, and precious metals finance FINANCIAL SERVICES/NATIONAL CONSUMER FLEET MORTGAGE GROUP - - 3rd largest originator nationally - 2.5% market share - - 4th largest servicer in U.S. - 2.9% market share - - Nation's largest servicing customer base - - Originating in 49 states GOVERNMENT BANKING - - #2 in total government banking deposits nationally - - #1 in government banking deposits in New England FINANCIAL SERVICES - - #1 cash management provider in Northeast-38,000 customers - - #1 cash management provider of cash management service for insurance companies in New England - - #1 provider of corporate trust services in New England AFSA DATA Corp. - - #1 third-party student loan servicer - - Service in excess of 3.5 million student loans nationwide - - More than $13 billion in principal balances serviced LETTER TO STOCKHOLDERS Dear Stockholder, To those of you reading this annual report as brand new shareholders of Fleet, welcome. And to those of you who have been with us for a while, thank you for your vote of confidence. Had you read only the headlines in recent months, you might conclude that Fleet has become a substantially different company from a year ago. Granted, we undertook two major acquisitions, announced that our consumer finance subsidiary was for sale, and that we were going to restructure our balance sheet. These activities took place during a time of unprecedented consolidation in the financial services industry. What isn't readily apparent from the headlines is how our strategy of building the preeminent financial institution in the Northeast prepared us to act on opportunities, strengthened our market position, and enhanced our capability to meet customers' expanding expectations. After all the commotion of the past year, this is a good time to take another look at the organization we've been crafting. A year ago we had just completed an 18-month profitability effort that we called Fleet Focus. Not only did it boost profitability, as we had set out to do, but it also sharpened our insight into the mechanics of cost reduction and gave us a concrete gasp on the realm of possibilities. In short, Fleet Focus prepared us for new challenges. [PICTURE] Terry Murray, president and chief executive officer, left, and Joel Alvord, chairman, in Boston, Fleet's new headquarters. The timing couldn't have been better. We were ready when the opportunity to acquire Shawmut came along. Soon after, we were in a position to acquire the U.S. operations of National Westminster Bank Plc when they went up for sale. Other financial institutions clearly shared Fleet's view of the logic of acquisitions--1995 became known as the year of the deal. The total value of acquisitions done by financial services companies in 1995 exceeded the total of the prior three years combined. Even though it was a blockbuster year for acquisitions, we think the consolidation wave still has a way to go. In another decade or so, the U.S. financial services industry will be defined by a handful of very large financial institutions that provide a full gamut of financial services. Our goal is to be one of them. The strategy that will take us there is in place. Underlying that strategy is our conviction that success is built on proven competencies. The surest way to get in trouble is to use acquisitions to delve into totally new businesses in totally different markets. Instead, we've concentrated on building the capability to manage certain kinds of business in selected markets. These skills are the basis for our growth. That's why Shawmut and NatWest fit so perfectly. We are building on Fleet's strong capabilities in consumer, small business, middle market, and investment services, where we already have successful track records. We are growing in geographic markets where we know the customers and have the products and distribution channels to meet their needs. We also had the benefit of having been through cost-reduction efforts. From that hands-on experience we knew where to look for cost redundancies in the Shawmut acquisition. We also had completed some 50 acquisitions. Our cumulative knowledge and Shawmut's centralized operations supported an ambitious consolidation timetable. The NatWest acquisition substantially raises our profile in the suburban New York markets, particularly New Jersey, and brings a good mix of higher- yielding assets and low-cost deposits that prudently leverage our growing capital base. Even as these acquisitions absorbed attention, we kept up our periodic reviews of our businesses. That led to our decision to sell Fleet Finance. Efforts to improve its performance were becoming a distraction from our primary strategy, and the sizable payoffs from the successful integration of Shawmut and NatWest tipped the scale. It made more sense to seek a new owner for Fleet Finance than to enhance its performance on our own. Another noteworthy accomplishment during 1995 was our definitive agreement with Kohlberg, Kravis and Roberrs (KKR) exchanging its dual convertible preferred stock for direct ownership of common shares. We had originally issued the convertible shares to KKR in 1991 in exchange for acquisition capital for the Bank of New England. We are pleased that KKR, with its reputation for astute investments, has signaled confidence in Fleet by agreeing to take the 7.5 percent ownership position. [GRAPH] Total Households Served by Fleet Number of ATM Transactions (numbers in millions) (numbers in millions) - -------------------------- ------------------------------------ 3.6 3.8 3.8 6.4* 23 45 55 59 153* 5.0 98** 60 92 93 94 95 91 92 93 94 95 - -------------------------- ------------------------------------ *6.4 million includes NatWest *Includes NatWest, Shawmut and Fleet related Households served **Includes Shawmut and Fleet The financial results of this very active year also were rewarding. We earned $1 billion, or $3.77 per share, before special charges related to the Shawmut, Fleet Finance, and KKR transactions. Even with these charges, we earned $610 million last year. Because, we accounted for the Shawmut acquisition as a pooling of interests, 1995 results reflect the shares issued in the transaction but, because it was completed so late in the year, recognized virtually none of the economic and strategic benefits. Even the performance ratios for 1995, excluding the special charges, were a respectable 1.26 percent return on assets and 16.17 percent return on realized common equity. Modest loan growth during 1995 confirmed the need for moving our business mix toward fee generation. Progress on this strategy was made in our mortgage company and our student loan processing business. We are the fourth largest mortgage loan servicer in the United States, with $116 billion in servicing and the largest third-party servicer of student loans, processing payments for more than $13 billion in loans. Our solid competitive positions in both businesses will help us sustain strong returns and take advantage of trends like consolidation in the mortgage servicing industry. We also made tremendous progress in our INCITY program, which provides credit and services particularly in low- to moderate-income neighborhoods. When combined with similar lending programs at Shawmut, INCITY's mortgage, consumer, and small-business loans reached $3.8 billion. Our strategy has made us the preeminent financial services organization in the Northeast, serving more than three million retail customer households and 265,000 small-business customers. We set out to build a powerhouse financial services provider in this area because we know that if we can satisfy this challenging market of discerning and demanding customers, we will have a remarkably solid foundation on which to build a bigger, more diverse financial services company. We've also balanced our regional expansion with national businesses that diversify our asset base and push us to remain innovative in technology, efficiency, and delivery of services to customers. Our assessment of trends points to continuing consolidation and the development of a relatively few nationally prominent institutions that set the pace for the financial services industry. Their names will be as recognizable as some of today's consumer products. The marketplace will link particular brands with perceived levels of quality and service. These financial services leaders will depend on technology to facilitate much of their product delivery while their employees concentrate on consulting with customers about increasingly complex financial decisions. These institutions will be positioned to become their customers' full financial partner. [GRAPH] Market Capitalization Dividends Declared (dollars in billions) (not restated) - ---------------------------------- ------------------------------------ $3.0 $4.0 $4.6 $4.4 $10.7 $.80 $.83 $1.03 $1.40 $1.63 91 92 93 94 95 91 92 93 94 95 - ---------------------------------- ------------------------------------ We see ourselves as stepping briskly along that path. The accomplishments in 1995 were lifted right out of our strategic playbook. Not only did we do well in a challenging year but we also demonstrated that we embrace the trends shaping our industry. Every now and then life presents you with some extraordinary propositions. The trick is to be in a position to respond to unique opportunities when they come along. We were in that position in 1995, and we will be ready for new opportunities in years to come. At Fleet we measure initiatives and opportunities by how much they further our ability to be our customers' full financial partner. We have the good fortune to be anchored in the challenging Northeast market and the foresight to selectively pursue nation al businesses. The mix capably leverages Fleet's considerable talents and investments in building a premier financial services organization readily accessible to customers through a variety of delivery channels. We recognize six dedicated individuals who retired from the Fleet and Shawmut Boards of Directors in 1995: Lafayette Keeney, Ruth R. McMullin, John A. Reeves, Ferdinand Colloredo-Mansfeld, Maurice Segall, and Wilson Wilde. We have had the privilege of their keen insight and judicious advice throughout many years. It takes extraordinary talent to make the strategic process look easy. We have that at Fleet-employees with excellent skills and a penchant for winning, an outstanding, experienced management team, and the business acumen of a dedicated board of directors. We especially appreciate the characteristics of the market in which we operate. We thank our shareholders and customers for continually challenging us to meet their expectations. /s/ Joel B. Alvord /s/ Terrence Murray Joel B. Alvord Terrence Murray Chairman President and Chief Executive Officer IDEALLY POSITIONED TO BE A FULL FINANCIAL PARTNER Preeminent in the Northeast and prominent in lines of business that cross geographic borders, Fleet puts significant resources and reach at the customers' disposal. Therein lies the foundation for Fleet to become its customers' full financial partner. [GRAPH] TELEPHONE BANKING CALL VOLUME SHAWMUT NATWEST (numbers in millions) ------------------------------------- 6 12 19 25 57* 42** 30 1991 1992 1993 1994 1995 ------------------------------------- *Includes NatWest, Shawmut and Fleet **Includes Shawmut and Fleet Fleet's strategic strength means capability to provide financial tools and knowledge for consumers, organizations, and corporations to manage their money through all applications, from transaction accounts to lines of credit and investment services. Within that strength is the foundation for continued product development in areas like insurance. It also means the capability to meet customers' expectations of convenient access to their bank just about anytime, from just about anywhere. That foundation in place, reinforced by significant investments in technology, the strategic emphasis turns to expanding customer relationships. The ability to execute sophisticated data-based marketing helps delineate advantages of banking with Fleet. Customer-focused communications make it easy for customers -- demographically among the most financially sophisticated and demanding in the country -- to match their needs with Fleet capabilities. Unparalleled capability intersecting with customer priorities. It is Fleet's charted course for full financial partnership, particularly with the households and corporations of the Northeast. [PICTURE ARTWORK] FLEET'S extensive product offering meets the needs of the most discriminating, - ------- financially savvy customer... ANCHORED IN AN UNCOMMON MARKET If the Northeast region were an independent nation, the value of the goods and services produced would be greater than the gross domestic product of most countries in the world. The economic output of the concentrated Northeast holds its own with the total economic output of countries with much larger geographic reach and the resources associated with size. [GRAPH] Assets Under Management on a combined basis (dollars in billions) - ----------------------------------------- $34.3 $36.7 $39.9 $39.2 $44.8 1991 1992 1993 1994 1995 - ----------------------------------------- A dynamic market like the Northeast, a major U.S. financial center with a population considerably more dense than the United States as a whole, is a compelling market for a financial institution. The people of the Northeast are among the most highly educated, entrepreneurial, wealthy, and financially active found anywhere in the world. In fact, real per capital income over the last three years grew faster in New England than for the rest of the country overall, and that trend is projected to continue. Another strength of the region, and a reflection of its entrepreneurial spirit, is the more than one million small businesses operating here. The financial services provider that succeeds in this environment accepts the expectation that it will innovate, invigorate, and embrace leadership. The market is demanding. It is the market in which Fleet excels. Dense population. Favorable demographics. Financially astute region. Can you think of a better place to own a bank? [PICTURE ARTWORK] THE FRANCHISE ------------- URBANIZED REGIONS & population density can be clearly identified in this satellite image of North America taken at night. From this vantage point, the sheer scale of the Northeast economy & its energetic population is immediately evident... CONNECTING WITH CUSTOMERS WHEREVER, WHENEVER In a less hectic time, bank customers equated convenience with location. How close was the neighborhood branch? Fast-paced lifestyles add dimension to that definition. Convenience conveys time spent productively. It assumes availability, ease of access, alternative channels of access. [GRAPH] Efficient Branch Network - ---------------------------------------------------------------- Fleet Branch Network 812 815 793 818 947 Branches consolidated, sold or divested (cumulative from 1991) 100 146 189 206 439 1991 1992 1993 1994 1995 - ---------------------------------------------------------------- Including NatWest total branches at December 31, 1995, would have been 1,222 and branches consolidated, sold or divested would have been 471 (cumulative from 1991). An institution that fails to deliver the convenience customers demand fails to keep its customers. Even so, customers' expectations develop at different rates. Across Fleet's customer base, approximately one third continue to prefer conducting their financial business in-person, face-to-face, in our branches. Another third gravitates to self-service options, from ATMs, by phone, or through computer-based bank-at-home capabilities. The rest mix the two methods according to the circumstances-driven definition of convenience. Meeting the mandate of convenience is a resource-intensive business. For Fleet, the ability to offer financial services through diverse distribution channels is another path to competitive advantage. Meeting customers' expectations for service options produces a powerful distribution network moving more products, with more options, tailored to the specific financial preferences of individuals and businesses. That, in a word, is choice, which just happens to be yet another way today's customers define convenience. [PICTURE ARTWORK] MEETING DIVERSE money access needs... --------------- The increasing use of personal computers in the home is changing banking Small BUSINESSES receive financial information at 8:00 a.m. daily --------- FLEET'S mobile ATM's follow the crowds... ------------ - - 33% of our customers prefer branches, 28% prefer self-service banking and the balance use both... TECHNOLOGICALLY ADVANCED, STRATEGICALLY POSITIONED Technology enables. Technology delivers customer choice and convenience, two essential components of success in today's financial services market. Customers tap Fleet's strong technological underpinnings every time they carry out a transaction or explore more productive means of managing their financial matters. Technology enables customers to bank with Fleet virtually any hour of the day, from almost anywhere. Electronic tools allow precise funds management implemented nearly at the speed of thought. [GRAPH] Mortgage Servicing (dollars in billions) - ------------------------------------- $58 $63 $77 $89 $116 1991 1992 1993 1994 1995 - ------------------------------------- Fleet's effective management of support operations depends a large part on how it approaches technology. Fleet has the scale and financial resources to make timely, knowledge-based investments in cutting-edge developments. In an industry that is one of the largest users of data processing, Fleet is a recognized leader in the use of information technology. Fleet has made technology a cornerstone of its market leadership by making customer service its touchstone for evaluating technological opportunities. Automation enables bankers to spend more time consulting with customers, less time on processing. While some fret that technology rushes pell-mell into the future, Fleet harnesses its power for improved processes, productivity, and customer benefit. For Fleet, therefore, technology creates another competitive advantage. INFORMATION WEEK Magazine identifies FLEET as a technology leader... - ---------------- [PICTURE ARTWORK] COMMERCIAL BANKING: CD-ROM technology provides immediate access to check information... SMALL BUSINESS: Technology has accelerated loan approvals... MORTGAGE: Technology will shorten response time while reducing operating expenses... INVESTMENT SERVICES: Computer displays various aspects of the customer relationship... FINANCIAL TABLE OF CONTENTS MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . 15 MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 33 REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . 34 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . 35 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . 36 Consolidated Statements of Changes in Stockholders' Equity . . . . . . . . . 37 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . 38 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 39 SUPPLEMENTAL FINANCIAL INFORMATION Rate/Volume Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Loan and Lease Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Interest Sensitivity of Loans Over One Year . . . . . . . . . . . . . . . . 59 Consolidated Average Balances/Interest Earned-Paid/Rates 1991-1995 . . . . . 60 Quarterly Summarized Financial Information . . . . . . . . . . . . . . . . . 62 Common Stock Price and Dividend Information . . . . . . . . . . . . . . . . 62 Overview . Fleet Financial Group (Fleet or the corporation) reported net income for 1995 of $610 million, or $1.57 per share, compared to the $849 million, or $3.09 per share, reported in 1994. Return on assets (ROA) and return on equity (ROE) were .74% and 9.32%, respectively, for 1995 compared to 1.07% and 15.66%, respectively, for 1994. Excluding the impact of special charges, earnings and earnings per share were $1,039 million and $3.77, respectively, in 1995 compared to $952 million and $3.48, respectively, in 1994 representing an increase of $87 million, or 9.1%. Return on assets and return on equity were 1.26% and 16.29%, respectively, in 1995, excluding special charges. During 1995 the corporation incurred several special charges including a $317 million (after-tax) charge for merger-related charges in connection with Fleet's merger with Shawmut National Corporation, which was consummated on November 30, 1995, and a $112 million (after-tax) charge related to the corporation's strategic decisions to sell Fleet Finance, Inc., the corporation's consumer finance subsidiary located in Atlanta, Georgia, and approximately $150 million of nonperforming loans. The corporation also incurred a $.59 reduction in earnings per share related to the conversion of $283 million of dual convertible preferred stock into 19.9 million shares of Fleet's common stock. This charge did not impact net income. During 1994, the corporation incurred special charges totaling $185 million in connection with restructuring and efficiency improvement programs and several acquisitions. . Net interest income on a fully taxable equivalent (FTE) basis totaled $3.1 billion for both 1995 and 1994. The net interest margin for 1995 was 4.12% compared to 4.30% in 1994. The decrease of 18 basis points was due principally to an increase in the cost of interest-bearing liabilities outpacing the increase in yields on interest-earning assets, which reflects an increasingly competitive market for customer deposits. The impact of the narrower margin in 1995 was substantially offset by a $2.2 billion increase in the corporation's average earning assets from $72.0 billion in 1994 to $74.2 billion in 1995. . The provision for credit losses was $101 million in 1995 compared to $65 million in 1994, with the increase due to an increase in net charge-offs during 1995. Net charge-offs increased by $63 million, while nonperforming assets (NPAs) decreased $262 million, after the reclassification of $317 million of nonperforming assets to assets held for sale or accelerated disposition. . Noninterest income increased 19% to $1.85 billion in 1995 compared to $1.56 billion in 1994. Noninterest income was positively impacted by increases of 10% or more in several categories, including: mortgage banking revenue; service charges, fees, and commissions; and investment services. . Noninterest expense, excluding $490 million of merger-related charges and a $175 million loss on assets held for sale or accelerated disposition, totaled $3.1 billion for 1995, compared to $3.0 billion in 1994, excluding $185 million of merger and restructuring charges. The slight increase is primarily attributable to tight expense controls that have enabled the corporation to keep expenses essentially flat despite the completion of several acquisitions during 1995. . Total loans at December 31, 1995 were $51.5 billion, compared to $46.0 billion at December 31, 1994. The increase is attributable to both acquisitions and new originations, offset by the reclassification of $1.6 billion of loans to assets held for sale or accelerated disposition during the fourth quarter of 1995. . During 1995 the corporation completed several strategic initiatives including: . Consummated the merger with Shawmut National Corporation, which added $21.1 billion in loans and $21.4 billion in deposits throughout New York, Connecticut, and Massachusetts. . Signed a definitive agreement to purchase the commercial banking assets of NatWest Bank, N.A. This transaction is expected to close in the second quarter of 1996. Subsequent to the closing, the corporation is expected to have approximately $90 billion in assets, reflecting a reduction in the combined corporation's total assets as lower return assets, primarily securities, are liquidated and the proceeds are used to pay down higher cost borrowings. . Exchanged Kohlberg, Kravis and Roberts' (KKR) ownership interest in Fleet's Massachusetts and Connecticut bank franchises, represented by its holdings of dual convertible preferred stock, into direct ownership of Fleet common stock. This will allow Fleet to efficiently integrate its banking operations with those acquired from Shawmut. . Completed four other acquisitions: NBB Bancorp, Plaza Home Mortgage Corporation, Northeast Federal Corporation, and the Business Finance Division of Barclays Business Credit, Inc. . Announced the decision to sell the assets of Fleet Finance, as this consumer finance company no longer fits the core strategic business plan of the corporation. . Repurchased the 19% publicly held shares of Fleet Mortgage Group's common stock, the corporation's mortgage banking subsidiary. INCOME STATEMENT ANALYSIS Net Interest Income - ---------------------------------------------------------- Year ended December 31 Dollars in millions FTE basis 1995 1994 1993 - ---------------------------------------------------------- Interest income $6,025 $5,208 $5,040 Tax-equivalent adjustment 44 52 46 Interest expense 3,005 2,161 1,917 - ---------------------------------------------------------- Net interest income $3,064 $3,099 $3,169 - ---------------------------------------------------------- Net interest income on an FTE basis for the year ended December 31, 1995, decreased $35 million compared to 1994, due primarily to a reduction in net interest margin. However, the negative impact of the reduction in net interest margin was substantially offset by growth in the corporation's average earning assets from $72.0 billion in 1994 to $74.2 billion in 1995. Increases in average interest-earning assets were principally the result of growth in the corporation's loan and lease portfolio due to both acquisitions and new originations. Net Interest Margin and Interest-Rate Spread - -------------------------------------------------------------------------- Year ended December 31 1995 1994 - -------------------------------------------------------------------------- Taxable-equivalent rates Average Average Dollars in millions Balance Rate Balance Rate - -------------------------------------------------------------------------- Money market instruments $987 6.30% $588 4.99% Securities 20,515 6.18 25,710 5.92 Loans and leases 51,043 9.03 44,102 8.17 Mortgages held for resale 1,459 7.96 1,322 6.90 Other 176 2.27 265 1.89 - -------------------------------------------------------------------------- Total interest-earning assets 74,180 8.17 71,987 7.29 - -------------------------------------------------------------------------- Deposits 43,120 4.00 40,113 2.92 Short-term borrowings 14,046 5.69 15,355 4.07 Long-term debt 6,581 7.26 5,383 6.76 - -------------------------------------------------------------------------- Total interest-bearing liabilities 63,747 4.71 60,851 3.55 - -------------------------------------------------------------------------- Interest-rate spread 3.46 3.74 Interest-free sources of funds 10,433 11,136 - -------------------------------------------------------------------------- Total sources of funds $74,180 4.05% $71,987 2.99% Net interest margin 4.12% 4.30% - -------------------------------------------------------------------------- The net interest margin for 1995 decreased 18 basis points to 4.12% compared to 4.30% for 1994, primarily due to the increase in cost of interest- bearing liabilities outpacing the increase in yields on interest-earning assets reflecting an increasingly competitive market for customer deposits. Offsetting the negative impact of increasing funding costs was a more favorable mix of interest-earning assets as the corporation has replaced lower-yielding securities with higher-yielding loans through acquisitions and new loan origination activity. Average securities represented 27.7% of average interest- earning assets in 1995 compared to 35.7% in 1994, while higher-yielding loans represented 68.8% of average interest-earning assets in 1995 compared to 61.3% in 1994. Average securities decreased $5.2 billion in 1995 resulting from the corporation's repositioning program aimed at reducing the average maturity of the securities portfolio coupled with a shifting of funds to higher-yielding loans and leases. [GRAPH] Percentage Composition of Average Interest-Earning Assets - --------------------------------------------------------- Securities Loans & Leases Other ---------- -------------- --------- 1995 27.7% 68.8% 3.5% 1994 35.7% 61.3% 3.0% Average loans increased from $44.1 billion at December 31, 1994, to $51.0 billion at December 31, 1995. This $6.9 billion increase primarily reflects growth in the commercial and residential loan portfolios due to both new origination activity and acquisitions. In addition, the corporation's leasing portfolio increased $740 million, or 50%, due to higher lease volume. The average balance of mortgages held for resale increased approximately $137 million as a result of a more favorable interest-rate environment for mortgage refinancing during the latter portion of 1995 and the resultant positive impact on mortgage loan production. Average deposits increased to $43.1 billion at December 31, 1995, from $40.1 billion a year ago due primarily to acquisitions. The interest rate paid on average deposits was 4.00% in 1995 compared to 2.92% in 1994 as a result of both a more competitive consumer marketplace and higher average interest rates in 1995 compared to 1994. Average short-term borrowings decreased $1.3 billion from $15.4 billion at December 31, 1994. This decrease corresponds to an increase of $1.2 billion in average long-term debt. Higher average interest rates in 1995 caused a 162 basis-point increase in the rate paid on short-term borrowings in 1995 and a 50 basis point increase in long-term debt rates. The contribution of 66 basis points to the net interest margin from interest-free sources during 1995 increased slightly from 56 basis points in 1994. Although the balance of average interest-free sources of funds decreased from $11.1 billion in 1994 to $10.4 billion in 1995, the 10 basis point increase results from interest-free sources of funds becoming more valuable during periods of higher interest rates. Noninterest Income - ----------------------------------------------------------------------- Year ended December 31 - ----------------------------------------------------------------------- Dollars in millions 1995 1994 1993 - ----------------------------------------------------------------------- Mortgage banking revenue $511 $391 $445 Service charges, fees, and commissions 492 438 423 Investment services revenue 322 294 291 Student loan servicing fees 72 54 51 Trading revenue 39 32 35 FDIC loan administration fees 23 52 45 Brokerage fees and commissions 21 18 23 Insurance 15 15 19 Other noninterest income 323 262 256 Securities available for sale gains (losses) 32 (1) 295 - ----------------------------------------------------------------------- Total noninterest income $1,850 $1,555 $1,883 - ----------------------------------------------------------------------- Noninterest income totaled $1.85 billion for 1995, up nearly 20% when compared to $1.56 billion for 1994 with increases of 10% or more noted in several lines of business, most notably mortgage banking where revenues of $511 million in 1995 represented a 31% increase over 1994 results. Mortgage Banking Revenue - -------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - -------------------------------------------------------------------- Net loan servicing revenue $342 $285 $243 Mortgage production revenue 98 31 176 Gains on sales of mortgage servicing 71 75 26 - -------------------------------------------------------------------- Total mortgage banking revenue $511 $391 $445 - -------------------------------------------------------------------- The 31% increase in mortgage banking revenue is largely due to higher mortgage production revenue, which increased from $31 million in 1994 to $98 million in 1995. Such revenue includes income derived from the loan origination process and net gains on sales of mortgage loans, both of which have been positively impacted by a more favorable interest-rate environment as Fleet originated approximately $13 billion of mortgage loans in 1995. Mortgage production revenue was also positively impacted by the corporation's adoption of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage Servicing Rights," as of April 1, 1995. In accordance with SFAS No. 122, the corporation capitalizes a portion of the total cost of mortgage loans originated as originated mortgage servicing rights (OMSRs) with the remaining cost allocated to the loan balance. The incremental impact of capitalizing OMSRs resulted in an increase of $50 million in mortgage production revenue during 1995. Additionally, net loan servicing revenue increased 20% from $285 million in 1994 to $342 million in 1995 due to a 30% increase in the corporation's loan servicing portfolio from $89 billion at December 31, 1994, to $116 billion at December 31, 1995. The increase in the mortgage servicing portfolio is due to $25 billion of acquisitions of servicing rights during 1995, as well as originations of mortgage loans by FMG and correspondent lenders. Service charges, fees, and commissions, which consist primarily of cash management services, electronic banking fees, and other transaction-related fees totaled $492 million in 1995 compared to $438 million in 1994, an increase of 12%. This increase was primarily attributable to various fee enhancement programs implemented during the latter part of 1994 and early 1995 as part of the corporation's efficiency improvement program. Investment services revenue was $322 million in 1995 compared to $294 million in 1994, an increase of $28 million, or 10%. The increase in investment services revenue is attributable to an increase in assets under management and administration from $148 billion at December 31, 1994, to $156 billion at December 31, 1995, coupled with strong stock and bond markets in 1995, which increased the value of the assets on which management fees are based. Investment services revenue comprises primarily personal asset management fees, which include services provided to meet the unique financial needs of affluent individuals with custom portfolio management and trust services. Personal asset management fees also include mutual funds revenue, which is derived from managing the $7.8 billion Galaxy family of mutual funds. Other components of investment services revenue include fees generated from providing investment management, record keeping, plan administration, and fiduciary services to employee benefit plans, and revenue earned from Fleet's endowment and foundation management and corporate trust divisions. Trading Revenue - -------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - -------------------------------------------------------------------- Interest-rate contracts $ 5 $ 5 $ 2 Debt securities 19 16 27 Foreign exchange contracts 15 11 6 - -------------------------------------------------------------------- Total trading revenue $ 39 $ 32 $ 35 - -------------------------------------------------------------------- Trading revenue of $39 million increased $7 million compared to the $32 million recorded in 1994. Modest improvements were noted in both debt securities and foreign exchange trading. The $18 million increase in student loan servicing fees in 1995 is attributable to additional accounts added under the federal government's direct student lending program at the corporation's student loan subsidiary, AFSA Data Corp. Federal Deposit Insurance Corporation (FDIC) loan administration fees decreased $29 million during 1995 to $23 million as the pool of loans being administered for the FDIC was resolved in 1995. The contract relating to FDIC loan administration fees expired on December 31, 1995. As a result, the corporation does not anticipate revenues from this source in 1996. Fleet's brokerage fees and commissions increased $3 million due primarily to favorable market conditions in the stock markets during 1995. The corporation recognized $32 million of net gains on sales of securities in 1995, compared to $1 million of net securities losses in 1994. The increase in securities gains is the result of a favorable interest-rate environment in 1995 as an improving bond market coupled with declining interest rates resulted in a positive impact on the valuation of the corporation's securities portfolio. The likelihood of profitability of any such sales in the future cannot be predicted. Other noninterest income increased $61 million from $262 million in 1994 to $323 million in 1995. Included in other noninterest income is approximately $77 million of net gains attributable to interest-rate contracts used in managing prepayment risk associated with the corporation's mortgage servicing portfolio compared to $6 million of net losses in 1994. These gains were fully offset by an increase in the amortization expense of mortgage servicing rights (refer to Noninterest Expense and Asset/Liability Management sections for additional information). Other noninterest income in 1995 compared to 1994 also included increases in tax processing fees of $18 million, increased gains on sale of loans of $14 million, and an increase of $30 million in gains related to the corporation's equity capital business. Due to the volatility of the fair value of investments relating to the corporation's equity capital business the likelihood of any further net gains or losses in the future cannot be predicted. The impact of these positive items were offset by the receipt of $60 million of interest relating to a tax settlement with the Internal Revenue Service (IRS) and a $13 million gain on the sale of Fleet Factors, the corporation's factoring business, both of which occurred in 1994. Noninterest Expense - ---------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - ---------------------------------------------------------------- Employee compensation and benefits $1,448 $1,428 $1,529 Occupancy 250 265 280 Equipment 209 188 188 Mortgage servicing rights amortization 190 90 247 Intangible assets amortization 105 65 60 Legal and other professional 102 95 100 Marketing 93 84 75 FDIC assessment 67 114 128 Telephone 61 54 57 Printing and mailing 58 54 54 Office supplies 51 43 49 Travel and entertainment 41 36 34 OREO expense 15 51 163 Other 380 393 454 - ---------------------------------------------------------------- Total noninterest expense, excluding special charges 3,070 2,960 3,418 Loss on assets held for sale or accelerated disposition 175 - - Merger and restructuring related charges 490 185 161 - ----------------------------------------------------------------- Total noninterest expense $3,735 $3,145 $3,579 - ----------------------------------------------------------------- Total noninterest expense, excluding special charges, was $3,070 million in 1995 and $2,960 million in 1994. The $110 million increase, or approximately 4%, was predominantly due to acquisitions completed during the year coupled with a $100 million increase in the amortization of mortgage servicing rights. Employee compensation and benefits increased $20 million, or 1.4%, to $1,448 million in 1995. The slight increase is attributable to several acquisitions taking place in 1995 as well as normal salary and benefit increases. This increase was offset by reductions in personnel from management cost-savings initiatives undertaken during 1994 and 1995, and savings associated with acquisition consolidations as full-time equivalent employees has decreased slightly to 30,800 at December 31, 1995, despite four acquisitions completed during 1995. The $100 million increase in mortgage servicing rights (MSRs) amortization is due primarily to an increase in the servicing portfolio from $89 billion at December 31, 1994, to $116 billion at December 31, 1995, and an increase in prepayment activity during 1995. High prepayment activity combined with projections of future prepayment activity adversely affected the value of FMG's mortgage servicing assets, which resulted in increased amortization of mortgage servicing rights during the year. Prepayments in excess of those anticipated at the time MSRs are recorded result in decreased anticipated future net servicing income. Such decreases in expected future net servicing income did result in accelerated amortization and/or impairment of MSRs. The corporation's net earnings and future net earnings could be adversely affected by unanticipated prepayments of the mortgage loans underlying its MSRs. However, the corporation has established economic hedges against a substantial portion of MSRs to protect its value. Intangible assets amortization increased $40 million from 1994 as goodwill and core deposit intangible assets were recorded in connection with several acquisitions during 1995, including the repurchase of the 19% of publicly held FMG common stock. Marketing expense increased 11% from 1994 to 1995 resulting from promotions relating to several new business initiatives undertaken during 1995, including several credit card programs, as well as promotions undertaken in connection with the Shawmut merger. FDIC assessment fees decreased $47 million as the FDIC reduced the deposit premium effective June 1, 1995 from twenty-three cents to four cents per $100 of domestic deposits. The FDIC has announced that the deposit premium will be eliminated for well-capitalized banks, effective January 1, 1996. However, the corporation has $3.5 billion of deposits insured by the Savings Association Insurance Fund (SAIF) that are still subject to deposit charges. Other real estate owned (OREO) expense decreased more than 70% due to a reduction in write-downs of OREO property of $36 million from the $51 million recorded in 1994. The decline in OREO expense during this period reflects the decline in the level of foreclosed properties and repossessed equipment, the stabilization of property values in the corporation's primary markets, and the continued effective management of these assets. Merger-related charges of $490 million were recorded in 1995 in connection with the Shawmut merger. The merger-related charges are direct incremental costs associated with the Shawmut merger and are presented in the table below: Merger-Related Charges - -------------------------------------------- Year ended December 31 Dollars in millions 1995 - -------------------------------------------- Personnel $270 Facilities 115 Data processing 60 Other merger expenses 45 - -------------------------------------------- Total $490 - -------------------------------------------- Personnel charges relate primarily to the costs of employee severance, the costs related to the termination of certain employee benefit plans and employee assistance for separated employees. Facilities charges are the result of the consolidation of branch offices as well as back-office operations, and consist of lease-termination costs, writedowns of owned properties, and other facilities-related costs. Data processing costs consist primarily of the write- off of duplicate or incompatible systems hardware and software. Other merger expenses consist primarily of transaction-related costs, such as professional and other fees. Merger-related charges of $101 million were also recorded in 1994 to reflect the integration of certain acquisitions. The merger-related charges included: $19 million for personnel charges; $39 million for the closure of branches and facilities, and lease-termination costs; $11 million of transaction-related costs; and $32 million of other costs representing the sale of certain assets as well as other merger-related costs. Charges totaling $84 million were recorded in 1994, in connection with a program to restructure the corporation's banking and mortgage operations. These programs were intended to enhance the corporation's competitive position through a comprehensive review of its operations. Refer to Note 8 of the Notes to the Consolidated Financial Statements for further information regarding the corporation's merger and restructuring accruals. The corporation also incurred a loss on assets held for sale or accelerated disposition in the fourth quarter of 1995 as a charge of $175 million was recorded relating to the corporation's decisions to sell Fleet Finance and approximately $150 million of certain nonperforming assets from the corporation's banking franchise that have been identified for accelerated disposition. These nonperforming assets are primarily commercial and commercial real estate loans. The charge was taken in order to reduce these assets to the lower of cost or estimated market value. Income Taxes In 1995, the corporation recognized income tax expense of $424 million, an effective rate of 40.9%. Tax expense for 1994 was $531 million, an effective tax rate of 38.2%. The higher effective rate during 1995 was primarily attributable to nondeductible merger-related costs and increased amortization of goodwill. Deferred tax assets, net of the valuation reserves, are expected to be realized from the recognition of future taxable income, and the reversal of existing deferred tax liabilities. For further information concerning the corporation's provision for income taxes, refer to Note 14 of the Notes to the Consolidated Financial Statements. Earnings by Subsidiary - -------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 - -------------------------------------------------------- Banking Group: Massachusetts $338 $329 Connecticut 225 230 Rhode Island 145 145 New York 140 178 Maine 44 34 New Hampshire 43 40 - -------------------------------------------------------- Total Banking Group 935 956 - -------------------------------------------------------- Financial Services Group: Fleet Mortgage Group(a) 86 55 Fleet Credit Corp. 23 20 Fleet Private Equity 16 3 AFSA Data Corp. 9 5 Fleet Capital 6 - Fleet Finance (73) (31) Other Financial Services 13 5 - --------------------------------------------------------- Total Financial Services Group 80 57 - --------------------------------------------------------- Parent (88) (44) Merger and restructuring-related charges(317) (120) - --------------------------------------------------------- Total $610 $849 - --------------------------------------------------------- (a)Net of minority interest of $2 million and $12 million, for the years ended December 31, 1995 and 1994, respectively. The Banking Group earned $935 million in 1995 compared to $956 million in 1994, primarily due to a loss of $37 million (after-tax) recorded as a result of the corporation's decision to sell certain nonperforming assets during 1995. Net interest income decreased $26 million due to an increasingly competitive market for deposits offset in part by a $2 billion increase in average interest-earning assets. The Banking Group experienced a $52 million increase in the provision for credit losses as net charge-offs increased $72 million to $254 million in 1995. Noninterest income increased $127 million primarily as a result of growth in service charges and investment services revenue due to fee-enhancement initiatives. Partially offsetting these increases was a $29 million decrease in FDIC loan administration fees as the pool of loans being administered for the FDIC was resolved as of December 31, 1995. Noninterest expenses increased slightly as increased operating costs due to acquired institutions were substantially offset by the successful implementation of several cost-cutting strategies, coupled with lower OREO expense and reduced FDIC premiums. The Financial Services Group's earnings increased $23 million in 1995. Fleet Mortgage Group (FMG) contributed income of $86 million in 1995, an increase of $31 million. As previously discussed, increased loan servicing revenue and mortgage production revenue contributed to the improved earnings, partially offset by higher mortgage servicing rights amortization. Fleet Credit Corp. reported net income of $23 million, representing a $3 million increase compared to 1994. Increased earnings were primarily due to an increase of 50% in the leasing portfolio as a result of new origination activity, partially offset by a $4 million loss due to the aforementioned charge taken to reflect the reclassification of certain nonperforming assets to held for sale or accelerated disposition. Fleet Private Equity (also known as Fleet Equity Partners) had net income of $16 million for 1995, compared to $3 million for 1994. Results for 1995 included $36 million of gains on equity capital investments compared to $6 million in 1994. During 1995, Fleet Private Equity added approximately $75 million of new investments resulting in total investments of $180 million at December 31, 1995. Fleet Capital, the corporation's asset-based lending subsidiary, earned $6 million in 1995. Fleet Capital, formerly the Business Finance Division of Barclays Business Credit, Inc., was acquired in January 1995. AFSA Data Corp., the corporation's student loan servicing subsidiary, is the nation's largest third-party servicer of student loans, servicing in excess of 3.5 million accounts with more than $13 billion in total loans serviced. AFSA's earnings increased to $9 million for the year ended December 31, 1995, reflecting continued growth in student loan products as well as cost efficiencies. Fleet Finance lost $73 million in 1995 compared to a $31 million loss recognized in 1994. This loss is primarily the result of the charge taken in connection with the corporation's strategic decision to sell Fleet Finance. Substantially all of Fleet Finance's assets have been reclassified to assets held for sale or accelerated disposition. Earnings at Fleet's other financial services companies, which include the corporation's brokerage, government securities businesses, and alternative mortgage financing business increased $8 million to $13 million in 1995. The parent company's net loss of $88 million in 1995 exceeded 1994's net loss by $44 million primarily due to the recognition in 1994 of $60 million of interest received in a tax settlement with the IRS. Lines of Business Fleet is managed functionally by major lines of business. At the center of the corporation's management accounting process is a profitability measurement system that produces financial results for each of these business lines. The profitability measurement system uses a rigorously derived set of principles that ensure business line financial results reflect the underlying economics of each business unit. At this time, there is no authoritative source to promulgate uniform standards for management accounting practices as there is for financial accounting principles. As such, Fleet's line of business results may not be directly comparable with similar information from other financial institutions. Management accounting methodologies are periodically refined and results may be restated from time to time to reflect profitability measurement system enhancements and organizational changes. The line of business results presented reflect the company's most recent methodological enhancements as well as significant changes made during 1995 to the corporation's organizational structure following the Shawmut merger. The corporation is managed along the following major lines of business: Financial Services and National Consumer, Commercial Financial Services, Consumer and Investment Services, and Treasury/Asset Collection/Equity Capital. The business line results reflect performance on a risk-adjusted basis. Capital is attributed to each business line based on the inherent risk in that unit. Provision for credit losses is allocated based on the credit profile of the loans and leases in a particular business line. Assets, liabilities, and assigned capital are match funded to minimize interest-rate risk in the business lines and centralize that exposure. Because of Fleet's integrated operations, management accounting methodologies allocate expenses incurred by support units such as operations, technology, and overhead to business lines. Business line results are presented on a fully taxable equivalent basis and net income is shown after application of effective tax rates by business line. Selected Financial Highlights by Line of Business
- ----------------------------------------------------------------------------------------------------------------- Year ended December 31, 1995 Average Net Average Loans and Dollars in millions Revenues(a) Income ROE ROA Assets Leases - ----------------------------------------------------------------------------------------------------------------- Financial Services and National Consumer $ 994 $ 159 20.18% 2.55% $ 6,214 $ 1,136 Commercial Financial Services 2,387 195 15.07 .76 25,681 24,304 Consumer and Investment Services 2,093 382 24.91 2.39 15,962 13,501 Treasury/Asset Collection/Equity Capital 2,244 109 18.99 .32 33,631 10,472 All other (b) -- 203 11.89 N/M (582) -- Merger-related charges and other nonrecurring items 201 (438) N/M N/M 1,821 1,630 - ----------------------------------------------------------------------------------------------------------------- Total $ 7,919 $ 610 9.32% .74% $ 82,727 $ 51,043 - -----------------------------------------------------------------------------------------------------------------
(a) Calculated on an FTE basis. (b) All other includes differences between legal and economic allocations of loan loss provision, credit reserve, and equity. Financial Services and National Consumer The Financial Services and National Consumer business line earned $159 million in 1995. Financial Services and National Consumer includes government banking, financial institutions, mortgage banking, national consumer lending, and processing businesses. For 1995, Financial Services and National Consumer had an ROA of 2.55% and an ROE of 20.18%. Commercial Financial Services Commercial Financial Services contributed $195 million of earnings in 1995. With average loans and leases of more than $24 billion, Commercial Financial Services had an ROA of .76% and ROE of 15.07%. This business line provides a full range of services to national, middle-market and commercial real estate customers as well as certain specialty businesses, including leasing, media, and precious metals. Also included is Fleet Capital, a national asset-based lending business that was acquired in January 1995. Commercial Financial Services earned $225 million for an ROA of .88% and ROE of 17.43%, excluding the premium associated with the acquisition of Fleet Capital. Consumer and Investment Services Consumer and Investment Services contributed $382 million of earnings in 1995. Consumer and Investment Services includes retail banking, small business banking, credit card products, personal financial services, and investment services. The major provider of funding for the company with average deposits of almost $38 billion, the Consumer and Investment Services unit had an ROA of 2.39% and an ROE of 24.91%. Treasury/Asset Collection/Equity Capital This unit generated earnings of $109 million in 1995. This unit includes the treasury function, which manages the corporation's securities and residential mortgage portfolios, trading operations, asset/liability management function, and the wholesale funding needs of the corporation. This unit also includes two fee-based businesses: Fleet Equity Partners and RECOLL Management Corporation. Fleet Equity Partners provides venture capital financing and earned $16 million in 1995. RECOLL Management Corporation provides distressed asset management services, primarily to the FDIC. RECOLL earned $13 million in 1995. The contract relating to FDIC loan administration expired on December 31, 1995. As a result, the corporation does not anticipate such revenues in 1996. Balance Sheet Analysis Securities
December 31 1995 1994 1993 Dollars in millions Amortized Market Amortized Market Amortized Market Cost Value Cost Value Cost Value - ----------------------------------------------------------------------------------------------------- Securities available for sale: U.S. Treasury and government agencies $ 7,891 $ 7,889 $ 3,851 $ 3,667 $ 7,511 $ 7,686 Mortgage-backed securities 8,457 8,470 8,352 7,898 8,238 8,434 Other debt securities 1,621 1,662 180 179 250 257 - ----------------------------------------------------------------------------------------------------- Total debt securities 17,969 18,021 12,383 11,744 15,999 16,377 Marketable equity securities 359 393 360 356 419 438 Other securities 119 119 150 150 93 93 - ----------------------------------------------------------------------------------------------------- Total securities available for sale $18,447 $18,533 $12,893 $12,250 $16,511 $16,908 - ----------------------------------------------------------------------------------------------------- Securities held to maturity: U.S. Treasury and government agencies $ 7 $ 7 $ 1,980 $ 1,864 $ 1,746 $ 1,743 Mortgage-backed securities -- -- 4,158 3,924 3,677 3,735 State and municipal 687 695 843 842 734 748 Other debt securities 104 80 1,910 1,822 1,774 1,796 - ----------------------------------------------------------------------------------------------------- Total securities held to maturity $ 798 $ 782 $ 8,891 $ 8,452 $ 7,931 $ 8,022 - ----------------------------------------------------------------------------------------------------- Total securities $19,245 $19,315 $21,784 $20,702 $24,442 $24,930 - -----------------------------------------------------------------------------------------------------
The total amortized cost of the securities portfolio decreased $2.5 billion to $19.2 billion at December 31, 1995. This decrease resulted from the corporation's repositioning program aimed at reducing the average maturity of the securities portfolio coupled with a shifting of funds to higher-yielding loans and leases. The shift in the components of the securities portfolio is due to a strategy to shorten the duration of the overall portfolio's maturity by replacing longer-term mortgage-backed securities with shorter-term U.S. Treasury and government agencies securities. During the fourth quarter of 1995 the corporation reclassified substantially all of its securities held to maturity to securities available for sale as the FASB permitted a one-time opportunity for institutions to reassess the appropriateness of the designations of all securities. At December 31, 1995, the securities available for sale portfolio had net unrealized gains of $86 million compared to net unrealized losses of $643 million at December 31, 1994. The $729 million improvement is attributable to declining interest rates and the strong performances in both the stock and bond markets during 1995. Loans and Leases Loan and lease portfolios inherently include credit risk. Fleet attempts to control such risk through review processes that include careful analysis of credit applications, portfolio diversification, and ongoing examinations of outstandings and delinquencies. Fleet strives to identify potential classified assets early, to take charge-offs promptly based on realistic assessments of probable losses, and to maintain strong loss reserves. The corporation's portfolio is well-diversified by borrower, industry, and product, thereby reducing risk. Total loans and leases increased $5.5 billion to $51.5 billion at December 31, 1995. Total loans and leases at December 31, 1995, reflects the reclassification of $1.6 billion of loans, primarily real estate and consumer loans, to assets held for sale or accelerated disposition during the fourth quarter of 1995 in connection with the corporation's initiative to sell the assets of Fleet Finance as well as $150 million of nonperforming loans from its banking franchise. The $5.5 billion increase in total loans and leases represented an increase of approximately 12% and was attributable to new loan originations across all banking franchises as well as various acquisitions throughout 1995. [GRAPH] Loan Portfolio Composition (Dollars in billions) - ------------------------------------------------------------------------------ Consumer Residential C&I CRE Leases Total -------- ----------- --- --- ------ ----- 1995 23.2 11.5 9.6 2.2 5.0 $51.5 1994 19.7 8.5 10.9 1.5 5.4 $46.0 Significant increases were noted in the commercial, residential real estate, and leasing portfolios. Excluding loans obtained from acquisitions and the reclassification of loans to assets held for sale or accelerated disposition, total loans and leases increased $2.1 billion, or approximately 5.0%. Commercial and Industrial - ------------------------------------------------------- December 31 Dollars in millions 1995 1994 - ------------------------------------------------------- Bank and insurance $2,007 $2,208 Communications 1,901 2,094 Real estate/construction/contractors 1,557 1,771 Transportation 1,498 1,265 Precious metals/jewelry 1,467 1,082 Business services 1,254 1,051 Healthcare 1,246 1,256 Machine and equipment 1,219 624 Retail 1,168 768 Tourism and entertainment 1,076 776 Food distribution and production 978 1,107 Apparel and textiles 961 736 Printing and publishing 834 562 Energy production and distribution 827 812 Home furnishings and durable goods 703 266 Forest products 656 531 Plastics and rubber 600 404 Agriculture 581 487 Other 2,718 1,875 - ------------------------------------------------------- Total $23,251 $19,675 - ------------------------------------------------------- Commercial and industrial loans increased $3.6 billion to $23.3 billion at December 31, 1995, as new loan originations have occurred across nearly all banking franchises. Commercial and industrial borrowers consist primarily of middle-market corporate customers and are well-diversified as to industry and companies within each industry, thereby mitigating risk. The acquisition of Fleet Capital in 1995 added approximately $2.3 billion of commercial and industrial loans. Consumer and Residential Real Estate - ------------------------------------------------------- December 31 Dollars in millions 1995 1994 - ------------------------------------------------------- Residential real estate $11,475 $ 8,529 Home equity 4,791 6,007 Credit card 1,588 1,474 Student loans 1,179 1,156 Installment/other 1,998 2,256 - ------------------------------------------------------- Total $21,031 $19,422 - ------------------------------------------------------- Approximately 77% of the consumer and residential real estate portfolio represented loans secured by residential real estate, including second mortgage and home equity loans and lines of credit. Outstanding residential real estate loans secured by one-to-four-family residences were $11.5 billion at December 31, 1995, compared to $8.5 billion at December 31, 1994. The $3.0 billion, or 35%, increase is primarily attributable to the acquisition of NBB Bancorp in January 1995, as well as loan purchases by various banking subsidiaries. Except for selected programs, such as loans obtained through business acquisitions or held for asset/liability management purposes, residential mortgage loans are generally originated by FMG and sold in the secondary market. Home equity loans decreased from $6.0 billion at December 31, 1994, to $4.8 billion at December 31, 1995, primarily the result of the reclassification of $1.5 billion of such loans to assets held for sale or accelerated disposition. Credit card outstandings increased $114 million to $1.6 billion at December 31, 1995. The increase was due to new originations resulting from special promotions, including cobranding arrangements with major retailers. The corporation manages the risk associated with most types of consumer loans by utilizing uniform credit standards when extending credit, together with enhanced computer systems that streamline the process of monitoring delinquencies and assisting in customer contact. Commercial Real Estate-Product Diversification - ------------------------------------------------------- December 31 Dollars in millions 1995 1994 - ------------------------------------------------------- Retail $1,159 $1,225 Apartments 1,137 1,102 Office 1,077 1,223 Industrial 444 436 Hotel 220 284 Land 85 131 Condominiums 85 81 Residential 62 75 Other 751 898 - ------------------------------------------------------- Total $5,020 $5,455 - ------------------------------------------------------- Commercial real estate loans decreased $435 million to $5.0 billion at December 31, 1995. The 8% decrease is primarily due to an increasingly competitive marketplace coupled with Fleet's stringent credit quality standards. The decrease also includes a reclassification of $79 million of commercial real estate loans to assets held for sale or accelerated disposition. Lease financing totaled $2.2 billion at December 31, 1995, compared to $1.5 billion at December 31, 1994. This increase in lease financing is primarily attributable to increased volume obtained through geographic expansion and specialization in targeted industries. The corporation provides lease financing for mid-to large-sized equipment acquisitions. Nonperforming Assets Nonperforming Assets(a) - ------------------------------------------------------------------------------ Commercial Commercial and Real Dollars in millions Industrial Estate Consumer Total - ------------------------------------------------------------------------------ Nonperforming loans and leases: Current or less than 90 days past due $124 $ 21 $ 12 $157 Noncurrent 116 51 116 283 OREO 4 40 15 59 - ------------------------------------------------------------------------------ Total NPAs at December 31, 1995 $244 $112 $143 $499 - ------------------------------------------------------------------------------ Total NPAs at December 31, 1994 $236 $261 $264 $761 - ------------------------------------------------------------------------------ (a) Throughout this document, NPAs and related ratios do not include loans greater than 90 days past due and still accruing interest ($198 million and $139 million at December 31, 1995 and 1994, respectively), or assets subject to federal financial assistance ($28 million and $59 million at December 31, 1995 and 1994, respectively). NPAs and related ratios at December 31, 1995, also do not include $317 million of NPAs classified as held for sale or accelerated disposition ($46 million of commercial and industrial, $77 million of commercial real estate and $194 million of consumer). Nonperforming assets (NPAs) decreased $262 million, or 34%, to $499 million at December 31, 1995, primarily due to the reclassification of $317 million of certain NPAs during the fourth quarter of 1995. These assets, primarily real estate and consumer loans, were reclassified to assets held for sale or accelerated disposition. Excluding this reclassification, NPAs would have been $816 million, an increase of $55 million from $761 million at December 31, 1994, which is reflective of acquisitions and the economy in the Northeast during 1995. During 1995, NPAs additions were $956 million, a 36% increase over 1994. This increase is primarily attributable to increases in consumer loan NPAs, principally Fleet Finance, and commercial and industrial NPAs. Reductions in NPAs during the year were primarily attributable to payments, loan charge-offs, and sales. Activity in Nonperforming Assets - --------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 - --------------------------------------------------------------------------- Balance at beginning of year $761 $1,038 Additions 956 702 Acquisitions 70 2 Reductions: Payments/interest applied (486) (438) Charge-offs/writedowns (306) (330) Sales/other (110) (132) Returned to accrual (69) (81) - --------------------------------------------------------------------------- Total reductions (971) (981) - --------------------------------------------------------------------------- Subtotal 816 761 Assets held for sale or accelerated disposition (317) - - --------------------------------------------------------------------------- Balance at end of year $499 $761 - --------------------------------------------------------------------------- NPAs at December 31, 1995, as a percentage of total loans, leases, and OREO, and as a percentage of total assets, were .97% and .59%, respectively, compared to 1.65% and .94%, respectively, at December 31, 1994. At December 31, 1995 and 1994, loans in the 90 days past due and still accruing interest category amounted to $198 million and $139 million, respectively, which included approximately $162 million and $102 million, respectively, of consumer loans. Although these amounts are not included in NPAs, management reviews loans in this category when considering risk elements to determine the adequacy of Fleet's credit loss reserve. NPAs totals and related ratios do not include nonaccrual assets classified as held for sale or accelerated disposition. At December 31, 1995, NPAs classified as held for sale or accelerated disposition totalled $317 million as follows:
Nonperforming Assets Held For Sale Or Accelerated Disposition - ------------------------------------------------------------------------------ Commercial Commercial and Real Dollars in millions Industrial Estate Consumer Total - ------------------------------------------------------------------------------ Nonaccrual loans and leases $46 $77 $172 $295 OREO - - 22 22 - ------------------------------------------------------------------------------ Total $46 $77 $194 $317 - ------------------------------------------------------------------------------
Reserve for Credit Losses Reserve for Credit Loss Activity - -------------------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 1992 1991 - -------------------------------------------------------------------------------------- Balance at beginning of year $1,496 $1,669 $1,937 $2,065 $1,671 Gross charge-offs: Consumer 141 130 133 136 169 Commercial and industrial 109 91 257 383 354 Commercial real estate 99 95 269 367 329 Residential real estate 65 52 49 121 35 Lease financing 4 9 21 34 26 - -------------------------------------------------------------------------------------- Total gross charge-offs 418 377 729 1,041 913 - -------------------------------------------------------------------------------------- Recoveries: Consumer 34 35 34 29 28 Commercial and industrial 48 60 63 50 39 Commercial real estate 25 27 34 32 14 Residential real estate 4 11 4 4 1 Lease financing 5 5 9 3 3 - -------------------------------------------------------------------------------------- Total recoveries 116 138 144 118 85 - -------------------------------------------------------------------------------------- Net charge-offs 302 239 585 923 828 Provision 101 65 327 728 995 Acquired/other 26 1 (10) 67 227 - -------------------------------------------------------------------------------------- Balance at end of year $1,321 $1,496 $1,669 $1,937 $2,065 - -------------------------------------------------------------------------------------- Ratio of net charge-offs to average loans and leases .59% .54% 1.35% 2.15% 2.02% - -------------------------------------------------------------------------------------- Ratio of reserve for credit losses to year-end loans and leases 2.56% 3.25% 3.82% 4.43% 4.73% - -------------------------------------------------------------------------------------- Ratio of reserve for credit losses to year-end NPAs 265% 196% 161% 96% 65% - -------------------------------------------------------------------------------------- Ratio of reserve for credit losses to year-end nonperforming loans and leases 301% 224% 199% 129% 93% - --------------------------------------------------------------------------------------
Net charge-offs increased $63 million to $302 million in 1995. Net charge- offs increased primarily in the commercial and residential loan portfolios. The sluggish economy as well as higher levels of personal bankruptcies directly contributed to higher net charge-offs in the consumer loan portfolio, particularly the consumer credit card portfolio and Fleet Finance related loans. The ratio of net charge-offs to average loans and leases increased to .59% at December 31, 1995, from .54% at December 31, 1994.
Reserve for Credit Loss Allocation - -------------------------------------------------------------------------------------------------------------------------------- December 31 1995 1994 1993 1992 1991 - -------------------------------------------------------------------------------------------------------------------------------- Percent of Percent of Percent of Percent of Percent of Loan Type to Loan Type to Loan Type to Loan Type to Loan Type to Dollars in millions Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans - -------------------------------------------------------------------------------------------------------------------------------- Commercial and industrial $606 45.1% $620 42.7% $678 43.5% $895 43.1% $878 39.6% Consumer 209 18.5 226 23.7 196 23.4 222 21.5 187 21.9 Commercial real estate: Construction 23 1.2 17 1.5 7 1.4 39 3.3 - 4.3 Interim/permanent 138 8.6 190 10.4 241 12.1 317 12.5 353 14.4 Residential real estate 90 22.3 47 18.5 50 16.9 60 17.0 81 16.2 Lease financing 19 4.3 18 3.2 36 2.7 31 2.6 33 3.6 Unallocated 236 - 378 - 461 - 373 - 533 - - -------------------------------------------------------------------------------------------------------------------------------- Total $1,321 100.0% $1,496 100.0% $1,669 100.0% $1,937 100.0% $2,065 100.0% - --------------------------------------------------------------------------------------------------------------------------------
Fleet's reserve for credit losses decreased $175 million from December 31, 1994, to $1,321 million at December 31, 1995. The corporation's ratios of reserve for credit losses to NPAs and reserve for credit losses to nonperforming loans and leases have increased due to the reclassification of $317 million of NPAs at December 31, 1995, to assets held for sale or accelerated disposition. The increase in the provision for credit losses from $65 million for 1994 to $101 million for 1995 reflects a higher level of net charge-offs for all loan types. The reserve for credit losses represents amounts available for future credit losses and reflects management's ongoing detailed review of certain individual loans and leases, supplemented by analyses of historical net charge- off experience of the portfolio and an evaluation of current and anticipated economic conditions and other pertinent factors. Based on these analyses, the corporation believes that its year-end reserve is adequate. Loans and leases (or portions thereof) deemed uncollectable are charged against the reserve, while recoveries of amounts previously charged off are added to the reserve. Loss provisions charged to earnings are added to the reserve. Amounts are charged off once the probability of loss has been established, with consideration given to factors such as the customer's financial condition, underlying collateral and guarantees, and general and industry economic conditions. Funding Sources Components of Funding Sources - ------------------------------------------------------- December 31 Dollars in millions 1995 1994 - ------------------------------------------------------- Deposits: Demand $12,305 $12,028 Regular savings, NOW, money market 22,835 23,870 Time: Domestic 17,554 14,338 Foreign 4,428 5,292 - ------------------------------------------------------- Total deposits $57,122 $55,528 - ------------------------------------------------------- Borrowed funds: Federal funds purchased $ 4,461 $ 2,753 Securities sold under agreements to repurchase 2,964 6,170 Commercial paper 2,138 835 Other 3,006 2,828 - ------------------------------------------------------- Total borrowed funds 12,569 12,586 - ------------------------------------------------------- Long-term debt 6,481 5,931 - ------------------------------------------------------- Total $76,172 $74,045 - ------------------------------------------------------- Total deposits increased $1.6 billion to $57.1 billion at December 31, 1995, from $55.5 billion at December 31, 1994, primarily due to an increase in wholesale funding. In addition, the corporation's mix of total deposits has shifted as domestic time deposits have increased by $3.2 billion while foreign time deposits have decreased by $.9 billion, and regular savings, NOW, and money market deposits have decreased by $1.0 billion. This shift reflects the increasingly competitive market for customer deposits as increases in lower cost deposits (i.e., demand deposits, savings, NOW, and money market accounts) due to acquisitions during 1995 have been substantially offset by the migration of similar types of deposits to time deposits and other alternative savings and investment products. Certificates of deposit (CDs) and other time deposits issued by domestic offices in amounts of $100,000 or more as of December 31, 1995, will mature as follows: Maturity of Time Deposits - ---------------------------------------------------------- December 31, 1995 Certificates All Other Remaining maturity of Time Dollars in millions Deposit Deposits - ---------------------------------------------------------- 3 months or less $3,265 $5,907 3 to 6 months 3,046 242 6 to 12 months 3,112 253 Over 12 months 4,491 1,666 - ---------------------------------------------------------- Total $13,914 $8,068 - ---------------------------------------------------------- Total borrowed funds remained relatively stable from December 31, 1994, to December 31, 1995. Other short-term borrowings include: treasury, tax, and loan; bank notes; and revolving credit facilities at FMG and Fleet. The amount outstanding under the revolving credit facility at FMG decreased $70 million to $430 million at December 31, 1995. The balance of long-term debt increased $550 million as repayments of $2.7 billion were replaced by new issuances of approximately $3.3 billion. New issuances included $840 million of bank notes due primarily in 1996; $663 million of medium-term notes due 1996-2003; $750 million of other senior notes due 1998-2001; and $250 million of subordinated notes due 2005. The proceeds from these issuances were primarily used for general corporate purposes. Asset/Liability Management The asset/liability management process at Fleet ensures that the risk to earnings from changes in interest rates is prudently managed. Asset/liability management uses three key measurements to monitor interest-rate risk: (1) the interest-rate sensitivity "gap" analysis; (2) a "rate shock" to measure earnings volatility due to an immediate increase or decrease in market interest rates of up to 200 basis points; and (3) simulations of net interest income under alternative balance sheet and interest-rate scenarios. Internal parameters have been established as guidelines for monitoring the gap analysis and the 200 basis-point rate shock. These guidelines serve as benchmarks for determining actions to balance the current position against overall strategic goals. Current exposures are reported to both corporate and bank asset/liability committees as well as the boards of directors. Interest-Rate Gap Analysis
- --------------------------------------------------------------------------------------------------------- Cumulatively Repriced Within December 31, 1995 3 4 12 2 Dollars in millions Months to 12 to 24 to 5 After 5 by repricing date or Less Months Months Years Years Total - --------------------------------------------------------------------------------------------------------- Cash and cash equivalents $ 4,566 $ - $ - $ - $ - $ 4,566 Securities 8,524 3,447 1,342 4,674 1,344 19,331 Loans and leases 28,919 7,999 3,681 6,710 4,216 51,525 Mortgages held for resale 2,005 -- -- -- -- 2,005 Other assets 1,489 519 416 1,189 3,392 7,005 - --------------------------------------------------------------------------------------------------------- Total assets 45,503 11,965 5,439 12,573 8,952 84,432 - --------------------------------------------------------------------------------------------------------- Deposits: Demand 5,065 -- 811 -- 6,429 12,305 Savings 9,659 6,035 3,668 3,015 458 22,835 Time 9,171 6,654 3,161 2,808 188 21,982 - --------------------------------------------------------------------------------------------------------- Total deposits 23,895 12,689 7,640 5,823 7,075 57,122 - --------------------------------------------------------------------------------------------------------- Short-term borrowings 12,371 60 88 48 2 12,569 Long-term debt 2,793 184 592 1,539 1,373 6,481 Other liabilities 216 -- -- -- 1,679 1,895 Stockholders' equity -- 95 -- 125 6,145 6,365 - --------------------------------------------------------------------------------------------------------- Total liabilities and equity 39,275 13,028 8,320 7,535 16,274 $ 84,432 - --------------------------------------------------------------------------------------------------------- Net off-balance-sheet (4,199) 794 2,309 1,851 (755) -- - --------------------------------------------------------------------------------------------------------- Periodic gap 2,029 (269) (572) 6,889 (8,077) -- Cumulative gap $ 2,029 $ 1,760 $ 1,188 $ 8,077 $ 0 -- Cumulative gap as a percent of total assets -1995: 2.4% 2.1% 1.4% 9.6% - --------------------------------------------------------------------------------------------------------- Cumulative gap as a percent of total assets -1994: (10.9)% (3.2)% 13.9% 14.1% - ---------------------------------------------------------------------------------------------------------
Interest-rate gap analysis provides a static analysis of the repricing characteristics of the entire balance sheet. It is prepared by scheduling assets and liabilities into time bands based on their next opportunity to reprice. For floating-rate instruments, the entire balances are placed at the next date on which their rates could be reset and for fixed-rate instruments the balances are placed in time bands according to their principal repayment schedules. It is necessary to apply further assumptions to refine this process. For instance, in order to recognize the potential for mortgage-related instruments to experience early payments of principal, a prepayment assumption based on management's expectations is layered on top of the scheduled principal payments. Other categories that are scheduled using management assumptions include noncontractual deposits, such as demand deposits, interest-bearing checking, savings, and money market deposits. In the interest-rate gap analysis, core demand deposits are allocated as follows: 10% in 3 months and under, 10% in year 2, and 80% after year 5. Interest-bearing checking and savings are allocated as follows: 12% in 3 months and under, 33% in months 4-12, 23% in year 2, 28% in years 3-5, and 4% after year 5. Additionally, money market deposits are allocated as follows: 63% in 3 months and under, 25% in months 4-12, and 12% in year 2. These allocations are consistent with management's current estimate of the sensitivity of the rates and balances of these accounts to changes in market interest rates. Management continues to analyze recent Fleet and industry data in order to maintain reasonable gap placements, based upon historical and expected pricing characteristics. At December 31, 1995, the corporation was 2.1% asset sensitive at the one- year cumulative gap interval compared to 3.2% liability sensitive at December 31, 1994. Fleet's one-year cumulative gap guideline is plus or minus 10% of total assets. Simulation analysis provides a dynamic and much more detailed analysis of the earnings sensitivity of the balance sheet. As a result, simulation analysis is the main tool for managing interest-rate risk at Fleet. Simulation analyses are used to examine the earnings impact of immediate interest-rate "shocks," gradual interest-rate "ramps," yield-curve "twists," as well as numerous other forecasted or planned scenarios. Within each scenario, the analysis incorporates what management believes to be the most reasonable assumptions about such variables as the prepayment rates on mortgages and the repricing of noncontractual deposits. Utilizing a 200 basis-point immediate rate-shock simulation, the most recent earnings simulation model projects net interest income for the next twelve months would decrease by an amount equal to approximately 3.5% if rates declined by 200 basis points immediately. The projection is within the corporation's 10% policy limit.
Interest-Rate Risk-Management Analysis - ------------------------------------------------------------------------------------------------------- Weighted Assets/ Average Weighted Average December 31, 1995 Notional Liabilities Maturity Fair Rate Dollars in millions Value Designated (years) Value Receive Pay - ------------------------------------------------------------------------------------------------------- Interest-Rate Swaps Receive-fixed/pay-variable swaps $2,965 Variable-rate loans 1,592 Fixed-rate deposits 610 Short-term borrowings 609 Long-term debt ------- 5,776 2.1 $69 6.19% 5.84% - ------------------------------------------------------------------------------------------------------- Pay-fixed/receive-variable 1,885 Short-term borrowings .6 (25) 5.78 6.84 - ------------------------------------------------------------------------------------------------------- Basis swaps 35 Fixed-rate deposits 615 Long-term debt 2,092 Securities ------- 2,742 2.2 (4) 5.86 5.96 - ------------------------------------------------------------------------------------------------------- Index-amortizing swaps receive-fixed/pay-variable 2,038 Variable-rate loans 1.2 1 5.08 5.43 - ------------------------------------------------------------------------------------------------------- Total interest-rate swaps $12,441 2.0 $41 5.87% 5.95% - ------------------------------------------------------------------------------------------------------- Other Interest-Rate Instruments Interest-rate cap agreements $550 Short-term borrowings 1.4 $6 - - - ------------------------------------------------------------------------------------------------------- Interest-rate corridor agreements 206 Short-term borrowings .7 1 - - - ------------------------------------------------------------------------------------------------------- Interest-rate collar agreements 10 Short-term borrowings 2.8 - - - - ------------------------------------------------------------------------------------------------------- Total other instruments $766 1.21 $7 - - - ------------------------------------------------------------------------------------------------------- Total interest-rate instruments $13,207 1.95 $48 - -------------------------------------------------------------------------------------------------------
Fleet uses interest-rate instruments to manage interest-rate risk within management guidelines limiting risk to earnings. Since interest-rate instruments are used to manage the interest-rate risk of specific assets and liabilities, the analysis considers the interest-rate sensitivity of specific portfolios, as well as the sensitivity of the entire balance sheet. There are situations where interest-rate instruments will be executed that increase existing asset or liability sensitivity (as measured by the gap position), but the resulting risk profile is desired and within Fleet's asset/liability management guidelines. Fleet considers the duration of the interest-rate instruments program within its asset/liability management parameters for interest-rate risk-management. Derivative instruments totaling $13.2 billion (notional amount) are being used for interest-rate risk-management purposes. These derivative instruments consist primarily of interest-rate swaps. During 1995 and 1994 the corporation also utilized interest-rate caps, floors and futures contracts for interest-rate risk-management purposes. During 1995, Fleet substantially reduced its asset/liability management positions in certain interest-rate instruments, such as swaps, options (caps, corridors, collars), and futures. These reductions occurred gradually as a result of a combination of maturities, sales, and terminations. The positions were eliminated because management determined they were no longer necessary given the nature of Fleet's balance sheet and the interest-rate environment. While Fleet reduced the size of these positions in 1995, the corporation envisions continued use of these instruments in the future. At December 31, 1995 the corporation had approximately $12.4 billion of interest-rate swaps outstanding for interest-rate risk-management purposes, including $2.0 billion of index-amortizing swaps. Under the terms of the index- amortizing swaps, Fleet receives a fixed rate and pays a floating rate based on certain indices such as a six-month London Interbank Offered Rate (LIBOR). Under certain conditions, if these indices fall below a specified range, the swaps would amortize (i.e., the swaps would wholly or partly mature) before the stated final maturity; if these indices remain above the specified range, none of the swaps would amortize until the stated final maturity. In addition to interest-rate swap agreements, the corporation had utilized interest-rate cap and floor agreements during 1995 to manage interest-rate risk. Interest-rate cap and floor agreements are similar to interest-rate swap agreements except that interest payments are only made or received if current interest rates rise above/below a predetermined interest rate. At year-end 1995, the corporation had approximately $550 million in notional amounts of purchased interest-rate cap agreements and $10 million in notional amounts of interest- rate collar arrangements (consisting of a cap and floor) outstanding. The corporation also had approximately $206 million in notional amounts of interest- rate corridor agreements outstanding, which consist of a cap that is sold for a higher-strike rate than the one that is purchased. Interest-rate corridors are utilized to protect the corporation from a contraction in the interest-rate spread due to a moderate rise in interest rates. The periodic net settlement of interest-rate risk-management instruments is recorded as an adjustment to net interest income. These interest-rate risk- management instruments generated $18 million and $6 million of net interest expense during 1995 and 1994, respectively. As of December 31, 1995, the corporation has net deferred income of $28 million relating to terminated interest-rate contracts, which will be amortized over the remaining life of the underlying interest-rate contracts of approximately three years. The interest-rate risk-management instrument activity for the two years ended December 31, 1995, is summarized in the following table (all amounts are notional amounts):
Interest-Rate Risk-Management Instrument Activity Interest-rate swaps --------------------------------------- Receive- Pay- Index- Dollars in millions Fixed Fixed Basis Amortizing Caps Corridors Collars Futures Total - ------------------------------------------------------------------------------------------------------------------ Notional amounts: Balance at January 1, 1994 $2,390 $1,928 $ - $3,670 $950 $2,406 $ - $ 2,528 $13,872 Additions 1,611 1,886 3,605 500 825 275 500 30,497 39,699 Maturities (1,128) (434) - (51) - (1,650) - (27,020) (30,283) Terminations - (1,296) - - - - - - (1,296) - ------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1994 2,873 2,084 3,605 4,119 1,775 1,031 500 6,005 21,992 Additions 4,928 370 615 - - - 10 2,771 8,694 Maturities (1,600) (94) (650) (831) (1,225) (257) (500) (677) (5,834) Terminations (425) (475) (828) (1,250) - (568) - (8,099) (11,645) - ------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1995 $5,776 $1,885 $2,742 $2,038 $550 $ 206 $ 10 $ - $13,207 - ------------------------------------------------------------------------------------------------------------------ Maturities of the Interest-Rate Risk-Management Instruments - ------------------------------------------------------------------------------------------------------------------ December 31, 1995 Dollars in millions Within 1 1 to 2 2 to 3 3 to 4 4 to 5 After 5 Year Years Years Years Years Years Total - ------------------------------------------------------------------------------------------------------------------ Notional amounts: Interest-rate swaps Receive-fixed $ 621 $2,664 $1,695 $137 $619 $40 $5,776 Pay-fixed 555 660 - 450 200 20 1,885 Basis 585 805 1,317 35 - - 2,742 Index-amortizing 1,440 356 42 200 - - 2,038 - ------------------------------------------------------------------------------------------------------------------ Total interest-rate swaps 3,201 4,485 3,054 822 819 60 12,441 - ------------------------------------------------------------------------------------------------------------------ Other interest-rate instruments 570 36 10 150 - - 766 - ------------------------------------------------------------------------------------------------------------------ Total interest-rate instruments $3,771 $4,521 $3,064 $972 $819 $60 $13,207 - ------------------------------------------------------------------------------------------------------------------
Mortgage Servicing Rights Prepayment-Risk Management. The corporation also uses interest-rate contracts to manage the prepayment risk associated with the corporation's mortgage servicing portfolio. The value of the corporation's mortgage servicing portfolio may be adversely impacted if mortgage interest rates decline and loan prepayments increase. As a result, the carrying value of the corporation's mortgage servicing rights are subject to a great degree of volatility in the event of unanticipated prepayments or defaults. To mitigate the risk related to adverse changes in interest rates and the potential resultant impairment to MSRs, the corporation holds interest-rate contracts (primarily purchased interest-rate floor contracts and purchased-call option contracts on U.S. Treasury securities). Such contracts, which are carried at a market value of $87.8 million at December 31, 1995, had unrealized and realized gains of $77 million in 1995. These gains are included in other noninterest income. Mortgage Servicing Rights Prepayment Risk-Management Analysis - ------------------------------------------------------------------------------- Weighted Weighted December 31, 1995 Notional Average Average Market Dollars in millions Value Maturity (yrs) Strike Rate Value - ------------------------------------------------------------------------------- Interest-rate floors $5,885 4.33 5.58% $71.2 Interest-rate caps 200 4.52 7.25 (.7) Purchased-call options 825 - - 17.3 - ------------------------------------------------------------------------------- Total $6,910 - - $87.8 - ------------------------------------------------------------------------------- The above instruments are used in an effort to protect the economic value of the corporation's mortgage servicing rights. Interest-rate caps and floors have a strike price that is indexed to the 5 and 10 year constant maturity treasury rate. These contracts mature as follows: $700 million and $5,385 million in 1999 and 2000, respectively. Purchased-call options consist of option contracts on long-term U.S. treasury securities. These option contracts mature between March and May of 1996. LIQUIDITY Liquidity is the ability of the corporation to meet each maturing obligation or customer demand for funds. Liquidity is provided through issuing liabilities, selling assets, or allowing assets to mature. The corporation's Asset and Liability Committee (ALCO) is responsible for implementing the Board of Directors' policies and guidelines for the maintenance of prudent levels of liquidity. The ALCO is responsible for monitoring the performance of each of the banking subsidiaries and the parent company relative to these policies and guidelines. The primary sources of liquidity for the parent company are interest and dividends from subsidiaries and access to the capital and money markets. Dividends from banking subsidiaries are limited by various regulatory requirements related to capital adequacy and earning trends. The corporation's subsidiaries rely on cash flows from operations, core deposits, borrowings, short-term high-quality liquid assets, and in the case of the nonbanking subsidiaries, funds from the parent company for liquidity. FMG has a separate funding program that includes a revolving-warehouse credit agreement of $1.8 billion at December 31, 1995, a decrease from the $2.2 billion available at December 31, 1994. FMG also has a shelf registration that provides for the issuance of debt securities. At December 31, 1995, $100 million of debt securities were available for future issuance under this shelf registration. FMG also sells commercial paper to fund short-term needs. At December 31, 1995, FMG had commercial paper outstanding of $1.4 billion compared to $108 million at December 31, 1994. At December 31, 1995, Fleet, excluding FMG, had commercial paper outstanding of $772 million, including $630 million placed directly by Fleet in its local markets, compared to $727 million and $472 million, respectively, at December 31, 1994. The corporation has backup lines of credit totaling $1 billion to ensure that funding is not interrupted if commercial paper is not available. At December 31, 1995 and 1994, Fleet had no outstanding balances under the line of credit. Certain of the corporation's banking subsidiaries have established a $5 billion bank note program of which $1.7 billion is outstanding at December 31, 1995. Through the issuance of senior debt, the corporation raised $3.3 billion in 1995, thereby strengthening its liquidity position. Fleet also has an effective universal shelf registration with the Securities and Exchange Commission (SEC), providing for the issuance of common and preferred stock, senior or subordinated debt securities, and other debt securities. The total amount of funds available as of December 31, 1995, under the corporation's shelf registration was $913 million. On February 21, 1996, the corporation issued $425 million of preferred stock leaving $488 million available under this registration statement. In addition, on February 2, 1996, the corporation filed a new registration statement for $1.0 billion, which is currently pending approval by the SEC. As shown in the Consolidated Statements of Cash Flows, cash and cash equivalents decreased by $4.0 billion during 1995. This decrease was primarily due to $4.0 billion of net cash used in financing activities as a result of net decreases of $3.2 billion in deposits and $801 million in short-term borrowings. Net cash provided by operating activities was principally generated by income from operations and proceeds from the sale of mortgages held for resale, offset in part by originations and purchases of such mortgages. Net cash used by investing activities was principally due to a net decrease in securities offset by loans to customers. Capital December 31 Dollars in millions 1995 1994 - -------------------------------------------------------------------- Risk-adjusted assets $69,384 $60,650 Tier 1 risk-based capital (4% minimum) 7.62% 9.14% Total risk-based capital (8% minimum) 11.29 12.92 Leverage ratio (4% minimum) 6.41 7.15 Common equity-to-assets 7.07 6.06 Total equity-to-assets 7.54 6.75 Tangible total equity-to-assets 6.30 6.17 Capital in excess of minimum requirements: Tier 1 risk-based $1,123 $3,120 Total risk-based 895 2,983 Leverage 1,161 2,445 - -------------------------------------------------------------------- A financial institution's capital serves to support growth and provide protection against loss to depositors and creditors. Equity capital represents the stockholders' investment in the corporation. Management strives to maintain an optimal level of capital on which an attractive return to the stockholders will be realized over both the short and long term, while serving depositors' and creditors' needs. Regulatory capital requirements are set forth in terms of (1) Leverage (Tier 1 capital/quarterly average assets); (2) risk-based Tier 1 capital (Tier 1 capital/risk-weighted on- and off-balance sheet assets); and (3) risk-based Total Capital (Total Capital/risk-weighted on- and off-balance sheet assets). The minimum requirements for each of these ratios is 4%, 4%, and 8%, respectively. In addition, under the FDIC Improvement Act (FDICIA), banks are categorized according to their capital levels (together with regulatory evaluations) into one of five categories ranging from "well-capitalized" to "critically undercapitalized." Each category serves to determine a bank's deposit insurance premium as well as any mandated restrictive regulatory actions. As of December 31, 1995, all of the Fleet affiliate banks were categorized as "well-capitalized," which specifies for minimum Leverage, Tier 1, and Total Capital ratios of 5%, 6%, and 10%, respectively. Lower regulatory capital ratios were mainly due to increased risk-adjusted assets primarily the result of the acquisitions of NBB Bancorp, the Business Finance Division of Barclays Business Credit, Inc., Plaza Home Mortgage, and Northeast Federal Corporation. At year end, KKR converted its dual convertible preferred stock into 19.9 million shares of Fleet common stock. This resulted in a reclassification from preferred equity to common equity, thereby improving the common equity-to-assets ratio, but leaving total equity-to-assets unchanged. COMPARISON OF 1994 AND 1993 Fleet reported net income for 1994 of $849 million, or $3.09 per share, compared to the $764 million, or $2.82 per share, reported in 1993, which was before a cumulative effect of a change in method of accounting of $53 million pertaining to income taxes. Return on assets and return on equity were 1.07% and 15.66%, respectively, for 1994 compared to 1.01% and 15.94%, respectively, for 1993. Net interest income on a fully taxable equivalent basis totaled $3.1 billion for 1994, compared to $3.2 billion in 1993. The net interest margin for 1994 was 4.30%, compared to 4.63% in 1993. The decrease of 33 basis points was due principally to the rise in interest rates during 1994 as the increased cost of funding sources outpaced the increase in yield on earning assets. The impact of the narrower margin in 1994 was substantially offset by growth in the corporation's average earning assets from $68.5 billion in 1993 to $72.0 billion in 1994. Net Interest Margin and Interest-Rate Spread - --------------------------------------------------------------------- December 31 1994 1993 - --------------------------------------------------------------------- Taxable-equivalent rates Average Average Dollars in millions Balance Rate Balance Rate - --------------------------------------------------------------------- Money market instruments $588 4.99% $617 3.07% Securities 25,710 5.92 21,875 6.55 Loans and leases 44,102 8.17 43,283 7.99 Mortgages held for resale 1,322 6.90 2,384 7.10 Other 265 1.89 325 1.54 - --------------------------------------------------------------------- Total interest-earning assets 71,987 7.29 68,484 7.43 - --------------------------------------------------------------------- Deposits 40,113 2.92 39,766 2.93 Short-term borrowings 15,355 4.07 12,807 3.03 Long-term debt 5,383 6.76 5,039 7.20 - --------------------------------------------------------------------- Interest-bearing liabilities 60,851 3.55 57,612 3.33 - --------------------------------------------------------------------- Interest-rate spread 3.74 4.10 Interest-free sources of funds 11,136 10,872 - --------------------------------------------------------------------- Total sources of funds $71,987 2.99% $68,484 2.80% - --------------------------------------------------------------------- Net interest margin 4.30% 4.63% - --------------------------------------------------------------------- The provision for credit losses was $65 million in 1994 compared to $327 million in 1993, with the decline due to continued improvements in asset quality and significant reductions in net charge-offs. Net charge-offs decreased $346 million and nonperforming assets decreased $277 million to $761 million. Noninterest income, excluding securities gains (losses), totaled $1.56 billion during 1994 compared to $1.59 billion in 1993. Noninterest income was adversely affected by a decrease in mortgage banking revenues resulting from the negative impact of increasing interest rates on mortgage originations. Noninterest expense, excluding $185 million of merger and restructuring- related charges, totaled $3.0 billion for the year ended December 31, 1994. Excluding the $161 million of merger and restructuring-related charges and the $90 million charge related to accelerated amortization of mortgage servicing assets in 1993, noninterest expense was reduced by $368 million, or 11%. Significant reductions were noted in employee compensation and several other expense categories. These reductions are attributable to the successful implementation of strategies developed as part of the corporation's efficiency- improvement programs. Total loans of $46.0 billion at December 31, 1994, represented an increase of approximately $2.3 billion, or 5%, compared to $43.7 billion at December 31, 1993. RECENT ACCOUNTING DEVELOPMENTS The FASB has issued SFAS No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed Of," which the corporation adopted on January 1, 1996. This statement requires that long-lived assets and certain identifiable intangibles to be held be reviewed for impairment whenever management becomes aware of events or changes in circumstances indicating that the carrying amount of an asset may not be recoverable. An impairment loss based on the fair value of the asset is recognized if the expected cash flows from the use and eventual disposition of the asset, on an undiscounted basis and without interest charges, are less than the carrying amount of the asset. Long-lived assets and certain identifiable intangibles to be disposed of are required to be reported at the lower of the carrying amount or fair value less cost to sell, except for assets being disposed of in connection with the disposal of a segment of a business, which will continue to be reported at the lower of the carrying amount or net realizable value. It is management's belief that the adoption of this statement will not have a material impact on the corporation or its results of operations. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which is effective for awards granted in fiscal years beginning after December 15, 1995. This standard defines a fair value based method of measuring employee stock options or similar equity instruments. In lieu of recording the value of such options as compensation expense, companies may provide pro forma disclosures quantifying the difference between compensation cost included in net income as prescribed by current accounting standards and the related cost measured by such fair value based method. The corporation will provide such disclosure in its financial statements after the effective date of the standard. However, the statement allows a company to continue to measure compensation cost for such plans under Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB Opinion No. 25, no compensation cost is recorded if, at the grant date, the exercise price of the options is equal to the fair market value of the corporation's common stock. The corporation has elected to continue to follow the accounting under APB No. 25. MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS The accompanying consolidated financial statements and related notes of the corporation were prepared by management in conformity with generally accepted accounting principles. Management is responsible for the integrity and fair presentation of these financial statements and related notes. Management has in place an internal accounting control system designed to safeguard corporate assets from material loss or misuse and to ensure that all transactions are first properly authorized and then recorded in its records. The internal control system includes an organizational structure that provides appropriate delegation of authority and segregation of duties, established policies and procedures, and comprehensive internal audit and loan review programs. Management believes that this system provides assurance that the corporation's assets are adequately safeguarded and that its records, which are the basis for the preparation of all financial statements, are reliable. The Audit and Risk Management Committees of the Board of Directors consist solely of directors who are not employees of the corporation or its subsidiaries. During 1995, the committees met nine times with internal auditors, loan review management, the independent auditors, and representatives of senior management to discuss the results of examinations and to review their activities to ensure that each is properly discharging its responsibilities. The independent auditors, internal auditors, and loan review management have direct and unrestricted access to these committees at all times. The corporation's consolidated financial statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants. Its independent auditors' report, which is based on an audit made in accordance with generally accepted auditing standards, expresses an opinion as to the fair presentation of the consolidated financial statements. In performing its audit, KPMG Peat Marwick LLP considers the corporation's internal control structure to the extent it deems necessary in order to issue its opinion on the consolidated financial statements. /s/ Terrence Murray /s/ Eugene M. McQuade Terrence Murray Eugene M. McQuade President and Executive Vice President and Chief Executive Officer Chief Financial Officer REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders of Fleet Financial Group, Inc.: We have audited the accompanying consolidated balance sheets of Fleet Financial Group, Inc., as of December 31, 1995 and 1994, 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, 1995. These consolidated financial statements are the responsibility of the corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Fleet Financial Group, Inc. at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Notes 1 and 7 of the notes to consolidated financial statements, the corporation changed its method of accounting for mortgage servicing rights to adopt the provisions of the Financial Accounting Standards Board's Statement No. 122, "Accounting for Mortgage Servicing Rights," as of April 1, 1995. Also as discussed in Notes 1 and 14, in 1993, the corporation changed its methods of accounting for investments in debt and equity securities and accounting for income taxes. /s/ KPMG Peat Marwick LLP Boston, Massachusetts January 17, 1996
CONSOLIDATED STATEMENTS OF INCOME - ----------------------------------------------------------------------------------------- Year ended December 31 Dollars in millions, except per share amounts 1995 1994 1993 - ----------------------------------------------------------------------------------------- Interest and fees on loans and leases $4,721 $3,694 $3,612 Interest on securities (includes interest from tax-exempt securities of $36 million, $33 million, and $27 million in 1995, 1994, and 1993, respectively) 1,304 1,514 1,428 - ----------------------------------------------------------------------------------------- Total interest income 6,025 5,208 5,040 - ----------------------------------------------------------------------------------------- Interest expense: Deposits 1,726 1,171 1,166 Short-term borrowings 801 628 388 Long-term debt 478 362 363 - ----------------------------------------------------------------------------------------- Total interest expense 3,005 2,161 1,917 - ----------------------------------------------------------------------------------------- Net interest income 3,020 3,047 3,123 - ----------------------------------------------------------------------------------------- Provision for credit losses 101 65 327 - ----------------------------------------------------------------------------------------- Net interest income after provision for credit losses 2,919 2,982 2,796 - ----------------------------------------------------------------------------------------- Noninterest income: Mortgage banking 511 391 445 Service charges, fees, and commissions 492 438 423 Investment services revenue 322 294 291 Student loan servicing fees 72 54 51 Trading revenue 39 32 35 Securities available for sale gains (losses) 32 (1) 295 Other 382 347 343 - ----------------------------------------------------------------------------------------- Total noninterest income 1,850 1,555 1,883 - ----------------------------------------------------------------------------------------- Noninterest expense: Employee compensation and benefits 1,448 1,428 1,529 Occupancy 250 265 280 Equipment 209 188 188 Mortgage servicing rights amortization 190 90 247 Intangible asset amortization 105 65 60 Legal and other professional 102 95 100 Marketing 93 84 75 FDIC assessment 67 114 128 OREO expense 15 51 163 Merger and restructuring-related charges 490 185 161 Loss on assets held for sale or accelerated disposition 175 - - Other 591 580 648 - ----------------------------------------------------------------------------------------- Total noninterest expense 3,735 3,145 3,579 - ----------------------------------------------------------------------------------------- Income before income taxes 1,034 1,392 1,100 Applicable income taxes 424 531 330 - ----------------------------------------------------------------------------------------- Income before minority interest and cumulative effect of change in method of accounting 610 861 770 Minority interest - (12) (6) Cumulative effect of change in method of accounting - - 53 - ----------------------------------------------------------------------------------------- Net income $ 610 $ 849 $ 817 - ----------------------------------------------------------------------------------------- Net income applicable to common shares $ 416 $ 818 $ 780 - ----------------------------------------------------------------------------------------- Fully diluted weighted average common shares outstanding 265,886,363 264,828,469 257,373,073 Fully diluted earnings per share before cumulative effect of change in method of accounting $1.57 $3.09 $2.82 Fully diluted earnings per share 1.57 3.09 3.03 Dividends declared 1.63 1.40 1.025 - -----------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------- December 31 Dollars in millions 1995 1994 - --------------------------------------------------------------------------- Assets Cash, due from banks, and interest-bearing deposits $4,505 $7,613 Federal funds sold and securities purchased under agreements to resell 61 957 Securities available for sale at market 18,533 12,250 Securities held to maturity (market value: $782 and $8,452) 798 8,891 Loans and leases 51,525 46,035 Reserve for credit losses (1,321) (1,496) - --------------------------------------------------------------------------- Net loans and leases 50,204 44,539 - --------------------------------------------------------------------------- Mortgages held for resale 2,005 560 Premises and equipment 991 985 Mortgage servicing rights 1,276 840 Accrued interest receivable 503 570 Deferred taxes 239 506 Excess cost over net assets acquired 935 317 Other intangibles 181 177 Other assets 4,201 2,821 - --------------------------------------------------------------------------- Total assets $84,432 $81,026 - --------------------------------------------------------------------------- Liabilities Deposits: Demand $12,305 $12,028 Regular savings, NOW, money market 22,835 23,870 Time 21,982 19,630 - --------------------------------------------------------------------------- Total deposits 57,122 55,528 - --------------------------------------------------------------------------- Federal funds purchased and securities sold under agreements to repurchase 7,425 8,923 Other short-term borrowings 5,144 3,663 Accrued expenses and other liabilities 1,895 1,510 Long-term debt 6,481 5,931 - --------------------------------------------------------------------------- Total liabilities 78,067 75,555 - --------------------------------------------------------------------------- Stockholders' equity Preferred stock 399 557 Common stock (shares issued: 262,864,257 in 1995 and 244,140,469 in 1994; shares outstanding: 262,721,926 in 1995 and 237,590,569 in 1994) 3 244 Common surplus 3,149 2,612 Retained earnings 2,768 2,719 Net unrealized gain (loss) on securities available for sale 52 (411) Treasury stock, at cost (142,331 shares in 1995 and 6,549,900 shares in 1994) (6) (250) - --------------------------------------------------------------------------- Total stockholders' equity 6,365 5,471 - --------------------------------------------------------------------------- Total liabilities and stockholders' equity $84,432 $81,026 - --------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Net Unrealized Gain (Loss) Common on Securities Dollars in millions, Preferred Stock $.01(a) Common Retained Available Treasury except per share amounts Stock Par Surplus Earnings For Sale Stock Total - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1992 $814 $222 $2,143 $1,602 $- $(46) $4,735 Net income - - - 817 - - 817 Cash dividends declared on common stock ($1.025 per share) - - - (140) - - (140) Cash dividends declared on preferred stock - - - (22) - - (22) Cash dividends declared by pooled companies prior to mergers - - - (67) - - (67) Purchase of preferred stock (100) - - (26) - - (126) Redemption of FDIC preferred stock (16) - - (2) - - (18) Common stock issued in connection with: Common stock offering, net of issuance costs of $10 - 15 404 - - - 419 Employee benefit plans and conversion of preferred stock (3) 5 70 (4) - 47 115 Net unrealized gain on securities available for sale at December 31, 1993 - - - - 238 - 238 Adjustment of valuation account for securities at lower of cost or market - - - 24 - - 24 Other items, net - - 8 (15) - (3) (10) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1993 $695 $242 $2,625 $2,167 $238 $ (2) $5,965 - ------------------------------------------------------------------------------------------------------------------------------------ Net income - - - 849 - - 849 Cash dividends declared on common stock ($1.40 per share) - - - (192) - - (192) Cash dividends declared on preferred stock - - - (15) - - (15) Cash dividends declared by pooled companies prior to mergers - - - (109) - - (109) Redemption of adjustable-rate preferred stock (122) - - - - - (122) Redemption of FDIC preferred stock (16) - - (3) - - (19) Common stock issued in connection with employee benefit plans - 4 66 (4) - 4 70 Adjustment to valuation reserve- securities available for sale - - - - (666) - (666) Treasury stock purchased - - - - - (252) (252) Other items, net - (2) (79) 26 17 - (38) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1994 $557 $244 $2,612 $2,719 $(411) $(250) $5,471 - ------------------------------------------------------------------------------------------------------------------------------------ Net income - - - 610 - - 610 Cash dividends declared on common stock ($1.63 per share) - - - (274) - - (274) Cash dividends declared on preferred stock - - - (17) - - (17) Cash dividends declared by pooled company prior to merger - - - (102) - - (102) Issuance of preferred stock 125 - - - - - 125 Common stock issued in connection with: Acquisition of Northeast Federal Corp. - 6 187 - - - 193 Employee benefit plans - - 53 (26) - 97 124 Conversion of dual convertible preferred stock to common stock (283) - 427 (156) - 12 - Treasury stock purchased - - - - - (446) (446) Treasury stock issued in connection with the acquisition of NBB Bancorp - - (17) (21) - 234 196 Retirement of treasury stock - - (371) 24 - 347 - Adjustment to valuation reserve- securities available for sale - - - - 523 - 523 Conversion of par value to $.01 per share(a) - (242) 242 - - - - Other items, net - (5) 16 11 (60) - (38) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1995 $399 $3 $3,149 $2,768 $52 $(6) $6,365 - ------------------------------------------------------------------------------------------------------------------------------------
(a) During 1995 the corporation changed the par value of its common stock from $1 per share to $.01 per share. See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended December 31 Dollars in millions 1995 1994 1993 - ---------------------------------------------------------------------------------------- Cash flows from operating activities Net income $610 $849 $817 Adjustments for noncash items: Depreciation and amortization of premises and equipment 165 161 147 Amortization of mortgage servicing rights and other intangible assets 295 155 307 Provision for credit losses 101 65 327 Deferred income tax expense (benefit) 73 130 (129) Cumulative effect of change in method of accounting - - (53) Securities (gains) losses (32) 1 (295) Merger and restructuring-related charges 425 185 161 Loss on assets held for sale or accelerated disposition 175 - - Originations and purchases of mortgages held for resale (13,349) (11,549) (22,556) Proceeds from sales of mortgages held for resale 11,997 14,326 22,025 (Increase) decrease in accrued receivables, net 118 (98) (183) (Decrease) increase in accrued liabilities, net (250) (530) 175 Other, net 290 4 120 - ---------------------------------------------------------------------------------------- Net cash flow provided by operating activities 618 3,699 863 - ---------------------------------------------------------------------------------------- Cash flows from investing activities Purchases of securities available for sale (23,307) (24,116) (14,542) Proceeds from sales of securities available for sale 10,836 26,859 11,887 Proceeds from maturities of securities available for sale 15,473 1,027 1,628 Purchases of securities held to maturity (746) (2,983) (6,905) Proceeds from maturities of securities held to maturity 3,462 2,272 2,522 Proceeds from sales of securities held to maturity - - 1,561 Net cash and cash equivalents paid for businesses acquired (2,816) (56) - Loans made to customers, nonbanking subsidiaries (1,430) (1,109) (3,413) Principal collected on loans made to customers, nonbanking subsidiaries 905 1,097 3,386 Loans purchased from third parties (including FDIC) (396) (817) (607) Proceeds from sales of loans 205 135 904 Net increase in loans and leases, banking subsidiaries (2,255) (1,958) (1,021) Putable loans transferred to the FDIC - 76 274 Proceeds from sales of OREO 99 134 245 Acquisition of minority interest in subsidiary (158) - - Purchases of premises and equipment (136) (266) (259) Purchases of mortgage servicing rights (331) (377) (266) - ---------------------------------------------------------------------------------------- Net cash flow used in investing activities (595) (82) (4,606) - ---------------------------------------------------------------------------------------- Cash flows from financing activities Net increase (decrease) in deposits (3,206) 5,077 (2,902) Net increase (decrease) in short-term borrowings (801) (4,025) 4,931 Proceeds from issuance of long-term debt 3,290 1,385 1,422 Repayments of long-term debt (2,740) (700) (1,214) Proceeds from issuance of common stock 124 70 523 Proceeds from issuance of preferred stock 125 - - Redemption and repurchase of common and preferred stock (446) (393) (289) Cash dividends paid (373) (299) (194) - ---------------------------------------------------------------------------------------- Net cash flow provided by (used in) financing activities (4,027) 1,115 2,277 - ---------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (4,004) 4,732 (1,466) - ---------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of year 8,570 3,838 5,304 - ---------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $4,566 $8,570 $3,838 - ----------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of Fleet Financial Group (Fleet or the corporation) conform to generally accepted accounting principles and prevailing practices within the banking industry. The corporation is a diversified financial services company headquartered in Boston, Massachusetts. The corporation is organized along four functional lines of business which include: financial services and national consumer, consumer and investment services, commercial financial services, and treasury/asset collection/equity capital. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to current year classifications. Fleet-Shawmut Merger. On November 30, 1995, Shawmut National Corporation (Shawmut) merged with and into Fleet (the Merger). The Merger was accounted for as a pooling of interests and, accordingly, the financial information for all prior periods presented has been restated to present the combined financial condition and results of operations of both companies as if the Merger had been in effect for all periods presented. Additional information pertaining to the Merger is included in Note 2, Mergers and Acquisitions. The following is a summary of the significant accounting policies: Basis of Presentation. The consolidated financial statements of Fleet include the accounts of the corporation and its subsidiaries. All material intercompany transactions and balances have been eliminated. The consolidated financial statements of the corporation have been prepared to give retroactive effect to the Merger. For purposes of the Consolidated Statements of Cash Flows, the corporation defines cash and cash equivalents to include cash, due from banks, interest- bearing deposits, federal funds sold, and securities purchased under agreements to resell. Securities. Securities are classified at the time of purchase, based on management's intention, as securities held to maturity, securities available for sale, or trading account securities. Effective December 31, 1993, the corporation adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires that securities available for sale be reported at fair value, with any net after-tax unrealized gains (losses) reflected as a separate component of stockholders' equity. Previously, debt securities that were held for indefinite periods of time were recorded at the lower of amortized cost or fair value with any net unrealized losses included in earnings; equity securities were stated at the lower of aggregate cost or fair value with net unrealized losses reported as a reduction of retained earnings. Securities held to maturity are those that management has the positive intent and ability to hold to maturity and are carried at amortized cost. Securities available for sale, which include marketable equity securities, are those that management intends to hold for an indefinite period of time, including securities used as part of the asset/liability management strategy, and that may be sold in response to changes in interest rates, prepayment risk, liquidity needs, the desire to increase capital, or other similar factors. Unrealized losses on an individual security deemed to be other than temporary are recognized as a realized loss in the accounting period in which such determination is made. The specific identification method is used to determine gains and losses on sales of securities. Trading account securities include securities, principally debt securities, that are purchased and held primarily for the purpose of selling them in the near term and are stated at fair value, as determined by quoted market prices. Gains and losses realized on the sale of trading account securities and adjustments to fair value are included in trading revenue. Loans and Leases. Loans are stated at the principal amounts outstanding, net of unearned income. Loans and leases are placed on nonaccrual status as a result of past-due status or a judgment by management that, although payments are current, such action is prudent. Except in the case of most consumer and residential real estate loans, loans and leases on which payments are past due 90 days or more are placed on nonaccrual status, unless they are well-secured and in the process of normal collection or renewal. Consumer loans, including residential real estate, are placed on nonaccrual status at 120 days past due and generally charged off at 180 days past due. When a loan is placed on nonaccrual status, all interest previously accrued in the current year, but not collected, is reversed against interest income. Any interest accrued in prior years is charged against the reserve for credit losses. Assets can be returned to accrual status when they become current as to principal and interest or demonstrate a period of performance under the contractual terms, and, in management's opinion, are fully collectable. Foreclosed Property and Repossessed Equipment. Property and equipment acquired through foreclosure (other real estate owned or OREO) are stated at the lower of cost or fair value less estimated selling costs. Credit losses arising at the time of foreclosure are charged against the reserve for credit losses. Any additional writedowns to the carrying value of these assets that may be required are charged to expense and recorded in a valuation reserve that is maintained on an asset-by-asset basis. Reserve for Credit Losses. The corporation continually evaluates its reserve for credit losses by performing detailed reviews of certain individual loans and leases in view of the historical net charge-off experience of the portfolio, evaluations of current and anticipated economic conditions, and other pertinent factors. Based on these analyses, the reserve for credit losses is maintained at levels considered adequate by management to provide for loan and lease losses inherent in these portfolios. Loans and leases, or portions thereof, deemed uncollectable are charged off against the reserve, while recoveries of amounts previously charged off are credited to the reserve. Amounts are charged off once the probability of loss has been established, giving consideration to such factors as the customer's financial condition, underlying collateral and guarantees, and general and industry economic conditions. Effective January 1, 1995, the corporation adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118. Under this standard, commercial and commercial real estate loans are considered impaired when it is probable that the corporation will not collect all amounts due in accordance with the contractual terms of the loan. Except for certain restructured loans, impaired loans are loans that are on nonaccrual status. Loans that are returned to accrual status are no longer considered to be impaired. Certain loans are exempt from the provisions of SFAS No. 114, including large groups of smaller-balance homogenous loans that are collectively evaluated for impairment, such as consumer and residential mortgage loans. The 1995 reserve for credit losses related to loans that are identified as impaired includes impairment reserves, which are based on discounted cash flows using the loan's effective interest rate, or the fair value of the collateral for collateral-dependent loans, or the observable market price of the impaired loan. Loans which were restructured prior to the adoption of SFAS No. 114, and which are performing in accordance with the renegotiated terms, are not required to be reported as impaired. Loans restructured subsequent to the adoption of SFAS No. 114 are required to be reported as impaired in the year of restructuring. Thereafter, such loans can be removed from the impaired loan disclosure if the loans were paying a market rate of interest at the time of restructuring and are performing in accordance with their renegotiated terms. In accordance with SFAS No. 114, a loan is classified as an insubstance foreclosure when the corporation has taken possession of the collateral, regardless of whether formal foreclosure proceedings take place. Upon adoption of SFAS No. 114, the corporation did not change its method of recognizing interest income on impaired loans. Cash receipts are generally applied to reduce the unpaid principal balance. Mortgages Held for Resale. Mortgages held for resale are recorded at the lower of aggregate cost or market value. Market value is determined by outstanding commitments from investors or by current investor yield requirements. Mortgage Servicing Rights (MSRs). During 1995, the FASB issued SFAS No. 122 "Accounting for Mortgage Servicing Rights." SFAS No. 122 requires that an entity recognize, as separate assets, rights to service mortgage loans for others irrespective of how those servicing rights are acquired, whether purchased or originated, by allocating the total cost of the loans between the loan and the servicing rights thereto based on their relative fair values. The corporation adopted SFAS No. 122 as of April 1, 1995, with application to transactions in which the corporation acquires MSRs through either purchase or origination of mortgage loans and sells those loans with servicing rights retained, and to impairment evaluations of all capitalized MSRs. SFAS No. 122 requires that capitalized mortgage servicing rights be assessed for impairment based upon the fair value of those rights. Fair values are estimated considering market prices for similar MSRs and on the discounted anticipated future net cash flows considering market consensus loan prepayment predictions, historical prepayment rates, interest rates, and other economic factors. For purposes of impairment evaluation and measurement, the corporation stratifies the MSRs based on predominant risk characteristics of the underlying loans, including loan type, amortization type (fixed or adjustable), and note rate. To the extent that the carrying value of MSRs exceeds fair value by individual stratum, a valuation allowance is established. The allowance may be adjusted in the future as the value of MSRs increase or decrease. The cost of MSRs is amortized over the estimated period of net servicing revenues. Prior to adoption of SFAS No. 122, the corporation capitalized as MSRs only acquisition costs of bulk servicing purchases and servicing rights acquired through the purchase of mortgage loans negotiated by others, net of aggregate gains from the sale of the purchased loans. Prior to SFAS No. 122, if recorded balances for any disaggregated MSR categories exceeded the undiscounted anticipated future net cash flows, a current impairment adjustment equal to the difference between the carrying value and the undiscounted anticipated future net cash flows was recorded. Excess Cost over Net Assets Acquired. The excess cost over net assets acquired (goodwill) is amortized on a straight-line basis over periods of up to 40 years. Goodwill relating to banking subsidiaries acquired subsequent to 1981 is amortized over periods ranging up to 25 years. On a periodic basis, the corporation reviews goodwill for events or changes in circumstances that may indicate that the carrying amount of goodwill may not be recoverable. Other Intangible Assets. The excess of the purchase price over the fair value of the tangible net assets of certain acquisitions has been allocated to core deposits (core deposit intangibles) based on valuations, and is amortized on a straight-line basis over the estimated period of benefit, not to exceed ten years. On a periodic basis, the corporation reviews its intangible assets for events or changes in circumstances that may indicate that the carrying amount of the assets may not be recoverable. Trading Instruments. Financial instruments (principally foreign exchange and interest-rate instruments) used for trading purposes are stated at market value. Realized and unrealized gains and losses are recognized in trading revenue. Interest revenue arising from trading instruments is included in the income statement as part of interest income. Income Taxes. The corporation changed its method of accounting for income taxes from the deferred method to the liability method, in accordance with SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1993. This statement requires deferred tax assets and liabilities to be recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the change is enacted. Interest-Rate Risk-Management Activities. The corporation enters into certain interest-rate instruments, including interest-rate swap, cap and floor agreements, and futures contracts to manage exposure to interest-rate risk. For those interest-rate instruments that alter the repricing characteristics of assets or liabilities, the net differential to be paid or received on the instruments is treated as an adjustment to the yield on the underlying assets or liabilities (the accrual method). For those interest-rate instruments entered into in connection with the securities available for sale portfolio that synthetically alter the interest-rate characteristics of the securities, the net differential to be paid or received on the instruments is recorded on the accrual method and the instruments are reported at fair value with unrealized gains and losses reflected as a separate component of stockholders' equity consistent with the reporting of unrealized gains and losses on those securities. To qualify for accrual accounting, the interest-rate instrument must be designated to specific assets or liabilities or pools of assets or liabilities, and must be effective at altering the interest-rate characteristics of the related assets or liabilities. To be effective, there must be correlation between the interest-rate index on the underlying asset or liability and the variable rate paid on the instrument. The corporation measures initial and ongoing correlation by statistical analysis of the relative movements of the interest-rate indices over time. If correlation were to cease, the interest-rate instrument would be accounted for as a trading instrument. Fleet has entered into certain swaps with imbedded written options which, under certain interest-rate scenarios, can cause the duration of the swaps to extend. If the maximum duration of these swaps is within a range of acceptable duration in accordance with asset/liability management parameters, Fleet applies the same policies as are applied to swaps without imbedded written options. If an interest-rate instrument is terminated, the gain or loss is deferred and amortized over the shorter of the remaining contract life or the maturity of the designated assets or liabilities. If the designated asset or liability is sold or settled or its balance falls below the notional amount of the instrument, accrual accounting is discontinued to the extent that the notional amount exceeds the balance, and accounting for trading instruments is applied. Gains and losses on futures contracts and other interest-rate instruments used to protect the value of assets and liabilities are included in income unless the futures contract qualified for hedge accounting. To qualify for hedge accounting, futures contracts must be designated as hedges of specific assets or liabilities and must reduce the corporation's exposure to interest-rate risk. In addition, at the inception of the hedge and throughout the hedge period, there must be high correlation between the futures contracts and the related hedged assets or liabilities. Gains and losses on futures contracts accounted for as hedges are deferred and amortized over the expected remaining lives of the related hedged assets or liabilities as an adjustment of interest income or interest expense. Earnings Per Share. Earnings per share is computed by dividing earnings (after deducting dividends and premiums paid on preferred stock) by the weighted average number of common shares and common stock equivalents outstanding during the period, assuming the conversion of the convertible preferred stock. Common stock equivalents include stock options and rights and the dual convertible preferred (DCP) stock. NOTE 2. MERGERS AND ACQUISITIONS As previously disclosed, the merger of Shawmut with and into Fleet was completed on November 30, 1995, and was accounted for as a pooling of interests. Under the terms of the Merger, approximately 105 million Fleet common shares were exchanged for all of the outstanding common shares of Shawmut at an exchange ratio of 0.8922 shares of Fleet for each share of Shawmut. The outstanding preferred stock of Shawmut was exchanged for comparable issues of Fleet preferred stock. The financial information for all prior periods presented has been restated to present the combined financial condition and results of operations of both companies as if the Merger had been in effect for all periods presented. In connection with the Merger, the corporation has signed definitive agreements to divest 64 branches to comply with anti-trust concerns. The sales, which are expected to be completed during the first half of 1996, will consist of approximately $2.6 billion in deposits and $1.9 billion in loans, including $1.1 billion in residential mortgages. On January 27, 1995, the corporation completed its acquisition of NBB Bancorp (NBB). The corporation issued approximately 6.2 million treasury shares with an aggregate carrying value of approximately $200 million as well as approximately $230 million in cash. In addition, Fleet issued 2.5 million warrants to purchase Fleet common stock to NBB stockholders with an exercise price of $43.875 per share and a term of six years. The warrants are exercisable for a five-year period beginning one year after the date of the acquisition. The transaction was accounted for under the purchase method of accounting. Goodwill is being amortized on a straight-line basis over 15 years. On January 31, 1995, the corporation completed its purchase of substantially all the assets of the Business Finance Division of Barclays Business Credit, Inc. (Barclays), now known as Fleet Capital, for approximately $2.6 billion in cash. The transaction was accounted for under the purchase method of accounting. Goodwill is being amortized on a straight-line basis over 25 years. The corporation also completed its tender offer to purchase the approximately 19% publicly held shares of Fleet Mortgage Group (FMG) common stock for $20.00 in cash per share on February 28, 1995. Goodwill is being amortized on a straight-line basis over 15 years. On March 3, 1995, the corporation purchased Plaza Home Mortgage Corporation (Plaza) which operates a mortgage banking franchise, principally in California, for approximately $88 million in cash. Goodwill is being amortized on a straight-line basis over 15 years. This acquisition added approximately $9.2 billion in mortgage servicing and expanded the corporation's mortgage banking franchise by 40 additional offices. On June 9, 1995, the corporation completed its acquisition of Northeast Federal Corp. (Northeast) with assets of $3.3 billion. The corporation issued approximately 5.8 million common shares with a fair value of approximately $193 million. This acquisition was accounted for under the purchase method of accounting. Goodwill is being amortized on a straight-line basis over 15 years. The information below presents, on a pro forma basis, certain historical financial information for the corporation, adjusted for each of the NBB, Plaza, FMG, Northeast, and Barclays transactions that occurred in 1995 as if such transactions had been consummated on January 1, 1995 and 1994, respectively: Pro Forma Results - ----------------------------------------------------------------------- Dollars in millions except per share data - ----------------------------------------------------------------------- Fleet, NBB, Plaza, FMG, Northeast, and Barclays 1995 1994 - ----------------------------------------------------------------------- Net interest income $3,054 $3,242 Net income available to common stockholders 404 786 Net income per common share 1.52 2.95 - ----------------------------------------------------------------------- Corporation As Reported Net interest income $3,020 $3,047 Net income available to common stockholders 416 818 Net income per common share 1.57 3.09 - ----------------------------------------------------------------------- On December 19, 1995, Fleet signed a definitive agreement to purchase NatWest Bank, N.A. (NatWest) for $2.7 billion in cash and up to an additional $560 million in accordance with an earnout provision. The earnout provision calls for an annual payment based upon the level of earnings from the NatWest franchise with a cap of $560 million over an eight-year period. Following the NatWest merger, Fleet expects to have approximately $90 billion in assets, reflecting an expected reduction of Fleet's and NatWest's assets. In connection with the NatWest merger, Fleet intends to substantially restructure its balance sheet to replace lower-yielding assets, primarily securities, with higher earning assets acquired from NatWest and to replace higher-cost purchased funding with lower cost deposits acquired from NatWest. The acquisition of NatWest will add approximately 300 branches in New York and New Jersey and is expected to close in the second quarter of 1996, subject to regulatory approval. The corporation completed several mergers of banking organizations during 1994. The mergers in the following table were accounted for as poolings of interests. The mergers of these organizations are reflected in the consolidated financial statements as though they had been combined with the corporation as of the beginning of the earliest period presented. 1994 Acquisitions Added at Common Completion Acquisition Shares Dollars and shares in millions Date on Date Issued - --------------------------------------------------------------------------- Peoples Bancorp of Worcester, Inc. May 23, 1994 871 7.4 New Dartmouth Bank June 6, 1994 1,724 5.7 Gateway Financial Corporation June 27, 1994 1,259 6.6 Sterling Bancshares Corp. August 15, 1994 1,000 3.6 - --------------------------------------------------------------------------- During 1994, the corporation acquired two smaller banks with combined total assets of $332 million, which were accounted for under the purchase method of accounting. In addition, ten branches with deposits of $427 million, deposits held by the Resolution Trust Corporation totaling $25 million and the processing services division of a bankruptcy claims processing company were acquired. NOTE 3. SECURITIES
1995 1994 --------------------------------------- ----------------------------------------- Gross Gross Gross Gross December 31 Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market Dollars in millions Cost Gains Losses Value Cost Gains Losses Value - --------------------------------------------------------------------------------------------------------------------------- Securities available for sale: U.S. Treasury and government agencies $7,891 $12 $14 $7,889 $3,851 $- $184 $3,667 Mortgage-backed securities 8,457 38 25 8,470 8,352 5 459 7,898 Other debt securities 1,621 47 6 1,662 180 - 1 179 - --------------------------------------------------------------------------------------------------------------------------- Total debt securities 17,969 97 45 18,021 12,383 5 644 11,744 - --------------------------------------------------------------------------------------------------------------------------- Marketable equity securities 359 37 3 393 360 6 10 356 Other securities 119 - - 119 150 - - 150 - --------------------------------------------------------------------------------------------------------------------------- Total securities available for sal $18,447 $134 $48 $18,533 $12,893 $11 $654 $12,250 - --------------------------------------------------------------------------------------------------------------------------- Securities held to maturity: U.S. Treasury and government agencie $7 $- $- $7 $1,980 $- $116 $1,864 State and municipal 687 9 1 695 843 5 6 842 Mortgage-backed securities - - - - 4,158 1 235 3,924 Other debt securities 104 - 24 80 1,910 1 89 1,822 - --------------------------------------------------------------------------------------------------------------------------- Total securities held to maturity $798 $9 $25 $782 $8,891 $7 $446 $8,452 - ---------------------------------------------------------------------------------------------------------------------------
The securities available for sale portfolio had net unrealized gains (losses) of $86 million and $(643) million at December 31, 1995 and 1994, respectively. Accordingly, stockholders' equity has been increased (reduced) by a valuation reserve of $52 million and $(411) million at December 31, 1995 and 1994, respectively, which represents the after-tax effect of the unrealized gains (losses). During the fourth quarter of 1995, the corporation reclassified substantially all of its securities held to maturity to securities available for sale as the FASB permitted a one-time opportunity for institutions to reassess the appropriateness of the designations of all securities. At December 31, 1995, securities available for sale and securities held to maturity with carrying values of $6.7 billion and $542 million, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes, compared to $2.6 billion and $5.3 billion, respectively, at December 31, 1994. Proceeds from sales of debt securities during 1995, 1994, and 1993 were $11 billion, $24 billion, and $11 billion, respectively. Gross gains of $49 million and gross losses of $48 million were realized on those sales in 1995, gross gains of $24 million and gross losses of $51 million were realized on those sales in 1994, and gross gains of $252 million and gross losses of $3 million were realized on those sales in 1993. Net realized gains on sales of marketable equity securities were $31 million, $14 million, and $45 million in 1995, 1994, and 1993, respectively. The amortized cost and estimated market value of debt securities held to maturity and securities available for sale by contractual maturity are shown in the following table. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Maturities of Debt Securities Available for Sale
- ----------------------------------------------------------------------------------------- December 31, 1995 Within 1 to 5 5 to 10 After 10 Dollars in millions 1 Year Years Years Years Total - ----------------------------------------------------------------------------------------- Amortized cost: U.S. Treasury and government agencies $6,576 $1,315 $- $- $7,891 Mortgage-backed securities - 2,572 337 5,548 8,457 Other debt securities 26 896 66 633 1,621 - ----------------------------------------------------------------------------------------- Total debt securities $6,602 $4,783 $403 $6,181 $17,969 - ----------------------------------------------------------------------------------------- Percent of total debt securities 36.8% 26.6% 2.2% 34.4% 100.0% Weighted average yield(a) 5.56 5.82 5.99 6.6 5.99 - ----------------------------------------------------------------------------------------- Market value $6,595 $4,796 $408 $6,222 $18,021 - -----------------------------------------------------------------------------------------
(a) A tax-equivalent adjustment has been included in the calculations of the yields to reflect this income as if it had been fully taxable. The tax- equivalent adjustment is based upon the applicable federal and state income tax rates.
- ------------------------------------------------------------------------------------------ Maturities of Debt Securities Held to Maturity December 31, 1995 Within 1 to 5 5 to 10 After 10 Dollars in millions 1 Year Years Years Years Total - ------------------------------------------------------------------------------------------ Amortized cost: U.S. Treasury and government agencies $7 $- $- $- $7 State and municipal 462 184 27 14 687 Other debt securities 3 16 3 82 104 - ------------------------------------------------------------------------------------------ Total debt securities $472 $200 $30 $96 $798 - ------------------------------------------------------------------------------------------ Percent of total debt securities 59.2% 25.0% 3.8% 12.0% 100.0% Weighted average yield(a) 6.70 7.78 9.83 9.08 7.35 - ------------------------------------------------------------------------------------------ Market value $465 $204 $33 $80 $782 - ------------------------------------------------------------------------------------------
(a) A tax-equivalent adjustment has been included in the calculations of the yields to reflect this income as if it had been fully taxable. The tax- equivalent adjustment is based upon the applicable federal and state income tax rates.
NOTE 4. LOANS AND LEASES - ------------------------------------------------------------------------------------------------------ December 31 Dollars in millions 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------ Loans: Commercial and industrial $23,251 $19,675 $19,031 $18,818 $17,310 Residential real estate 11,475 8,529 7,378 7,444 7,063 Consumer 9,556 10,893 10,229 9,415 9,558 Commercial real estate: Construction 606 666 637 1,436 1,890 Interim/permanent 4,414 4,789 5,279 5,480 6,315 - ------------------------------------------------------------------------------------------------------ Loans, net of unearned income 49,302 44,552 42,554 42,593 42,136 - ------------------------------------------------------------------------------------------------------ Lease financing: Lease receivables 2,267 1,765 1,291 1,194 1,698 Estimated residual value 520 212 165 172 190 Unearned income (564) (494) (297) (237) (324) - ------------------------------------------------------------------------------------------------------ Lease financing, net of unearned income(a) 2,223 1,483 1,159 1,129 1,564 - ------------------------------------------------------------------------------------------------------ Total loans and leases, net of unearned income $51,525 $46,035 $43,713 $43,722 $43,700
(a) The corporation's leases consist principally of full-payout, direct financing leases. For federal income tax purposes, the corporation has the tax benefit of depreciation on the entire leased unit and interest on the long-term debt. Deferred taxes arising from leveraged leases totaled $182 million in 1995 and $60 million in 1994. Future minimum lease payments to be received are $469 million in 1996; $341 million, 1997; $325 million, 1998; $222 million, 1999; $242 million, 2000; $668 million, 2001 and thereafter. At December 31, 1995, the corporation reclassified certain loans totalling $1,631 million ($1,477 million of consumer, $79 million of commercial real estate, $46 million of commercial and industrial, and $29 million of residential) to assets held for sale or accelerated disposition. Such loans are included in other assets and were adjusted to the lower of cost or estimated market value. Total loans and leases at December 31, 1995 include $28 million of loans subject to loss-sharing arrangements with the Federal Deposit Insurance Corp. (FDIC), whereby the FDIC generally reimburses Fleet for 80% of net charge-offs for periods ranging from three to five years from the date of acquisition. Concentrations of Credit Risk. Although the corporation is engaged in business nationwide, the lending done by the banking subsidiaries is primarily concentrated in the northeastern region. NOTE 5. RESERVES FOR LOSSES Reserve for Credit Loss Activity - -------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - -------------------------------------------------------------------------- Balance at beginning of year $1,496 $1,669 $1,937 Provision charged to income 101 65 327 Loans and leases charged off (418) (377) (729) Recoveries of loans and leases charged off 116 138 144 Acquisitions/other 26 1 (10) - -------------------------------------------------------------------------- Balance at end of year $1,321 $1,496 $1,669 - -------------------------------------------------------------------------- Acquisitions/other includes reserves acquired as a result of acquisitions, offset in part by reserve transfers to the FDIC and reserves related to assets held for sale or accelerated disposition. Reserve for OREO Activity - -------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - -------------------------------------------------------------------------- Balance at beginning of year $50 $45 $ 51 Provision (15) 31 124 Dispositions, net (12) (26) (130) - -------------------------------------------------------------------------- Balance at end of year $23 $50 $ 45 - -------------------------------------------------------------------------- NOTE 6. NONPERFORMING ASSETS
- ----------------------------------------------------------------------------------------------- Year Ended December 31 Dollars in millions 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------- Nonperforming loans and leases: Current or less than 90 days past due $157 $186 $254 $622 $575 Noncurrent 283 480 584 885 1,654 OREO 59 95 200 507 941 - ----------------------------------------------------------------------------------------------- Total NPAs $499 $761 $1,038 $2,014 $3,170 - ----------------------------------------------------------------------------------------------- NPAs as a percent of outstanding loans, leases, and OREO 0.97% 1.65% 2.35% 4.53% 7.05% - ----------------------------------------------------------------------------------------------- Accruing loans and leases contractually past due 90 days or more $198 $139 $120 $163 $267 - ----------------------------------------------------------------------------------------------- Assets held for sale or accelerated disposition $317 - - - - - -----------------------------------------------------------------------------------------------
At December 31, 1995, the recorded investment in impaired loans was $295 million, substantially all of which were on nonaccrual status. Included in this amount is $207 million of impaired loans for which the related impairment reserve is $54 million, and $88 million of impaired loans that, due primarily to charge-offs, do not have an impairment reserve. The average recorded investment in impaired loans during the year was $428 million. The amount of interest income recognized on impaired loans during the year ended December 31, 1995 was immaterial. The reserve for credit losses contains additional amounts for impaired loans as deemed necessary to maintain reserves at levels considered adequate by management. The corporation has no material outstanding commitments to lend additional funds to customers whose loans have been placed on nonperforming status or the terms of which have been modified. The gross interest income that would have been recorded if the nonperforming loans and leases had been current in accordance with their original terms and had been outstanding throughout the period (or since origination if held for part of the period) was $59 million, $66 million, and $106 million in 1995, 1994, and 1993, respectively. The actual amount of interest income on those loans included in net income for the period was $26 million, $19 million, and $27 million in 1995, 1994, and 1993, respectively. NOTE 7. MORTGAGE SERVICING RIGHTS The corporation's MSRs activity for the years ended December 31, 1995, 1994, and 1993 is as follows: Mortgage Servicing Rights - -------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - -------------------------------------------------------------------------- Balance at beginning of year $840 $579 $563 Additions: Originated 50 - - Acquired 628 377 266 Servicing sales (52) (26) (3) Amortization (142) (90) (247) Impairment reserve (48) - - - -------------------------------------------------------------------------- Balance at end of year $1,276 $840 $579 - -------------------------------------------------------------------------- During 1995, the corporation recorded impairment charges of $59 million and credits relating to the impairment reserve of $11 million; therefore, at December 31, 1995, the corporation's impairment reserve balance pertaining to MSRs was $48 million. At December 31, 1995, the aggregate fair value of the corporation's capitalized MSRs was approximately $1.5 billion. The incremental impact of capitalizing originated mortgage servicing rights in accordance with SFAS No. 122 resulted in an increase of $50 million in mortgage production revenues for the year ended December 31, 1995. NOTE 8. MERGER- AND RESTRUCTURING-RELATED CHARGES Merger-related charges of $490 million were recorded in 1995 in connection with the Merger. The merger-related charges are direct incremental costs associated with the Merger and are presented in the table below: Components of Merger-Related Charges - ---------------------------------------------------- Dollars in millions 1995 - ---------------------------------------------------- Personnel $270 Facilities 115 Data processing 60 Other merger expenses 45 - ---------------------------------------------------- Total $490 - ---------------------------------------------------- Personnel relates primarily to the costs of employee severance, the costs related to the termination of certain employee benefit plans, and employee assistance for separated employees. Facilities charges, which are the result of the consolidation of branch offices as well as back-office operations, consist of lease-termination costs, writedowns of owned properties, and other facilities-related costs. Data processing costs consist primarily of the write- off of duplicate or incompatible systems hardware and software. Other merger expenses consist primarily of transaction costs, such as professional and other fees. All funding for cash expenditures relating to the merger-related charge have been, and are anticipated to be, paid from the operating activities of the corporation. The corporation's liquidity has not been, nor is it anticipated to be, significantly affected by these cash outlays. As a result of the merger, the corporation expects to incur approximately $35 million of incremental costs that are supportive of future business operations, which will be expensed as incurred and not charged against the merger accrual. The following table presents a summary of activity with respect to merger accrual: Merger Accrual - ---------------------------------------------------- Year ended December 31, 1995 Dollars in millions - ---------------------------------------------------- Balance at beginning of year $ - Provision charged against income 490 Cash outlays (65) Noncash writedowns (90) - ---------------------------------------------------- Balance at end of year $ 335 - ---------------------------------------------------- Merger-related charges of $101 million were also recorded in 1994 to reflect the integration of several other acquisitions. The merger-related charges include: $19 million for personnel charges; $39 million for the closure of branches and facilities and lease-termination costs; $11 million of transaction-related costs; and $32 million of other costs representing the sale of certain assets as well as other merger-related costs. Substantially all of these costs have been paid as of December 31, 1995. The corporation recorded restructuring charges of $84 million and $161 million in connection with efficiency improvement programs during 1994 and 1993, respectively. These programs, which commenced in 1993 and continued into 1995, were intended to enhance the corporation's competitive position through a comprehensive review of all its banking, mortgage banking, and consumer finance activities and operations. The charges included only identified direct and incremental costs associated with these programs. The components of the restructuring charges for 1994 and 1993 were as follows: Components of Restructuring Charges - ---------------------------------------------------- Dollars in millions - ---------------------------------------------------- Severance $122 Occupancy 71 Other (including project costs) 52 - ---------------------------------------------------- Total restructuring charges $245 - ---------------------------------------------------- All funding for cash expenditures relating to the restructuring plans has been made from the operating activities of the corporation. The corporation's liquidity has not been significantly affected by these cash outlays. During 1995 and 1994, $15 million and $20 million, respectively, of incremental costs were incurred relating to the restructuring plan and were charged against current period expense as these costs were supportive of future business operations. The corporation does not anticipate any additional incremental costs related to these programs. The following table presents a summary of activity with respect to the restructuring accrual: Restructuring Accrual - -------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - -------------------------------------------------------------------------- Balance at beginning of year $77 $126 $- Provision charged against income - 84 161 Cash outlays (60) (90) (25) Noncash writedowns - (43) (10) - -------------------------------------------------------------------------- Balance at end of year $17 $77 $126 - -------------------------------------------------------------------------- The cash outlays made during 1995 relate primarily to severance costs and project-related costs. Noncash writedowns relate to vacated facilities and consist primarily of building and leasehold improvement write-offs. The corporation expects that substantially all remaining costs will be paid in 1996 and that the restructuring accrual at December 31, 1995, will be adequate. NOTE 9. SHORT-TERM BORROWINGS
- -------------------------------------------------------------------------------------------------------- Securities Federal Sold Under Other Total Funds Agreements to Commercial Short-Term Short-Term Dollars in millions Purchased Repurchase Paper Borrowings Borrowings - ------------------------------------------------------------------------------------------------------- 1995 Balance at December 31 $4,461 $2,964 $2,138 $3,006 $12,569 Highest balance at any month-end 4,840 6,944 2,138 4,912 16,557 Average balance for the year 4,451 5,159 1,582 2,853 14,045 Weighted average interest rate as of December 31 5.20% 5.21% 5.86% 5.54% 5.40% Weighted average interest rate paid for the year 6.02 5.70 6.07 4.98 5.69 - -------------------------------------------------------------------------------------------------------- 1994 Balance at December 31 $2,753 $6,170 $835 $2,828 $12,586 Highest balance at any month-end 4,368 10,835 1,199 5,041 18,069 Average balance for the year 3,943 7,769 1,005 2,638 15,355 Weighted average interest rate as of December 31 5.14% 5.69% 5.96% 5.51% 5.55% Weighted average interest rate paid for the year 4.22 4.05 4.36 3.94 4.07 - -------------------------------------------------------------------------------------------------------- 1993 Balance at December 31 $2,151 $7,304 $1,337 $5,584 $16,376 Highest balance at any month-end 2,151 9,122 1,415 5,584 16,376 Average balance for the year 1,632 7,505 1,036 2,634 12,807 Weighted average interest rate as of December 31 3.10% 2.90% 3.38% 3.16% 3.06% Weighted average interest rate paid for the year 3.08 2.96 3.52 3.04 3.03 - --------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to repurchase generally mature within 30 days of the transaction date. Commercial paper and other short-term borrowings generally mature within 90 days, although commercial paper may have a term of up to 270 days. Total credit facilities available were $2.8 billion with $430 million outstanding at December 31, 1995, compared to $3.2 billion with $500 million outstanding at December 31, 1994. The amounts outstanding under the lines of credit relate entirely to FMG at both December 31, 1995 and 1994. During 1995, the corporation and its subsidiaries paid commitment fees ranging from 0.01% to 0.19% on the lines. NOTE 10. LONG-TERM DEBT Fleet has an effective universal shelf registration statement with the Securities and Exchange Commission (SEC), providing for the issuance of common and preferred stock, senior or subordinated debt securities, and other debt securities. The total amount of funds available as of December 31, 1995, under the corporation's shelf registration was $913 million. The following table presents components of long-term debt for the parent company and its affiliates: Long-Term Debt - ------------------------------------------------------------------------------ December 31 Maturity Dollars in millions Date 1995 1994 - ------------------------------------------------------------------------------ Senior notes and debentures Parent company: 5.625% notes 1995 $- $200 8.875% notes 1996 150 150 MTNs 5.875% - 9.33% 1996 - 1998 501 80 7.65% - 8.125% notes 1997 200 200 7.25% notes 1997 - 1999 400 400 6.00% notes 1998 250 - 7.125% notes 2000 250 - Floating-rate note 2000 50 - Other 2013 1 1 - ------------------------------------------------------------------------------ Total parent company 1,802 1,031 - ------------------------------------------------------------------------------ Affiliates: 9.80% notes 1995 - 250 5.50% - 5.60% notes 1995 - 225 9.98% notes 1996 70 70 Floating-rate bank notes 1996 840 1,288 7.03% bank notes 1997 50 - 6.125% notes 1997 150 150 Floating-rate notes 1997 350 400 6.50% notes 1999 150 150 MTNs 5.35% - 7.48% 1996 - 2003 394 285 FHLB borrowings 1996 - 2015 629 482 6.50% note 2001 200 - Other 1996 - 2009 12 16 - ------------------------------------------------------------------------------ Total affiliates 2,845 3,316 - ------------------------------------------------------------------------------ Total senior notes and debentures 4,647 4,347 - ------------------------------------------------------------------------------ Subordinated notes and debentures:(a) Floating-rate subordinated notes 1997 50 50 Floating-rate subordinated notes 1998 100 100 7.625% - 9.85% subordinated notes 1999 450 450 9.00% - 9.90% subordinated notes 2001 325 325 6.875% subordinated notes 2003 150 150 7.20% subordinated notes 2003 150 150 8.125% subordinated notes 2004 250 250 8.625% subordinated notes 2005 250 - 8.625% subordinated notes 2007 107 107 Other 1997 2 2 - ------------------------------------------------------------------------------ Total subordinated notes and debentures 1,834 1,584 - ------------------------------------------------------------------------------ Total long-term debt $6,481 $5,931 - ------------------------------------------------------------------------------ (a) At December 31, 1995 and 1994, all subordinated debt was at the parent company, with the exception of $250 million at an affiliate in 1995, and is included in total risk-based capital. The $100 million of 7.65% and $400 million of 7.25% notes provide for single principal payments and are not redeemable prior to maturity. The $150 million of 8.875% and $100 million of 8.125% notes are unsecured obligations with interest payable semiannually and are not redeemable prior to maturity. The $250 million of 6.00% and the $250 million of 7.125% notes pay interest semiannually and are not redeemable prior to maturity. The $50 million floating- rate note accrues interest based on the three-month London Interbank Offered Rate (LIBOR) payable quarterly and is not redeemable prior to maturity. Long-term senior borrowings of affiliates include $394 million of medium- term notes (MTNs), $150 million of 6.125% notes, $150 million of 6.50% notes, and $200 million of 6.50% notes issued by FMG, and $70 million of 9.98% notes issued by Fleet Financial Corp. The $350 million of floating-rate notes due 1997 were issued by subsidiary banks and have a rate that floats with LIBOR. The notes are secured by the banks' qualifying student loan portfolios or collateralized by mortgage-backed securities (MBS). Of the $840 million floating-rate bank notes due 1996 and issued by subsidiary banks, $150 million float with the federal funds rate, $235 million float with the prime rate, and $455 million is tied to LIBOR. The fixed-rate subordinated notes all provide for single principal payments at maturity. All the floating-rate subordinated notes due 1997 and 1998 are redeemable at the option of the corporation, in whole or in part, at their principal amount plus accrued interest. The notes due 1997 were called for redemption effective February 22, 1996. These notes pay interest based on the three-month LIBOR and reset quarterly. Included in the subordinated notes are $150 million of 9.85% notes due June 1, 1999, and $71 million of floating-rate notes due June 1, 1998, that, at the corporation's option, will either be exchanged for common stock, preferred stock, or certain other primary capital securities of the corporation having a market value equal to the principal amount of the notes or will be repaid from the proceeds of other issuances of such securities. The corporation may, however, at its option, revoke its obligation to redeem the notes with capital securities based upon the capital treatment of the notes by its primary regulator or consent by its primary regulator for such revocation. The holders of the capital notes are subordinate in rights to depositors and other creditors. The aggregate payments required to retire long-term debt are: 1996, $2,058 million; 1997, $1,129 million; 1998, $606 million; 1999, $805 million; 2000, $507 million; 2001 and thereafter, $1,376 million. NOTE 11. PREFERRED STOCK - ------------------------------------------------------------------- December 31 Dollars in millions, except per share data 1995 1994 - ------------------------------------------------------------------- 9.30% cumulative preferred stock, $250 stated value, 575,000 shares issued and outstanding at December 31, 1995 and 1994 $144 $144 9.35% cumulative preferred stock, $250 stated value, 500,000 shares issued and outstanding at December 31, 1995 125 - 10.12% Series III perpetual preferred stock, $1 par, 519,758 shares issued and outstanding at December 31, 1995 and 1994 50 50 9.375% Series IV perpetual preferred stock, $1 par, 478,838 shares issued and outstanding at December 31, 1995 and 1994 46 46 Preferred stock with cumulative and adjustable dividends, $50 stated value, 688,700 shares issued and outstanding at December 31, 1995 and 1994 34 34 Dual convertible preferred stock, $200 stated value, 1,415,000 shares issued and outstanding at December 31, 1994 - 283 - ------------------------------------------------------------------- Total $399 $557 - ------------------------------------------------------------------- The 9.30% cumulative preferred stock is redeemable at the option of the corporation on or after October 15, 1997, at $250 per share, plus accrued and unpaid dividends thereon. The 9.35% cumulative preferred stock is redeemable at the option of the corporation on or after January 15, 2000, at $250 per share, plus accrued and unpaid dividends thereon. The Series III perpetual preferred stock is redeemable at the option of Fleet on or after June 1, 1996, at $105.06 per share, declining each year to $100 per share on or after June 1, 2001, plus accrued and unpaid dividends thereon. The Series IV perpetual preferred stock is redeemable at the option of Fleet on or after December 1, 1996, at $100 per share, plus accrued and unpaid dividends thereon. The preferred stock with cumulative and adjustable dividends is redeemable at the option of the corporation at $50 per share. Except in certain circumstances, the holders of the preferred stock have no voting rights. On December 31, 1995, the dual convertible preferred stock (DCP) was exchanged for approximately 16 million shares of Fleet common stock at a conversion price of $17.65 per common share. The holders of the DCP received an additional 3.9 million shares as part of the consideration for the exchange. These additional shares were valued at the closing market price of Fleet common shares on the day of the conversion and treated as a reduction of retained earnings and of earnings available to common shareholders. This resulted in a $.59 reduction to fully diluted earnings per share for 1995. The holders of the DCP stock also control nontransferable rights to purchase 6,500,000 shares of common stock at an exercise price of $17.65 per share (the rights). The rights, which are exercisable immediately, will expire on July 12, 2001, and are not transferable. Fleet has the option to pay appreciation on the rights in lieu of delivering the shares upon exercise. On February 21, 1996, the corporation issued $425 million of preferred stock. NOTE 12. COMMON STOCK At December 31, 1995, Fleet had 262,721,926 common shares outstanding. Shares reserved for future issuance in connection with the corporation's stock plans, the DCP rights, and stock options totaled 26,339,339. During 1995, shareholders approved an increase in the authorized shares of Fleet common stock to 600 million. Also see Note 11, Preferred Stock, for further information pertaining to the exchange of the DCP. In connection with the acquisition of NBB on January 27, 1995, the corporation issued warrants to the shareholders of NBB for the purchase of 2.5 million shares of common stock. The warrants have an exercise price of $43.875 per share and are exercisable for a five-year period beginning on January 27, 1996. Also, in connection with the settlement of certain litigation, the corporation issued warrants for the purchase of up to 1.2 million shares of common stock on January 18, 1994. The period for the exercise of the warrants expired on January 18, 1996. Fleet's Board of Directors has declared a dividend of one preferred share purchase right for each outstanding share of Fleet common stock. Under certain conditions, a right may be exercised to purchase 1/100 of the corporation's cumulative participating preferred stock at a price of $50, subject to adjustment. The rights become exercisable if a party acquires 10% or more (in the case of certain qualified investors, 15% or more) of the issued and outstanding shares of Fleet common stock, or after the commencement of a tender or exchange offer for 10% or more of the issued and outstanding shares. When exercisable under certain conditions, each right would entitle the holder to receive, upon exercise of a right, that number of shares of common stock having a market value of two times the exercise price of the right. The rights will expire in the year 2000 and may be redeemed in whole, but not in part, at a price of $0.01 per share at any time prior to expiration or the acquisition of 10% of Fleet common stock. NOTE 13. EMPLOYEE BENEFITS Stock Option Plan. The corporation has a stock option plan, which provides for the granting of incentive and nonqualified stock options to certain employees, for the purchase of Fleet common stock at fair market value at the date of grant. In most cases, options granted under the plan vest over a five- year period and expire at the end of ten years; otherwise, options granted under the plan are exercisable after a minimum of one year but within ten years of the date of grant. Option plans resulted in charges to expense of $3 million in 1995, $5 million in 1994, and $2 million in 1993. At December 31, 1995, 1994, and 1993, exercisable options totaled 4,191,404; 3,347,706; and 3,183,814, respectively. The following table shows the activity for the stock option plans: Stock Options - ------------------------------------------------------------------------------ 1995 1994 1993 - ------------------------------------------------------------------------------ Balance at January 1 10,072,830 8,464,792 6,714,687 Granted 2,288,617 3,827,637 3,051,620 Exercised 3,559,259 1,539,021 898,656 Expired or canceled 685,435 680,578 402,859 Balance at December 31 8,116,753 10,072,830 8,464,792 - ------------------------------------------------------------------------------ Price range-high Balance at January 1 $37.31 $37.31 $34.75 Granted 42.19 36.94 37.31 Exercised 36.94 32.75 28.44 Expired or canceled 36.94 36.94 34.75 Balance at December 31 42.19 37.31 37.31 - ------------------------------------------------------------------------------ Price range-low Balance at January 1 $5.19 $5.19 $5.19 Granted 8.15 8.07 11.21 Exercised 6.87 5.19 5.19 Expired or canceled 5.19 5.19 5.19 Balance at December 31 6.87 5.19 5.19 - ------------------------------------------------------------------------------ Restricted Stock Plan. The corporation has a restricted stock plan under which key employees are awarded shares of the corporation's common stock subject to certain vesting requirements. With respect to stock granted in 1995, restrictions lapse, in whole or in part, on the third anniversary of the date of the agreement awarding such restricted stock only if certain preestablished performance goals are attained. As of December 31, 1995 and 1994, 224,750 grants and 323,734 grants were outstanding, respectively, with a weighted average grant price of $33.40 and $26.38, respectively. In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based Compensation," which is effective for awards granted in fiscal years beginning after December 15, 1995. This standard defines a fair value based method of measuring employee stock options or similar equity instruments. In lieu of recording the value of such stock options as compensation expense, companies may provide pro forma disclosures quantifying the difference between compensation cost included in net income as prescribed by current accounting standards and the related cost measured by such fair value based method. The corporation will provide such disclosure in its financial statements after the effective date of the standard. However, the statement allows a company to continue to measure compensation cost for such plans under Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB Opinion No. 25, no compensation cost is recorded if, at the grant date, the exercise price of the options is equal to the fair market value of the corporation's common stock. The corporation has elected to continue to follow the accounting under APB No. 25. Pension Plans. The corporation maintains noncontributory, defined benefit pension plans covering substantially all employees. Benefit payments to retired employees are based upon years of service and a percentage of qualifying compensation during the final years of employment. The amounts contributed to the plans are determined annually based upon the amount needed to satisfy the Employee Retirement Income Security Act (ERISA) funding standards. Assets of the plans are primarily invested in listed stocks, corporate obligations, and U.S. Treasury and government agency obligations. During 1994, the mortality table was revised to the 1983 Group Annuity Mortality Table. The corporation also maintains supplemental, noncontributory defined benefit plans covering certain employees whose benefits exceed the Internal Revenue Service (IRS) limitation under the corporation's qualified defined benefit plans. Funded Status of Plans
- ----------------------------------------------------------------------------------------- December 31 Overfunded Plans Underfunded Plans Dollars in millions 1995 1994 1995 1994 - ----------------------------------------------------------------------------------------- Actuarial present value of accumulated benefit obligations: Vested benefits $343 $238 $ 32 $13 Nonvested benefits 36 28 4 1 - ----------------------------------------------------------------------------------------- Accumulated benefit obligations 379 266 36 14 Additional benefits related to future compensation levels 132 89 25 11 - ----------------------------------------------------------------------------------------- Projected benefit obligations rendered to date 511 355 61 25 Plan assets at fair value 522 434 1 - - ----------------------------------------------------------------------------------------- Plan assets in excess of (less than) projected benefit obligations 11 79 (60) (25) Unrecognized net transition (asset) obligation being amortized (11) (10) 11 2 Unrecognized prior service cost being amortized 28 33 8 9 Unrecognized net loss from past experience different from that assumed 86 35 19 5 Additional amounts recognized due to minimum level funding - - (13) (5) - ----------------------------------------------------------------------------------------- Prepaid (accrued) pension cost $114 $137 $(35) $(14) - -----------------------------------------------------------------------------------------
Components of Pension Expense - ------------------------------------------------------------------------------ Year ended December 31 Dollars in millions 1995 1994 1993 - ------------------------------------------------------------------------------ Service cost for benefits earned during the period $29 $37 $30 Interest cost on projected benefit obligations 35 31 27 Actual return on plan assets (72) (3) (31) Net amortization and deferral 39 (32) (2) - ------------------------------------------------------------------------------ Net pension expense $31 $33 $24 - ------------------------------------------------------------------------------ Staffing reductions and change in control provisions were initiated during 1995 due to the Shawmut merger. These events resulted in a net expense of $39 million associated with the settlement and curtailment of pension plan distributions, which is included in the accompanying statement of operations for the year ended December 31, 1995, but is excluded from the previous table detailing net periodic pension cost. For December 31, 1995, 1994, and 1993, the assumed discount rates were 7.25%, 8.50%, and 7.25% to 7.50%, respectively. The 1995, 1994, and 1993 rate of increase in compensation levels used to measure the projected benefit obligations was 4.5% to 5.0%. The expected long-term rate of return on plan assets for 1995 was 10.0%, and 8.85% to 10.0% for 1994 and 1993. The corporation maintains various defined contribution savings plans covering substantially all employees. The corporation's savings plan expense was $34 million, $28 million, and $22 million for 1995, 1994, and 1993, respectively. Postretirement Healthcare Benefits. In addition to providing pension benefits, the corporation provides healthcare cost assistance and life insurance benefits for retired employees. The cost of providing these benefits was $21 million, $22 million, and $25 million in 1995, 1994, and 1993, respectively. The following table presents the plan's funded status reconciled with amounts recognized on the corporation's balance sheet: Funded Status of Postretirement Plan - ------------------------------------------------------------------------------ December 31 Dollars in millions 1995 1994 - ------------------------------------------------------------------------------ Accumulated postretirement benefit obligations: Retirees $124 $115 Fully eligible active plan participants 8 28 Other active plan participants 3 16 - ------------------------------------------------------------------------------ Total accumulated postretirement benefit obligations 135 159 Plan assets at fair value 12 2 - ------------------------------------------------------------------------------ Plan assets (less than) projected benefit obligation (123) (157) Unrecognized net (gain) loss 1 (14) Unrecognized transition obligation 79 155 - ------------------------------------------------------------------------------ Accrued postretirement benefit costs $(43) $(16) - ------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------- Components of Postretirement Benefit Costs - ---------------------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - ---------------------------------------------------------------------------------------- Service cost for benefits earned during the period $1 $3 $2 Interest cost on projected benefit obligations 12 11 14 Net amortization of the transition obligation 9 9 9 Net amortization and deferral of gains and losses (1) (1) - - ---------------------------------------------------------------------------------------- Net postretirement benefit expense $21 $22 $25 - ----------------------------------------------------------------------------------------
Shawmut's postretirement plans were impacted during 1995 due to amendments and change in control provisions related to the merger. These events resulted in settlement and curtailment charges of $28 million, which are included in the accompanying statement of operations for the year ended December 31, 1995, but excluded from the previous table detailing postretirement benefits cost. Discount rates of 7.25% and 8.50% were used in determining the accumulated postretirement benefit obligation for the years ended December 31, 1995 and 1994. The rate of return on plan assets was 10.00% for 1995 and 8.85% for 1994. The healthcare cost trend rate was 10.25% as of December 31, 1995, decreasing gradually to 4.25% through the year 2001, and level thereafter. The healthcare cost trend rate assumption has a minimal effect on the amounts reported. For example, increasing the assumed healthcare cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1995 by $1.5 million, and the aggregate of the service cost and interest cost components of the net periodic postretirement benefit cost for 1995 by approximately $153,000. NOTE 14. INCOME TAXES The corporation changed its method of accounting for income taxes from the deferred method to the liability method as required by SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1993. The cumulative effect of this accounting change was the recognition of a $53.1 million income tax benefit in the first quarter of 1993. Deferred income tax assets and liabilities reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the corporation's deferred tax assets and deferred tax liabilities as of December 31, 1995 and 1994, are presented in the following table: Net Deferred Tax Assets - ------------------------------------------------------------------------------ December 31 Dollars in millions 1995 1994 - ------------------------------------------------------------------------------ Deferred tax assets: Reserve for credit losses $495 $569 Expenses not currently deductible 326 69 Intangible assets 43 66 Net operating loss carryforward 31 77 Reserve for unrealized losses on securities available for sale - 245 Other 282 186 - ------------------------------------------------------------------------------ Total gross deferred tax assets 1,177 1,212 Less: valuation reserve 75 104 - ------------------------------------------------------------------------------ Deferred tax assets 1,102 1,108 - ------------------------------------------------------------------------------ Deferred tax liabilities: Lease financing 326 154 Mortgage banking 115 84 Purchase accounting adjustments, net 67 69 Depreciation 63 65 Subsidiary stock transaction 49 49 Reserve for unrealized gains on securities available for sale 33 - Employee benefits 30 49 Other 180 132 - ------------------------------------------------------------------------------ Total gross deferred tax liabilities 863 602 - ------------------------------------------------------------------------------ Net deferred tax assets $239 $506 - ------------------------------------------------------------------------------ The realization of the corporation's deferred tax assets is dependent upon the ability to generate taxable income in future periods, and from the reversal of existing deferred tax liabilities. The corporation has evaluated the available evidence supporting the realization of its gross deferred tax assets of $1.2 billion at both December 31, 1995 and 1994, including the amount and timing of future taxable income, and determined it is more likely than not the asset will be realized. Given the nature of state tax laws, the corporation believes that uncertainty remains concerning the realization of tax benefits in various state jurisdictions. Therefore, state valuation reserves of $75 million and $104 million have been established at December 31, 1995 and 1994, respectively. These benefits may, however, be recorded in the future either as realized or as it becomes more likely than not, in the corporation's best judgment, that such tax benefits or portions thereof will be realized. The deferred tax expense of $13 million and $130 million in 1995 and 1994, respectively, include a deferred tax benefit of $29 million and $27 million, respectively, due to a change from the beginning of the respective year's deferred tax asset valuation reserve, related primarily to state deferred tax assets. The current and deferred components of income taxes for the years ended December 31, 1995, 1994, and 1993 are as follows: Income Tax Expense - --------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - --------------------------------------------------------------------- Current income taxes: Federal $346 $323 $352 State and local 65 78 107 - --------------------------------------------------------------------- 411 401 459 - --------------------------------------------------------------------- Deferred income tax expense (benefit): Federal 11 107 (100) State and local 2 23 (29) - --------------------------------------------------------------------- 13 130 (129) - --------------------------------------------------------------------- Total: Federal 357 430 252 State and local 67 101 78 - --------------------------------------------------------------------- Applicable income taxes $424 $531 $330 - --------------------------------------------------------------------- The income tax expense for the years ended December 31, 1995, 1994, and 1993, varied from the amount computed by applying the statutory income tax rate to income before taxes. The reasons for the differences are as follows: Statutory Rate Analysis - ------------------------------------------------------------------------------ December 31 1995 1994 1993 - ------------------------------------------------------------------------------ Tax at statutory rate 35.0% 35.0% 35.0% Increases (decreases) in taxes resulting from: State and local income taxes, net of federal income tax benefit 4.2 4.6 4.7 Goodwill amortization 1.7 0.3 0.5 Merger-related costs 1.4 0.7 - Change in federal valuation reserve - (0.8) (7.7) Tax-exempt income (1.8) (1.5) (1.8) Other, net 0.4 (0.1) (0.6) - ------------------------------------------------------------------------------ Effective tax rate 40.9% 38.2% 30.1% - ------------------------------------------------------------------------------ During 1995, $448 million in state net operating losses expired. The expiration of these net operating loss carryforwards did not impact the corporation's consolidated income tax expense as all amounts were fully reserved. The corporation has state net operating loss carryforwards of approximately $474 million at December 31, 1995, primarily in one taxing jurisdiction. These carryforwards will begin to expire in 1996 and continue through 2010. NOTE 15. TRADING ACTIVITIES AND OTHER DERIVATIVE FINANCIAL INSTRUMENTS, AND OFF-BALANCE SHEET ITEMS Trading Activities. All of the corporation's trading positions are currently stated at market value with realized and unrealized gains and losses reflected in noninterest income. The corporation recognized trading revenue of $39 million, $32 million, and $35 million for 1995, 1994, and 1993, respectively. Trading revenue is comprised of gains and losses resulting from trading positions taken by the corporation in debt securities, foreign exchange contracts, and interest-rate contracts. Trading positions in debt securities consist of U.S. federal and state government and agency securities. The types of interest-rate contracts traded include interest-rate swaps, caps, floors, and collars as well as futures and option contracts. Foreign exchange contracts consist primarily of foreign exchange forwards and foreign currency options and futures contracts. The following table represents the notional or contractual amount of Fleet's off-balance sheet trading instruments and related credit exposure. Notional principal amounts are a measure of the volume of agreements transacted, but the level of credit risk is significantly less. The amount of credit risk can be estimated by calculating the cost to replace, on a present value basis and at current market rates, all profitable contracts outstanding at year end. Credit risk disclosures relate to accounting losses that would be recognized if the counterparties completely failed to perform their obligations. To manage its level of credit risk, the corporation deals with counterparties of good credit standing, establishes counterparty credit limits, and enters into netting agreements whenever possible. Gross credit exposure amounts are presented below and disregard any netting agreements. Interest-rate instrument activities are subject to the same credit review, analysis, and approval process as those applied to commercial loans. Netting agreements contain rights of offset that provide for the net settlement of certain contracts with the same counterparty in the event of default. In the event of a default by a counterparty, the cost to the corporation, if any, would be the replacement cost of the contract at the current market rate. Trading Instruments with Off-Balance Sheet Risk - ------------------------------------------------------------------------- Contract or Notional Credit Dollars in millions Amount Exposure December 31 1995 1994 1995 1994 - ------------------------------------------------------------------------- Interest-rate contracts $4,568 $7,067 $45 $50 Foreign exchange contracts 5,341 11,916 153 183 - ------------------------------------------------------------------------- The amounts disclosed below represent the end-of-period fair value of derivative financial instruments held or issued for trading purposes and the average aggregate fair values during the year for those instruments: Trading Instruments - ------------------------------------------------------------------------------ Fair Value Average December 31, 1995 (Carrying Fair Dollars in millions Amount) Value - ------------------------------------------------------------------------------ Interest-rate contracts: Assets $34 $31 Liabilities (24) (22) Foreign exchange contracts: Assets 153 245 Liabilities (133) (213) - ------------------------------------------------------------------------------ Interest-Rate Risk-Management Activities. The corporation's principal objective in holding or issuing derivatives for purposes other than trading is interest-rate risk-management. The operations of Fleet are subject to a risk of interest-rate fluctuations to the extent that there is a difference between the amount of the corporation's interest-earning assets and the amount of interest- bearing liabilities that mature or reprice in specified periods. The principal objective of Fleet's asset/liability management activities is the management of interest-rate risk and liquidity within parameters established by various boards of directors. To achieve its risk-management objective, the corporation uses a combination of interest-rate instruments, including interest-rate swaps, caps, floors, and futures contracts. The following table presents the notional amount and fair value of interest-rate risk-management instruments at December 31, 1995 and 1994: Interest-Rate Risk-Management Instruments - -------------------------------------------------------------------------- 1995 1994 December 31 Notional Fair Notional Fair Dollars in millions Amount Value Amount Value - -------------------------------------------------------------------------- Interest-rate swaps: Receive-fixed/pay-variable $5,776 $69 $2,873 $(44) Pay fixed/receive-variable 1,885 (25) 2,084 67 Basis swaps 2,742 (4) 3,605 (1) Index-amortizing swaps 2,038 1 4,119 (234) Interest-rate cap agreements 550 6 1,775 43 Interest-rate corridor agreements 206 1 1,031 (5) Interest-rate collar agreements 10 - 500 (1) Futures contracts sold - - 6,005 21 - --------------------------------------------------------------------------- Total $13,207 $48 $21,992 $(154) - --------------------------------------------------------------------------- Interest-rate swap agreements involve the exchange of fixed- and variable- rate interest payments based upon a notional principal amount and maturity date. Interest-rate basis swaps involve the exchange of floating-rate interest payments based on indices, such as U.S. Treasury bill and LIBOR. Index- amortizing interest-rate swaps involve the exchange of fixed- and variable-rate interest payments based upon a notional principal amount, which amortizes based on an index, such as six-month LIBOR. Interest-rate cap agreements are similar to interest-rate swap agreements except that cash interest payments are made or received only if current interest rates rise above predetermined interest rates. Similarly, in an interest-rate floor agreement, cash interest payments are made or received only if current interest rates fall below a predetermined interest rate. An interest-rate collar consists of a cap and a floor. Interest-rate corridor agreements consist of a simultaneous purchase and sale of a cap. The corporation enters into interest-rate swap, cap, floor, and corridor agreements to manage the impact of fluctuating interest rates on earnings. Futures contracts are also used by the corporation to manage interest-rate exposure. These instruments are exchange-traded contracts for the future delivery of securities, other financial instruments or cash settlement at a specified price or yield. The corporation's interest-rate risk-management instruments had an exposure to credit risk of $197 million at December 31, 1995, versus $87 million at December 31, 1994. The corporation's credit risk at December 31, 1995, is mitigated by $11 million of collateral held by Fleet. The credit exposure represents the cost to replace, on a present value basis and at current market rates, all profitable contracts outstanding at year end. The increase in the credit exposure from year to year mainly reflects the increase in market value of the remaining swaps. The periodic net settlement of interest-rate risk-management instruments is recorded as an adjustment to net interest income. These interest-rate risk- management instruments generated $18 million and $6 million of net interest expense during 1995 and 1994, respectively. As of December 31, 1995, the corporation has net deferred income of $28 million relating to terminated interest-rate contracts, which will be amortized over the remaining life of the underlying interest-rate contracts of approximately three years. Mortgage Servicing Rights Prepayment Risk Management. The corporation also uses interest-rate contracts to manage the prepayment risk associated with the corporation's mortgage servicing portfolio. The value of the corporation's mortgage servicing portfolio may be adversely impacted if mortgage interest rates decline and loan prepayments increase. As a result, the carrying value of the corporation's MSRs are subject to a great degree of volatility in the event of unanticipated prepayments or defaults. To mitigate the risk related to adverse changes in interest rates and the potential resultant impairment to MSRs, the corporation holds interest-rate contracts (primarily purchased interest-rate floor contracts and purchased-call option contracts on U.S. Treasury securities). At December 31, 1995, the corporation had approximately $6.9 billion in notional value of such contracts. Such contracts are carried at market value, which was $87.8 million at December 31, 1995, with unrealized and realized gains and losses included in noninterest income. The corporation recorded net gains (losses) of $77 million, $(6) million, and $3 million in 1995, 1994, and 1993, respectively. Other Financial Instruments - ------------------------------------------------------------------------------ Contract or Notional December 31 Amount Dollars in millions 1995 1994 - ------------------------------------------------------------------------------ Other financial instruments whose notional or contractual amounts exceed the amount of potential credit risk: Commitments to sell loans $2,680 $506 Commitments to originate or purchase loans 1,591 422 Assets sold with recourse 283 378 - ------------------------------------------------------------------------------ Financial instruments whose notional or contractual amounts represent potential credit risk: Commitments to extend credit 29,247 27,452 Letters of credit, financial guarantees, and foreign office guarantees (net of participations) 3,880 3,108 - ------------------------------------------------------------------------------ Commitments to sell loans have off-balance sheet market risk to the extent that the corporation does not have available loans to fill those commitments, which would require the corporation to purchase loans in the open market. Commitments to originate or purchase loans have off-balance sheet market risk to the extent the corporation does not have matching commitments to sell loans obtained under such commitments, which could expose the corporation to lower-of- cost or market valuation adjustments in a rising interest-rate environment. Commitments to extend credit are agreements to lend to customers in accordance with contractual provisions. These commitments usually are for specific periods or contain termination clauses and may require the payment of a fee. The total amounts of unused commitments do not necessarily represent future cash requirements in that commitments often expire without being drawn upon. Commitments to Extend Credit - ------------------------------------------------------------------------------ December 31 Dollars in millions 1995 1994 - ------------------------------------------------------------------------------ Commercial and industrial loans $18,617 $18,351 Revolving, open-end loans secured by residential properties (e.g., home equity lines) 3,124 3,660 Credit card lines 3,838 3,008 Commercial real estate 2,035 1,373 Other unused commitments 1,633 1,060 - ------------------------------------------------------------------------------ Total $29,247 $27,452 - ------------------------------------------------------------------------------ Letters of credit and financial guarantees are agreements whereby the corporation guarantees the performance of a customer to a third party. Collateral is required to support letters of credit in accordance with management's evaluation of the creditworthiness of each customer. The credit risk assumed in issuing letters of credit is essentially equal to that in other lending activities. Management does not anticipate any material losses as a result of these transactions. NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, quoted market prices are used. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience, and other factors. Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. The aggregate fair value amounts presented do not purport to represent the underlying market value of the corporation. Also, because of differences in methodologies and assumptions used to estimate fair values, Fleet's fair values should not be compared to those of other financial institutions. The following describes the methods and assumptions used by Fleet in estimating the fair values. Securities. Fair values are based primarily on quoted market prices. Loans. The fair values of fixed-rate and certain variable-rate commercial and commercial real estate loans and certain consumer loans are estimated by discounting the contractual cash flows using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The carrying value of certain other variable-rate commercial and commercial real estate loans approximates fair value due to the short-term and frequent repricing characteristics of these loans. For certain variable-rate consumer loans, including home equity lines of credit and credit card receivables, the carrying amounts approximate fair value. For residential real estate, fair value is estimated by reference to quoted market prices. For nonperforming loans and certain loans where the credit quality of the borrower has deteriorated significantly, fair values are estimated by discounting expected cash flows at a rate commensurate with the risk associated with the estimated cash flows, based on recent appraisals of the underlying collateral or by reference to recent loan sales. Mortgages Held for Resale. Fair value is estimated using the quoted market prices for securities backed by similar types of loans and current dealer commitments to purchase loans. Deposits. The fair value of deposits with no stated maturity or a maturity of less than 90 days is considered to be equal to the carrying amount. The fair value of time deposits is estimated by discounting contractual cash flows using interest rates currently offered on the deposit products. Short-Term Borrowings. The carrying amount reported in the balance sheet approximates fair value. Long-Term Debt. The fair value of Fleet's long-term debt is estimated based on quoted market prices for the issues for which there is a market or by discounting cash flows based on current rates available to Fleet for similar types of borrowing arrangements. Off-Balance Sheet Instruments. Fair values for off-balance sheet instruments are based on quoted market prices, current settlement values, or established pricing models using current assumptions. On-Balance Sheet Financial Instruments
- -------------------------------------------------------------------------------------------------- 1995 1994 December 31 Carrying Fair Carrying Fair Dollars in millions Value Value Value Value - -------------------------------------------------------------------------------------------------- Financial assets: Cash and cash equivalents and accrued interest receivable $5,069 $5,069 $9,162 $9,162 Securities 19,331 19,315 21,141 20,702 Loans(a) 48,009 48,639 43,074 44,857 Mortgages held for resale 2,005 2,005 560 560 Trading account securities 64 64 120 120 Trading instruments 187 187 59 59 Other 1,999 2,006 111 148 Financial liabilities: Deposits with no stated maturity 35,140 35,140 35,898 35,898 Time deposits 21,982 22,263 19,630 19,304 Short-term borrowings 12,569 12,569 12,586 12,586 Long-term debt 6,481 6,728 5,931 5,855 Trading instruments 157 157 50 50 Other 303 303 253 253 - --------------------------------------------------------------------------------------------------
(a) Excludes net book value of lease financing of $2,195 million and $1,465 million at December 31, 1995 and 1994, respectively. The fair value of forward commitments to originate or purchase residential mortgage loans and to sell residential mortgage loans was $20 million and $(17) million, respectively, based on the value at December 31, 1995. These fair values consider the difference between current levels of interest rates and committed rates. At December 31, 1995, interest-rate risk-management derivative contracts had a net unrealized gain of $48 million compared to a net unrealized loss of $(154) million at December 31, 1994. Certain assets, which are not financial instruments and, accordingly, are not included in the above fair values, contribute substantial value to the corporation in excess of the related amounts recognized in the balance sheet. These include the core deposit intangibles and the related retail banking network, the value of customer relationships associated with certain types of consumer loans (particularly the credit card portfolio), lease financing business, and MSRs. NOTE 17. COMMITMENTS, CONTINGENCIES, AND OTHER DISCLOSURES One of the corporation's banking subsidiaries, which served as indenture trustee for certain healthcare receivable backed bonds issued by certain special purpose subsidiaries of Towers Financial Corporation, and another defendant, have been named in a lawsuit in federal court in Manhattan by purchasers of the bonds. The suit seeks damages in an undetermined amount equal to the difference between the current value of the bonds and their face amount of approximately $200 million, plus interest, as well as punitive damages. The corporation is vigorously defending the action. Subsequent to the announcement of the Merger, certain alleged stockholders of Shawmut filed several purported class action lawsuits against Shawmut, Fleet, and members of Shawmut's Board of Directors. The complaints all make similar allegations concerning the Merger. The corporation believes the allegations contained in these complaints are entirely without merit and intends to contest them vigorously. The corporation and its subsidiaries are involved in various other legal proceedings arising out of, and incidental to, their respective businesses. Management of the corporation, based on its review with counsel of the development of these matters to date, does not anticipate that any losses incurred as a result of these legal proceedings would have a materially adverse effect on the corporation's financial position. Lease Commitments. The corporation has entered into a number of noncancelable operating lease agreements for premises and equipment. The minimum annual rental commitments under these leases at December 31, 1995, exclusive of taxes and other charges, are $126 million in 1996; $111 million, 1997; $96 million, 1998; $80 million, 1999; $66 million, 2000; and $422 million, 2001 and subsequent years. Total rental expense for 1995, 1994, and 1993, including cancelable and noncancelable leases, amounted to $162 million, $153 million, and $157 million, respectively. Certain leases contain escalation clauses, which correspond with increased real estate taxes and other operating expenses, and renewal options calling for increased rents as the leases are renewed. No restrictions are imposed by any lease agreement regarding the payment of dividends, additional debt financing, or entering into further lease agreements. Regulatory Matters. As a bank holding company and a unitary savings and loan holding company, Fleet is subject to regulation by the Federal Reserve Board (the Federal Reserve) and the Office of Thrift Supervision (OTS). Banking subsidiaries are subject to regulation by the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and OTS, as well as state regulators. Each subsidiary bank's deposits are insured by the FDIC. Transaction and Dividend Restrictions. Fleet's banking subsidiaries are subject to restrictions under federal law that limit the transfer of funds by the subsidiary banks to Fleet and its nonbanking subsidiaries. Such transfers by any subsidiary bank to Fleet or any nonbanking subsidiary are limited in amount to 10% of the bank's capital and surplus. Various federal and state banking statutes limit the amount of dividends the subsidiary banks can pay to Fleet without regulatory approval. The payment of dividends by any subsidiary bank may also be effected by other factors such as the maintenance of adequate capital for such subsidiary bank. Various regulators and the boards of directors of the affected institutions continue to review dividend declarations and capital requirements of Fleet and its subsidiaries consistent with current earnings, future earning prospects, and other factors. Restrictions on Cash and Due from Banks. The corporation's banking subsidiaries are subject to requirements of the Federal Reserve to maintain certain reserve balances. At December 31, 1995 and 1994, these reserve balances were $1,363 million and $1,502 million, respectively. NOTE 18. DISCLOSURE FOR STATEMENTS OF CASH FLOWS
Cash Flow Disclosure - ---------------------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - ---------------------------------------------------------------------------------------- Supplemental disclosure of cash paid during the period for: Interest $2,995 $2,096 $2,087 Income taxes, net of refund 194 370 454 - ---------------------------------------------------------------------------------------- Supplemental disclosure of noncash investing and financing activities: Transfer of loans to foreclosed property and repossessed equipment 72 86 186 Reclassification of securities from securities held to maturity to available for sale 5,308 - - Conversion of DCP to common stock 439 - - Retirement of treasury stock 347 - - Transfer of assets held for sale or accelerated disposition 1,725 - - Adjustment to unrealized gain (loss) on securities available for sale 463 (649) 238 - ---------------------------------------------------------------------------------------- Assets acquired and liabilities assumed in business combinations were as follows: Assets acquired, net of cash and cash equivalents paid 8,920 347 - Net cash and cash equivalents paid for businesses acquired (2,816) (56) - Liabilities assumed 5,715 291 - Common stock issued in connection with businesses acquired 193 - - Treasury stock issued in connection with businesses acquired 196 - - - ----------------------------------------------------------------------------------------
NOTE 19.
PARENT COMPANY ONLY FINANCIAL STATEMENTS Statements of Income - ---------------------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - ---------------------------------------------------------------------------------------- Dividends from subsidiaries: Banking subsidiaries $817 $427 $287 Other subsidiaries 246 37 24 Interest income 153 140 134 Other 67 114 97 - ---------------------------------------------------------------------------------------- Total income 1,283 718 542 - ---------------------------------------------------------------------------------------- Interest expense 296 215 193 Noninterest expense 156 74 195 - ---------------------------------------------------------------------------------------- Total expenses 452 289 388 - ---------------------------------------------------------------------------------------- Income before income taxes and equity in undistributed income of subsidiaries 831 429 154 Applicable income taxes (benefit) (54) 34 (53) - ---------------------------------------------------------------------------------------- Income before equity in undistributed income of subsidiaries 885 395 207 Equity in undistributed income of subsidiaries (275) 454 557 - ---------------------------------------------------------------------------------------- Income before cumulative effect of change in method of accounting 610 849 764 Cumulative effect of change in method of accounting - - 53 - ---------------------------------------------------------------------------------------- Net income $610 $849 $817 - ----------------------------------------------------------------------------------------
Balance Sheet - ------------------------------------------------------------------------------ December 31 Dollars in millions 1995 1994 - ------------------------------------------------------------------------------ Assets: Money market instruments $194 $476 Securities 150 428 Loans receivable from: Banking subsidiaries 519 116 Other subsidiaries 2,120 1,768 - ------------------------------------------------------------------------------ 2,639 1,884 Investment in subsidiaries: Banking subsidiaries 6,597 5,534 Other subsidiaries 1,005 1,065 - ------------------------------------------------------------------------------ 7,602 6,599 - ------------------------------------------------------------------------------ Other 404 386 - ------------------------------------------------------------------------------ Total assets $10,989 $9,773 - ------------------------------------------------------------------------------ Liabilities: Short-term borrowings $803 $1,207 Accrued liabilities 435 480 Long-term debt 3,386 2,615 - ------------------------------------------------------------------------------ Total liabilities 4,624 4,302 - ------------------------------------------------------------------------------ Stockholders' equity 6,365 5,471 - ------------------------------------------------------------------------------ Total liabilities and stockholders' equity $10,989 $9,773 - ------------------------------------------------------------------------------
Statements of Cash Flows - ---------------------------------------------------------------------------------------- Year ended December 31 Dollars in millions 1995 1994 1993 - ---------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $610 $849 $817 Adjustments for noncash items: Equity in undistributed income of subsidiaries 275 (454) (557) Depreciation and amortization 18 16 17 Net securities gains (29) (13) (47) Increase (decrease) in accrued liabilities, net (56) 38 102 Other, net (79) 136 (34) - ---------------------------------------------------------------------------------------- Net cash flow provided by operating activities 739 572 298 - ---------------------------------------------------------------------------------------- Cash flows from investing activities: Purchases of securities (205) (908) (478) Proceeds from sales and maturities of securities 543 739 435 Net increase in loans made to affiliates (780) (52) (278) Capital contributions to subsidiaries (219) (210) (258) Acquisition of minority interest in subsidiary (158) - - - ---------------------------------------------------------------------------------------- Net cash flow used in investing activities (819) (431) (579) - ---------------------------------------------------------------------------------------- Cash flows from financing activities: Net increase (decrease) in short-term borrowings (404) 297 61 Proceeds from issuance of long-term debt 1,014 400 450 Repayments of long-term debt (242) (317) (603) Proceeds from issuance of common stock 124 70 494 Proceeds from issuance of preferred stock 125 - - Redemption and repurchase of common and preferred stock (446) (375) (129) Cash dividends paid (373) (299) (194) - ---------------------------------------------------------------------------------------- Net cash flow provided by (used in) financing activities (202) (224) 79 - ---------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (282) (83) (202) - ---------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of year 476 559 761 - ---------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $194 $476 $559 - ----------------------------------------------------------------------------------------
RATE/VOLUME ANALYSIS (Unaudited) - ------------------------------------------------------------------------------------------------------------ 1995 Compared to 1994 1994 Compared to 1993 Increase (Decrease) Due to(a) Increase (Decrease) Due to(a) Dollars in millions Volume Rate Net Volume Rate Net - ------------------------------------------------------------------------------------------------------------ Interest earned on:(b) Interest-bearing deposits $ 2 $7 $9 $10 $3 $13 Federal funds sold and securities purchased under agreements to resell 21 3 24 12 (15) (3) Trading account securities (3) 2 (1) (1) 1 - Securities available for sale (260) 34 (226) 142 (79) 63 Securities held to maturity (63) 28 (35) 44 (27) 17 Nontaxable securities (2) 10 8 8 (1) 7 Loans and leases(c) 602 403 1,005 71 84 155 Mortgages held for resale 10 15 25 (73) (5) (78) - ------------------------------------------------------------------------------------------------------------ Total interest-earning assets 307 502 809 213 (39) 174 - ------------------------------------------------------------------------------------------------------------ Interest paid on: Deposits: Savings (33) 130 97 (6) (26) (32) Time 244 215 459 28 9 37 - ------------------------------------------------------------------------------------------------------------ Total interest-bearing deposits 211 345 556 22 (17) 5 - ------------------------------------------------------------------------------------------------------------ Short-term borrowings (47) 221 174 87 151 238 Long-term debt 85 29 114 10 (9) 1 - ------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities 249 595 844 119 125 244 - ------------------------------------------------------------------------------------------------------------ Net interest differential $58 $(93) $(35) $94 $(164) $(70) - ------------------------------------------------------------------------------------------------------------
(a) The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each. (b) A tax-equivalent adjustment has been included in the calculations to reflect this income as if it had been fully taxable. The tax-equivalent adjustment is based upon the applicable federal and state income tax rates. The FTE adjustment included in interest income was $44 million in 1995, $52 million in 1994, and $46 million in 1993. (c) Includes fee income of $110 million, $108 million, and $119 million for the years ended December 31, 1995, 1994, and 1993, respectively.
LOAN AND LEASE MATURITY (Unaudited) - ---------------------------------------------------------------------------------------- December 31, 1995 Within 1 1 to 5 After 5 Dollars in millions Year Years Years Total - ---------------------------------------------------------------------------------------- Commercial and industrial $13,684 $5,588 $3,979 $23,251 Residential real estate 6,723 2,723 2,029 11,475 Consumer 6,095 1,902 1,559 9,556 Commercial real estate: Construction 378 138 90 606 Interim/permanent 2,821 852 741 4,414 Lease financing 1,234 695 294 2,223 - ---------------------------------------------------------------------------------------- Total $30,935 $11,898 $8,692 $51,525 - ---------------------------------------------------------------------------------------- INTEREST SENSITIVITY OF LOANS OVER ONE YEAR (Unaudited) - ---------------------------------------------------------------------------------------- December 31, 1995 Predetermined Floating Dollars in millions Interest Rates Interest Rates Total - ---------------------------------------------------------------------------------------- 1 to 5 years $7,016 $4,882 $11,898 After 5 years 8,360 332 8,692 - ---------------------------------------------------------------------------------------- Total $15,376 $5,214 $20,590 - ----------------------------------------------------------------------------------------
CONSOLIDATED AVERAGE BALANCES/INTEREST EARNED-PAID/RATES 1991-1995 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------- Year ended December 31 1995 1994 - ----------------------------------------------------------------------------------------------------------------------- Interest Interest Average Earned/ Average Earned/ Dollars in millions(a) Balance Paid(b) Rate Balance Paid(b) Rate - ----------------------------------------------------------------------------------------------------------------------- Assets: Interest-bearing deposits $325 $23 7.08% $292 $14 4.79% Federal funds sold and securities purchased under agreements to resell 662 39 5.89 296 15 5.07 Trading account securities 79 4 5.06 99 5 4.95 Securities available for sale 12,779 797 6.24 16,923 1,023 6.05 Securities held to maturity 6,954 412 5.92 7,971 447 5.61 Nontaxable securities 782 59 7.54 816 51 6.25 Loans and leases(c) 51,043 4,619 9.03 44,102 3,614 8.17 Mortgages held for resale 1,459 116 7.96 1,322 91 6.90 Foreclosed property and repossessed equipment 97 - - 166 - - - ----------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 74,180 6,069 8.17% 71,987 5,260 7.29% - ----------------------------------------------------------------------------------------------------------------------- Accrued interest receivable 539 - - 533 - - Reserve for credit losses (1,489) - - (1,600) - - Other assets 9,497 - - 8,641 - - - ----------------------------------------------------------------------------------------------------------------------- Total assets $82,727 $6,069 - $79,561 $5,260 - - ----------------------------------------------------------------------------------------------------------------------- Liabilities and stockholders' equity: Deposits: Savings $22,987 $592 2.57% $24,803 $495 2.00% Time 20,133 1,135 5.64 15,310 676 4.41 - ----------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 43,120 1,727 4.00 40,113 1,171 2.92 - ----------------------------------------------------------------------------------------------------------------------- Short-term borrowings 14,046 800 5.69 15,355 626 4.07 Long-term debt 6,581 478 7.26 5,383 364 6.76 - ----------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 63,747 3,005 4.71 60,851 2,161 3.55 - ----------------------------------------------------------------------------------------------------------------------- Net interest spread 3,064 3.46% 3,099 3.74% - ----------------------------------------------------------------------------------------------------------------------- Demand deposits and other noninterest-bearing timme deposits 10,910 - - 11,227 - - Other liabilities 1,525 - - 1,701 - - - ----------------------------------------------------------------------------------------------------------------------- Total liabilities 76,182 3,005 - 73,779 2,161 - - ----------------------------------------------------------------------------------------------------------------------- Dual convertible preferred stock - - - - - - Stockholders' equity and dual convertible preferred stock 6,545 - - 5,782 - - - ----------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $82,727 $3,005 - $79,561 $2,161 - - ----------------------------------------------------------------------------------------------------------------------- Net interest margin 4.12% 4.30% - -----------------------------------------------------------------------------------------------------------------------
(a) The data in this table is presented on a taxable-equivalent basis. The tax- equivalent adjustment is based upon the applicable federal and state income tax rates. (b) Includes fee income of $110 million, $108 million, $119 million, $124 million, and $105 million for the years ended December 31, 1995, 1994, 1993, 1992, and 1991, respectively. (c) Nonperforming loans are included in average balances used to determine rates.
CONSOLIDATED AVERAGE BALANCES/INTEREST EARNED-PAID/RATES 1991-1995 (Unaudited) - ------------------------------------------------------------------------------------------- 1993 1992 1991 Interest Interest Interest Average Earned/ Average Earned/ Average Earned/ Balance Paid(b) Rate Balance Paid(b) Rate Balance Paid(b) Rate - ------------------------------------------------------------------------------------------- $47 $1 2.13% $74 $3 4.05% $178 $ 10 5.41% 570 18 3.16 1,195 34 3.16 2,167 123 5.66 114 5 4.17 113 6 5.31 107 8 7.36 14,140 960 6.79 14,061 1,102 7.84 1,597 121 7.56 7,056 430 6.09 3,846 286 7.44 11,409 1,009 8.84 679 44 6.48 454 24 5.29 949 66 6.91 43,283 3,459 7.99 43,029 3,688 8.57 40,986 3,950 9.64 2,384 169 7.10 1,974 175 8.88 1,447 138 9.51 211 - - 513 - - 468 - - - ------------------------------------------------------------------------------------------- 68,484 5,086 7.43% 65,259 5,318 8.15% 59,308 5,425 9.15% - ------------------------------------------------------------------------------------------- 512 - - 522 - - 523 - - (1,829) - - (2,063) - - (1,894) - - 8,119 - - 7,915 - - 7,162 - - - ------------------------------------------------------------------------------------------- $75,286 $5,086 - $71,633 $5,318 - $65,099 $5,425 - - ------------------------------------------------------------------------------------------- $25,086 $527 2.10% $23,532 $718 3.05% $19,195 $926 4.82% 14,680 639 4.35 18,499 981 5.30 21,672 1,488 6.87 - ------------------------------------------------------------------------------------------- 39,766 1,166 2.93 42,031 1,699 4.04 40,867 2,414 5.91 - ------------------------------------------------------------------------------------------- 12,807 388 3.03 8,848 306 3.46 6,520 414 6.34 5,039 363 7.20 4,116 332 8.06 3,947 314 7.96 - ------------------------------------------------------------------------------------------- 57,612 1,917 3.33 54,995 2,337 4.25 51,334 3,142 6.12 - ------------------------------------------------------------------------------------------- 3,169 4.10% 2,981 3.90% 2,283 3.03% - ------------------------------------------------------------------------------------------- 10,854 - - 10,999 - - 9,198 - - 1,509 - - 1,238 - - 837 - - - ------------------------------------------------------------------------------------------- 69,975 1,917 - 67,232 2,337 - 61,369 3,142 - - ------------------------------------------------------------------------------------------- - - - 283 - - 134 - - 5,311 - - 4,118 - - 3,596 - - - ------------------------------------------------------------------------------------------- $75,286 $1,917 - $71,633 $2,337 - $65,099 $3,142 - - ------------------------------------------------------------------------------------------- 4.63% 4.57% 3.85% - -------------------------------------------------------------------------------------------
QUARTERLY SUMMARIZED FINANCIAL INFORMATION(a) (Unaudited) - ------------------------------------------------------------------------------------------------------------------------ By quarter 1995 1994 Dollars in millions, except per share data 1 2 3 4 Year 1 2 3 4 Year - ------------------------------------------------------------------------------------------------------------------------ Interest income $1,448 $1,539 $1,540 $1,498 $6,025 $1,239 $1,285 $1,339 $1,345 $5,208 Interest expense 692 775 777 761 3,005 463 518 580 600 2,161 - ------------------------------------------------------------------------------------------------------------------------ Net interest income 756 764 763 737 3,020 776 767 759 745 3,047 - ------------------------------------------------------------------------------------------------------------------------ Provision for credit losses 20 28 27 26 101 25 12 11 17 65 - ------------------------------------------------------------------------------------------------------------------------ Net interest income after provision for credit losses 736 736 736 711 2,919 751 755 748 728 2,982 Securities available for sale gains (losses) 1 4 7 20 32 (1) 19 2 (21) (1) Other noninterest income 402 472 441 503 1,818 390 353 378 435 1,556 - ------------------------------------------------------------------------------------------------------------------------ 1,139 1,212 1,184 1,234 4,769 1,140 1,127 1,128 1,142 4,537 Noninterest expense 764 797 746 1,428 3,735 797 890 728 730 3,145 - ------------------------------------------------------------------------------------------------------------------------ Income (loss) before income taxes 375 415 438 (194) 1,034 343 237 400 412 1,392 Applicable income taxes 149 161 170 (56) 424 128 105 148 150 531 - ------------------------------------------------------------------------------------------------------------------------ Income (loss) before minority interest 226 254 268 (138) 610 215 132 252 262 861 Minority interest - - - - - (2) (3) (3) (4) (12) - ------------------------------------------------------------------------------------------------------------------------ Net income (loss) $226 $254 $268 $(138) $610 $213 $129 $249 $258 $849 Earnings (loss) per share $0.82 $0.91 $0.96 $(1.17) $1.57 $0.75 $0.46 $0.91 $0.97 $3.09 - ------------------------------------------------------------------------------------------------------------------------
(a) The quarterly summarized financial information has been restated to reflect the pooling of interests with Shawmut National Corporation. COMMON STOCK PRICE AND DIVIDEND INFORMATION(a) (Unaudited)
- ----------------------------------------------------------------------------------------------------------------- By quarter 1995 1994 1 2 3 4 Year 1 2 3 4 Year - ----------------------------------------------------------------------------------------------------------------- Stock Price High 34 5/8 38 3/8 39 1/8 43 43 38 41 3/8 40 1/2 37 7/8 41 3/8 Low 30 7/8 32 1/8 35 38 1/8 30 7/8 31 3/4 34 3/8 34 7/8 29 7/8 29 7/8 - ----------------------------------------------------------------------------------------------------------------- Dividends declared .40 .40 .40 .43 1.63 .30 .35 .35 .40 1.40 Dividends paid .40 .40 .40 .40 1.60 .30 .30 .35 .35 1.30 - -----------------------------------------------------------------------------------------------------------------
(a) Fleet's (FLT) common stock is listed on the New York Stock Exchange (NYSE). The table above sets forth, for the periods indicated, the range of high and low sale prices per share of Fleet's common stock on the composite tape and dividends declared and paid per share. AFFILIATES BANKING COMPANIES FLEET BANK, N.A. FLEET BANK FLEET NATIONAL BANK Erland E. Kailbourne OF CONNECTICUT Chairman and CEO Eileen S. Kraus Hermes L. Ames Chairman President Richard A. Higginbotham Peter D. Kiernan Plaza President and CEO Albany, N Y 12207 777 Main Street Telephone: (518) 447-4100 Hartford, CT 06115 Telephone: (860) 986-2000 FLEET NATIONAL BANK Thomas J. Skala FLEET BANK OF MAINE Chairman M. Anne Szostak Dean T. Holt Chairman President and CEO Paul R. McConnell 111 Westminster Street President and CEO Providence, RI 02903 2 Portland Square Telephone: (401) 278-6000 Portland, ME 04104-5091 Telephone: (207) 874-5000 FLEET BANK, F.S.B. Luther H. Hodge FLEET BANK OF President MASSACHUSETTS, N.A. 2255 Glades Road FLEET NATIONAL BANK Boca Raton, FL 33431 OF MASSACHUSETTS Telephone: (407) 989-2241 Leo R. Breitman Chairman and CEO John P. Hamill President 75 State Street Boston, MA 02109 Telephone: (617) 346-4000 FLEET BANK - NH Michael C. Whitney Chairman, President, and CEO 1155 Elm Street Manchester, NH 03101 Telephone: (603) 647-3700 FINANCIAL SERVICES COMPANIES AFSA DATA CORP. FLEET INVESTMENT ADVISORS Douglas A. Leafstedt Thomas M. O'Neill Chairman and CEO Managing Director and Steven Snyder Chief Investment Officer President 75 State Street 2277 East 220th Street Boston, MA 02109 Long Beach, CA 90810-1690 Telephone: (617) 346-4000 Telephone: (310) 513-2700 FLEET INVESTMENT SERVICES FLEET BROKERAGE SECURITIES Michael J. Rothmeier Frieda Z. Lewis Managing Director President and CEO One Federal Street 67 Wall Street Boston, MA 02110 New York, NY 10005 Telephone: (617) 292-2000 Telephone: (212) 806-2888 FLEET REAL ESTATE CAPITAL FLEET CAPITAL Georgina Macdonald Peter G. Bland President and CEO Chairman and CEO 245 Summer Street Irwin Teich Boston, MA 02209-9173 President Telephone: (617) 573-5008 200 Glastonbury Boulevard Glastonbury, CT 06033 FLEET SECURITIES, INC. Telephone: (860) 659-3200 Joseph A. Harcum Chairman and CEO FLEET CREDIT CORP. John P. O'Brien Ronald H. Chamides President President 14 Wall Street - 27th Floor 50 Kennedy Plaza New York, NY 10005 Providence, RI 02903 Telephone: (212) 285-0800 Telephone: (401) 278-6000 FLEET SERVICES CORP. FLEET PRIVATE EQUITY David M. Sheppard (Fleet Equity Partners) Chairman and CEO Robert M. Van Degna P.O. Box 366 Chairman and CEO Providence, RI 02901 Habib Y. Gorgi Telephone: (401) 275-7050 President Robert P. Drum 111 Westminster Street President Providence, RI 02903 Peter D. Kiernan Plaza Telephone: (401) 278-6770 Albany, NY 12207 Telephone: (518) 447-4100 FLEET MORTGAGE GROUP, INC. Gerald L. Baker Chairman and CEO 1333 Main Street P.O. Box 11988 Columbia, SC 29211 Telephone: (803) 929-7900 OFFICERS AND DIRECTORS OFFICERS Terrence Murray President and Chief Executive Officer Joel B. Alvord Chairman Robert J. Higgins Vice Chairman Gunnar S. Overstrom, Jr. Vice Chairman H. Jay Sarles Vice Chairman Michael R. Zucchini Vice Chairman David L. Eyles Executive Vice President and Chief Credit Policy Officer Eugene M. McQuade Executive Vice President and Chief Financial Officer Anne M. Finucane Senior Vice President Robert B. Hedges, Jr. Senior Vice President William C. Mutterperl Senior Vice President, Secretary and General Counsel Anne M. Slattery Senior Vice President M. Anne Szostak Senior Vice President Brian T. Moynihan Managing Director, Strategic Planning and Corporate Development
BOARD OF DIRECTORS Terrence Murray John T. Collins Thomas D. O'Connor President and Chairman and Chairman and Chief Executive Officer Chief Executive Officer Chief Executive Officer Fleet Financial Group The Collins Group, Inc. Mohawk Paper Mills, Inc. Boston, MA Boston, MA, an Cohoes, NY, a manufacturer and acquisition company distributor of fine printing papers Joel B. Alvord Chairman Bernard M. Fox Michael B. Picotte Fleet Financial Group Chairman, President, and Managing General Boston, MA Chief Executive Officer Partner and Northeast Utilities Chief Executive Officer William Barnet, III Hartford, CT, an The Picotte Companies President and electric utility company Albany, NY, investment builders Chief Executive Officer of commercial office buildings William Barnet & Son, Inc. James F. Hardymon Spartanburg, SC, processing and Chairman and John R. Riedman trading natural and synthetic Chief Executive Officer Chairman yarns, fibers, and resins Textron Inc. Riedman Corp. Providence, RI, a Rochester, NY, a national Bradford R. Boss multi-industry company insurance brokerage firm Chairman A.T. Cross Company Robert M. Kavner Lois D. Rice Lincoln, RI, a manufacturer Managing Director Guest Scholar and distributor of fine writing Kavner & Associates Program in Economic Studies instruments and leather goods Beverly Hills, CA, Brookings Institution consultants in the Washington, D.C. Stillman B. Brown communications and President media industries John S. Scott Harcott Corporation Retired Chairman Hartford, CT, an Raymond C. Kennedy Richardson-Vicks Inc. investments firm Chairman Wilton, CT, a worldwide Kendell Holdings, Inc. marketer of consumer products Paul J. Choquette, Jr. Hudson, NY, a private venture President capital company investing in Samuel O. Thier Gilbane Building Company small, new companies President Providence, RI, a national Massachusetts General Hospital construction firm Boston, MA
Robert J. Matura Paul R. Tregurtha Chairman and Chairman and Chief Executive Officer Chief Executive Officer Treefort Fellows and Mormac Marine Group, Inc. Robert J. Matura Associates Stamford, CT, a marine Stamford, CT, consulting shipping company firm specializing in international textiles, apparel, and retailing Arthur C. Milot Private Investor Jamestown, RI
STOCKHOLDER INFORMATION - ------------------------------------------------------------------------------- DIVIDEND POLICY The Board of Directors of Fleet Financial Group considers dividends at least annually. The current annualized dividend rate is $1.72 per common share. DIVIDEND REINVESTMENT SERVICE Fleet's automatic dividend reinvestment service, available on request, enables stockholders to have their quarterly dividends reinvested in shares of the corporation and/or to make voluntary cash investments. All brokerage fees and commissions for these transactions are absorbed by the corporation. Occasionally, the corporation may establish discounts on these transactions. DIVIDEND DISBURSING AGENT Fleet National Bank, Providence, RI STOCK TRANSFER AGENT AND REGISTRAR Fleet National Bank 111 Westminster Street Providence, RI 02903 (800) 538-1516 INDEPENDENT AUDITORS KPMG Peat Marwick LLP, Boston, Massachusetts COMMON STOCK DATA Traded: New York Stock Exchange (NYSE) Symbol: FLT Stockholders of Record (12/31/95): 65,043 Shares Outstanding (12/31/95): 262,721,926 INFORMATION SERVICE Fleet welcomes stockholder and public interest in our services and activities. Questions pertaining to material presented in this report and requests for other reports filed with the Securities and Exchange Commission should be directed to: Roberta Rizzo Investor Relations Fleet Financial Group One Federal Street Boston, MA 02110-2010 (617) 346-0142 [FLEET FINANCIAL GROUP LOGO] Fleet Financial Group - One Federal Street - Boston, Massachusetts 02110-2010 EX-21 14 EXHIBIT 21 Fleet Financial Group, Inc. Subsidiaries of the Registrant Jurisdiction of Subsidiary Incorporation - ---------- ------------- Banking Subsidiaries: Fleet Banking Group, Inc. Rhode Island Fleet Bank, National Association United States Fleet Bank of Massachusetts, National Association United States Fleet National Bank United States Fleet Bank New York Fleet Bank United States Merrill/Norstar Bankshare Association Maine Fleet Bank of Maine Maine Indian Head Banks, Inc. New Hampshire Fleet Bank-NH New Hampshire Fleet National Bank of Connecticut United States Fleet National Bank of Massachusetts United States Fleet Bank, F.S.B. Florida Non-Banking Subsidiaries: Fleet Mortgage Group, Inc. Rhode Island Fleet Mortgage Corp. Rhode Island Fleet Real Estate Funding Corp. South Carolina Fleet Mortgage Securities, Inc. Rhode Island Fleet Mortgage Asset Management Corp. Rhode Island Shawmut Mortgage Company Connecticut Fleet Financial Corporation Rhode Island Fleet Finance, Inc. Rhode Island Fleet Finance, Inc. Delaware Fleet Credit Corporation Rhode Island Fleet Capital Corporation Connecticut Fleet Securities, Inc. New York Fleet Brokerage Securities, Inc. Delaware AFSA Data Corporation California Fleet Private Equity Co., Inc. Rhode Island Fleet Investment Services, Inc. Rhode Island Fleet Services Corporation New York Fleet Investment Advisors, Inc. New York Shawmut Investment Advisors, Inc. Massachusetts Fleet Trust Company New York Fleet Trust Company of Florida, N.A. United States Shawmut National Trust Company Florida Shawmut Trust Company New York Fleet Real Estate Capital, Inc. Rhode Island EX-23 15 EXHIBIT 23 FLEET FINANCIAL GROUP, INC. INDEPENDENT AUDITORS' CONSENT The Board of Directors Fleet Financial Group, Inc. We consent to incorporation by reference in the Registration Statements (Nos. 33-19425, 33-22045, 33-48818, 33-56061, 33-57501, 33-57677, 33-62367, 33-58933, 33-64635 and 33-59139) on Form S-8, the Registration Statements (Nos. 33-36707, 33-55555, 33-58933 and 333-00701) on Form S-3, and the Registration Statements (Nos. 33-55579, 33-58573 and 33-58933) on Form S-4 of Fleet Financial Group, Inc. of our report dated January 17, 1996, relating to the consolidated balance sheets of Fleet Financial Group, Inc. as of December 31, 1995 and 1994, 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, 1995, which report has been incorporated by reference in the Annual Report on Form 10-K of Fleet Financial Group, Inc. for the year ended December 31, 1995. Our report refers to changes in the methods of accounting for mortgage servicing rights, investments in debt and equity securities, and income taxes. /s/ KPMG Peat Marwick LLP Boston, Massachusetts March 28, 1996 EX-27 16 FLEET FINANCIAL GROUP FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the December 31, 1995 consolidated financial statements and management's discussion and analysis of financial condition and results of operations contained in the Form 10-K and is qualified in its entirety by reference to such financial statements. 1,000,000 12-MOS DEC-31-1995 DEC-31-1995 $4,344 161 61 64 18,533 798 782 51,525 1,321 84,432 57,122 12,569 1,895 6,481 0 399 3,152 2,814 84,432 4,721 1,304 0 6,025 1,726 3,005 3,020 101 32 3,735 1,034 1,034 0 0 610 1.57 1.57 4.12 $499 198 0 0 1,496 418 116 1,321 1,321 0 0
EX-27.(A) 17 FLEET FINANCIAL GROUP RESTATED FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the December 31, 1994 restated supplemental consolidated financial statements and management's discussion and analysis of financial condition and results of operations contained in the Form 8-K dated January 19, 1996 and is qualified in its entirety by reference to such supplemental financial statements. 1,000,000 12-MOS DEC-31-1994 DEC-31-1994 $4,641 2,972 957 120 12,250 8,891 8,452 46,035 1,496 81,026 55,528 12,586 1,510 5,931 0 557 2,856 2,058 81,026 3,694 1,514 0 5,208 1,171 2,161 3,047 65 (1) 3,145 1,392 1,392 0 0 849 3.09 3.09 4.30 $761 139 0 0 1,669 377 138 1,496 1,496 0 0
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