SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OCTOBER 25, 1995
Date of Report (Date of earliest event reported)
BANK OF NEW HAMPSHIRE CORPORATION
(Exact name of registrant as specified in its charter)
NEW HAMPSHIRE 0-9517 02-0346918
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
300 FRANKLIN STREET
MANCHESTER, NEW HAMPSHIRE 03101
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (603) 695-3000<PAGE>
ITEM 5. OTHER EVENTS
Following the close of business on October 25, 1995,
Peoples Heritage Financial Group, Inc. ("Peoples Heritage"), a
Maine corporation, First Coastal Banks, Inc. ("First Coastal"),
a New Hampshire corporation and a wholly-owned subsidiary of
Peoples Heritage, and Bank of New Hampshire Corporation (the
"Registrant"), a New Hampshire corporation, entered into an
Agreement and Plan of Merger (the "Agreement") which sets forth
the terms and conditions under which First Coastal will merge
with and into the Registrant (the "Merger").
The Agreement provides that upon consummation of the
Merger, each outstanding share of common stock of the
Registrant (other than (i) any dissenting shares under New
Hampshire law and (ii) any shares held by Peoples Heritage
other than in a fiduciary capacity or in satisfaction of a debt
previously contracted) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be
converted into the right to receive two shares of common stock
of Peoples Heritage, plus the right to receive cash in lieu of
any fractional share interest.
In connection with the execution of the Agreement,
The First National Bank of Portsmouth ("FNBP"), a wholly-owned
subsidiary of First Coastal, and Bank of New Hampshire, a
wholly-owned subsidiary of the Registrant, entered into an
Agreement and Plan of Merger, dated as of October 25, 1995 (the
"Bank Merger Agreement"). The Bank Merger Agreement sets forth
the terms and conditions, including consummation of the Merger,
under which FNBP will merge with and into the Bank of New
Hampshire immediately following the Merger.
Concurrently with the execution and delivery of the
Agreement, (i) the Registrant entered into a Stock Option
Agreement with Peoples Heritage (the "Registrant Stock Option
Agreement") whereby the Registrant granted to Peoples Heritage
an option to purchase up to 808,767 shares of common stock of
the Registrant, representing 19.9% of the outstanding shares of
the common stock of the Registrant, at a price of $33.50 per
share, which is exercisable only upon the occurrence of certain
events, and (ii) Peoples Heritage entered into a Stock Option
Agreement with the Registrant (together with the Registrant
Stock Option Agreement, the "Stock Option Agreements") whereby
Peoples Heritage granted to the Registrant an option to
purchase up to 1,674,894 shares of Peoples Heritage common
stock, representing 9.9% of the outstanding shares of Peoples
Heritage common stock, at a price of $19.75 per share, which
also is exercisable only upon the occurrence of certain events.
Each of the Stock Option Agreements provide the grantee (i)
with the right, in certain circumstances, to require the issuer
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to repurchase the option and any shares acquired by exercise of
the option and (ii) with the right to require the issuer to
register the common stock acquired by or issuable upon exercise
of the option under the Securities Act of 1933, as amended.
Concurrently with the execution and delivery of the
Agreement, Peoples Heritage entered into a Stockholder
Agreement with certain stockholders of the Registrant, pursuant
to which, among other things, such stockholders agreed to vote
their shares of the common stock of the Registrant (which
amount to 10.9% of the shares of such stock outstanding) in
favor of the Merger.
Consummation of the Merger is subject to the approval
of the respective shareholders of Peoples Heritage and of the
Registrant and the receipt of all required regulatory
approvals, as well as other customary conditions.
The Agreement, the Stock Option Agreements, the
Stockholder Agreement and the press release issued on October
25, 1995 regarding the Merger are attached as exhibits to this
report and are incorporated herein by reference. The foregoing
summaries of the Agreement, the Stock Option Agreements and the
Stockholder Agreement do not purport to be complete and are
qualified in their entirety by reference to such exhibits.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
The following exhibits are filed with this report:
Exhibit Number Description
1 Agreement and Plan of Merger,
dated as of October 25, 1995,
among Peoples Heritage, First
Coastal and the Registrant
2 Stock Option Agreement, dated
as of October 25, 1995, between
Peoples Heritage (as issuer)
and the Registrant (as grantee)
3 Stock Option Agreement, dated
as of October 25, 1995, between
Peoples Heritage (as grantee)
and the Registrant (as issuer)
4 Stockholder Agreement, dated as
of October 25, 1995, among
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Peoples Heritage and certain
stockholders of the Registrant
5 Press Release, dated October
25, 1995, relating to
transactions among Peoples
Heritage, First Coastal, the
Registrant and the Bank
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SIGNATURES
Pursuant to the requirements of the Securities Ex-
change Act of 1934, the Company has duly caused this report to
be signed on its behalf by the undersigned thereunto duly au-
thorized.
BANK OF NEW HAMPSHIRE CORPORATION
By: /s/ Gregory D. Landroche
Name: Gregory D. Landroche
Title: Chief Financial Officer
Date: November 3, 1995
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EXHIBIT INDEX
Exhibit Number Description
1 Agreement and Plan of Merger,
dated as of October 25, 1995,
among Peoples Heritage, First
Coastal and the Registrant
2 Stock Option Agreement, dated
as of October 25, 1995, between
Peoples Heritage (as grantee)
and the Registrant (as issuer)
3 Stock Option Agreement, dated
as of October 25, 1995, between
Peoples Heritage (as issuer)
and the Registrant (as grantee)
4 Stockholder Agreement, dated as
of October 25, 1995, among
Peoples Heritage and certain
stockholders of the Registrant
5 Press Release, dated October
25, 1995, relating to
transactions among Peoples
Heritage, the Registrant and
their respective subsidiaries
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EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
AMONG
PEOPLES HERITAGE FINANCIAL GROUP, INC.,
FIRST COASTAL BANKS, INC.
AND
BANK OF NEW HAMPSHIRE CORPORATION
DATED AS OF OCTOBER 25, 1995<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.................................. 3
ARTICLE II THE MERGER AND THE BANK MERGER............... 8
2.1 The Merger................................... 8
2.2 Effective Time; Closing...................... 9
2.3 Treatment of Capital Stock................... 10
2.4 Shareholder Rights; Stock Transfers.......... 10
2.5 Dissenting Shares............................ 10
2.6 Fractional Shares............................ 11
2.7 Exchange Procedures.......................... 11
2.8 Anti-Dilution Provisions..................... 13
2.9 Additional Actions........................... 13
2.10 The Bank Merger.............................. 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 14
3.1 Capital Structure............................ 14
3.2 Organization, Standing and Authority
of the Company............................. 14
3.3 Ownership of the Bank........................ 15
3.4 Organization, Standing and Authority
of the Bank................................ 15
3.5 Authorized and Effective Agreement........... 16
3.6 Securities Documents and Regulatory Reports.. 17
3.7 Financial Statements......................... 18
3.8 Material Adverse Change...................... 19
3.9 Environmental Matters........................ 19
3.10 Tax Matters.................................. 20
3.11 Legal Proceedings............................ 21
3.12 Compliance with Laws......................... 21
3.13 Certain Information.......................... 22
3.14 Employee Benefit Plans....................... 22
3.15 Certain Contracts............................ 24
3.16 Brokers and Finders.......................... 25
3.17 Insurance.................................... 25
3.18 Properties................................... 25
3.19 Labor........................................ 26
3.20 Required Vote................................ 26
3.21 Accounting for the Merger; Reorganization.... 27
3.22 Disclosures.................................. 27
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ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR............................ 27
4.1 Capital Structure............................ 27
4.2 Organization, Standing and Authority of
the Acquiror............................... 28
4.3 Ownership of the Acquiror Subsidiaries....... 28
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries...................... 29
4.5 Authorized and Effective Agreement........... 29
4.6 Securities Documents and Regulatory
Reports.................................... 31
4.7 Financial Statements......................... 31
4.8 Material Adverse Change...................... 32
4.9 Environmental Matters........................ 33
4.10 Tax Matters.................................. 33
4.11 Legal Proceedings............................ 34
4.12 Compliance with Laws......................... 34
4.13 Certain Information.......................... 35
4.14 Employee Benefit Plans....................... 35
4.15 Certain Contracts............................ 37
4.16 Brokers and Finders.......................... 37
4.17 Insurance.................................... 37
4.18 Properties................................... 38
4.19 Labor........................................ 38
4.20 Required Vote; Acquiror Rights Agreement..... 39
4.21 Accounting for the Merger; Reorganization.... 39
4.22 Disclosures.................................. 39
ARTICLE V COVENANTS.................................... 39
5.1 Reasonable Best Efforts...................... 39
5.2 Shareholder Meetings......................... 40
5.3 Regulatory Matters........................... 40
5.4 Investigation and Confidentiality............ 41
5.5 Press Releases............................... 42
5.6 Business of the Parties...................... 43
5.7 Current Information.......................... 48
5.8 Indemnification; Insurance................... 48
5.9 Certain Directors and Officers............... 50
5.10 Benefit Plans and Arrangements............... 50
5.11 Accountants' Letters......................... 51
5.12 Certain Policies; Integration................ 51
5.13 Restrictions on Resale....................... 52
5.14 Disclosure Supplements....................... 53
5.15 Failure to Fulfill Conditions................ 53
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ARTICLE VI CONDITIONS PRECEDENT......................... 53
6.1 Conditions Precedent - The Acquiror,
the Acquiror Sub and the Company........... 53
6.2 Conditions Precedent - The Company........... 55
6.3 Conditions Precedent - The Acquiror
and the Acquiror Sub....................... 56
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT............ 57
7.1 Termination.................................. 57
7.2 Effect of Termination........................ 59
7.3 Survival of Representations, Warranties
and Covenants.............................. 59
7.4 Waiver....................................... 60
7.5 Amendment or Supplement...................... 60
ARTICLE VIII MISCELLANEOUS................................ 60
8.1 Expenses..................................... 60
8.2 Entire Agreement............................. 61
8.3 No Assignment................................ 61
8.4 Notices...................................... 61
8.5 Alternative Structure........................ 62
8.6 Interpretation............................... 63
8.7 Counterparts................................. 63
8.8 Governing Law................................ 63
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Company Stockholder Agreement
Exhibit C Form of Acquiror Stock Option Agreement
Exhibit D Form of Company Affiliate Letter
Exhibit E Form of Acquiror Affiliate Letter
Exhibit F Matters to be covered by Opinion(s) of
Counsel to the Acquiror
Exhibit G Matters to be covered by Opinion(s) of
Counsel to the Company
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated
as of October 25, 1995, by and among Peoples Heritage Financial
Group, Inc. (the "Acquiror"), a Maine corporation, First
Coastal Banks, Inc. (the "Acquiror Sub"), a New Hampshire cor-
poration and a wholly-owned subsidiary of the Acquiror, and
Bank of New Hampshire Corporation (the "Company"), a New Hamp-
shire corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquiror and
the Company have determined that it is in the best interests of
their respective companies and their shareholders to consummate
the business combination transactions provided for herein, in-
cluding the merger of the Acquiror Sub with and into the Com-
pany, subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain
undertakings, conditions, representations, warranties and cov-
enants in connection with the transactions contemplated hereby;
and
WHEREAS, as a condition and inducement to the
Acquiror's willingness to enter into this Agreement, (i) the
Company is concurrently entering into a Stock Option Agreement
with the Acquiror (the "Company Stock Option Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant
to which the Company is granting to the Acquiror the option to
purchase shares of Company Common Stock (as defined herein)
under certain circumstances and (ii) certain stockholders of
the Company are concurrently entering into a Stockholder Agree-
ment with the Acquiror (the "Company Stockholder Agreement"),
in substantially the form attached hereto as Exhibit B, pursu-
ant to which, among other things, such stockholders agree to
vote their shares of Company Common Stock in favor of this
Agreement and the transactions contemplated hereby;
WHEREAS, as a condition and inducement to the
Company's willingness to enter into this Agreement, the Ac-
quiror is concurrently entering into a Stock Option Agreement
with the Company (the "Acquiror Stock Option Agreement"), in
substantially the form attached hereto as Exhibit C, pursuant
to which the Acquiror is granting to the Company the option to
purchase shares of Acquiror Common Stock (as defined herein)
under certain circumstances;<PAGE>
NOW, THEREFORE, in consideration of the premises and
of the mutual covenants and agreements herein contained, the
parties hereto do hereby agree as follows:
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ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed
to them for all purposes of this Agreement.
"Acquiror Common Stock" shall mean the common stock,
par value $.01 per share, of the Acquiror and, unless the con-
text otherwise requires, related Acquiror Rights.
"Acquiror Employee Plans" shall have the meaning set
forth in Section 4.14(a) hereof.
"Acquiror Employee Stock Benefit Plans" shall mean
the following employee benefit plans of the Acquiror: 1986
Stock Option and Stock Appreciation Rights Plan, 1986 Employee
Stock Purchase Plan, Thrift Incentive Plan, Profit Sharing Em-
ployee Stock Ownership Plan, Restricted Stock Plan for Non-
Employee Directors, 1995 Stock Option Plan for Non-Employee
Directors and Dividend Reinvestment Plan.
"Acquiror Financial Statements" shall mean (i) the
consolidated statements of financial condition (including re-
lated notes and schedules, if any) of the Acquiror as of Decem-
ber 31, 1994, 1993 and 1992 and the consolidated statements of
operations, shareholders' equity and cash flows (including re-
lated notes and schedules, if any) of the Acquiror for each of
the three years ended December 31, 1994, 1993 and 1992 as filed
by the Acquiror in its Securities Documents, and (ii) the con-
solidated statements of financial condition of the Acquiror
(including related notes and schedules, if any) and the con-
solidated statements of operations, shareholders' equity and
cash flows (including related notes and schedules, if any) of
the Acquiror included in the Securities Documents filed by the
Acquiror with respect to the quarterly and annual periods ended
subsequent to December 31, 1994.
"Acquiror Maine Bank" shall mean Peoples Heritage
Savings Bank, a Maine-chartered savings bank and a wholly-owned
subsidiary of the Acquiror.
"Acquiror New Hampshire Bank" shall mean The First
National Bank of Portsmouth, a national bank and a wholly-
owned subsidiary of the Acquiror Sub.
"Acquiror Preferred Stock" shall mean the shares of
preferred stock, par value $.01 per share, of the Acquiror.
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"Acquiror Rights" shall mean the rights attached to
shares of Common Stock pursuant to the Acquiror Rights Agree-
ment.
"Acquiror Rights Agreement" shall mean the Stock-
holder Rights Agreement, dated as of September 12, 1989, be-
tween Acquiror and Mellon Securities Trust Company, in its ca-
pacity as Rights Agent.
"Articles of Merger" shall have the meaning set forth
in Section 2.2 hereof.
"Bank" shall mean Bank of New Hampshire, a New
Hampshire-chartered commercial bank and a wholly-owned subsid-
iary of the Company.
"Bank Commissioner" shall mean the Bank Commissioner
of the State of New Hampshire.
"Bank Merger" shall have the meaning set forth in
Section 2.10 hereof.
"Bank Merger Agreement" shall have the meaning set
forth in Section 2.10 hereof.
"BHCA" shall mean the Bank Holding Company Act of
1956, as amended.
"BIF" means the Bank Insurance Fund administered by
the FDIC or any successor thereto.
"Code" shall mean the Internal Revenue Code of 1986,
as amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Company Common Stock" shall mean the common stock,
no par value with a stated value of $2.50 per share, of the
Company.
"Company Employee Plans" shall have the meaning set
forth in Section 3.14(a) hereof.
"Company Financial Statements" shall mean (i) the
consolidated statements of financial condition (including re-
lated notes and schedules, if any) of the Company as of Decem-
ber 31, 1994, 1993 and 1992 and the consolidated statements of
operations, shareholders' equity and cash flows (including re-
lated notes and schedules, if any) of the Company for each of
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the three years ended December 31, 1994, 1993 and 1992 as filed
by the Company in its Securities Documents, and (ii) the con-
solidated statements of financial condition of the Company (in-
cluding related notes and schedules, if any) and the consoli-
dated statements of operations, shareholders' equity and cash
flows (including related notes and schedules, if any) of the
Company included in the Securities Documents filed by the Com-
pany with respect to the quarterly and annual periods ended
subsequent to December 31, 1994.
"Company Preferred Stock" shall mean the shares of
preferred stock, no par value per share, of the Company.
"Dissenting Shares" shall have the meaning set forth
in Section 2.5 hereof.
"Effective Time" shall mean the date and time speci-
fied pursuant to Section 2.2 hereof as the effective time of
the Merger.
"Environmental Claim" means any written notice from
any Governmental Entity or third party alleging potential li-
ability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, personal
injuries or penalties) arising out of, based on, or resulting
from the presence, or release into the environment, of any Ma-
terials of Environmental Concern.
"Environmental Laws" means any federal, state or lo-
cal law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, order, judgment, de-
cree, injunction or agreement with any governmental entity re-
lating to (1) the protection, preservation or restoration of
the environment (including, without limitation, air, water va-
por, surface water, groundwater, drinking water supply, surface
soil, subsurface soil, plant and animal life or any other natu-
ral resource), and/or (2) the use, storage, recycling, treat-
ment, generation, transportation, processing, handling, label-
ing, production, release or disposal of Materials of Environ-
ment Concern. The term Environmental Law includes without
limitation (1) the Comprehensive Environmental Response, Com-
pensation and Liability Act, as amended, 42 U.S.C. Section
9601, et seq; the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901, et seq; the Clean Air Act, as
amended, 42 U.S.C. Section 7401, et seq; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 9601, et seq; the Emergency Planning and Community
Right to Know Act, 42 U.S.C. Section 1101, et seq; the Safe
Drinking Water Act, 42 U.S.C. Section 300f, et seq; and all
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comparable state and local laws, and (2) any common law (in-
cluding without limitation common law that may impose strict
liability) that may impose liability or obligations for inju-
ries or damages due to, or threatened as a result of, the pres-
ence of or exposure to any Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Exchange Ratio" shall have the meaning set forth in
Section 2.3 hereof.
"FDIA" shall mean the Federal Deposit Insurance Act,
as amended.
"FDIC" shall mean the Federal Deposit Insurance Cor-
poration or any successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on
Form S-4 (or on any successor or other appropriate form) to be
filed by the Acquiror in connection with the issuance of shares
of Acquiror Common Stock pursuant to the Merger, including the
Proxy Statement which forms a part thereof, as amended and
supplemented.
"FRB" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Governmental Entity" shall mean any federal or state
court, administrative agency or commission or other governmen-
tal authority or instrumentality.
"Material Adverse Effect" shall mean, with respect to
the Acquiror or the Company, respectively, any effect that (i)
is material and adverse to the financial condition, results of
operations or business of the Acquiror and its Subsidiaries
taken as whole and the Company and the Bank taken as a whole,
respectively, or (ii) materially impairs the ability of the
Company, the Bank, the Acquiror, the Acquiror Sub or the Ac-
quiror New Hampshire Bank to consummate the transactions con-
templated by this Agreement and the Bank Merger Agreement, pro-
vided, however, that Material Adverse Effect shall not be
deemed to include the impact of (a) changes in laws and regula-
tions or interpretations thereof that are generally applicable
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to the banking or savings industries (including without limita-
tion prospective changes which result in assessments of all
institutions with SAIF-insured deposits which are intended to
recapitalize the SAIF), (b) changes in generally accepted ac-
counting principles that are generally applicable to the bank-
ing or savings industries, (c) expenses incurred in connection
with the transactions contemplated hereby and (d) the actions
contemplated by Section 5.12 hereof.
"Materials of Environmental Concern" means pollut-
ants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other materials regulated under En-
vironmental Laws.
"Merger" shall mean the merger of the Acquiror Sub
with and into the Company pursuant to the terms hereof.
"MRSA" shall mean the Maine Revised Statutes An-
notated.
"NASD" shall mean the National Association of Securi-
ties Dealers, Inc.
"NHBCA" shall mean the New Hampshire Business Corpo-
ration Act.
"NHBTCI" shall mean the New Hampshire Board of Trust
Company Incorporation.
"OCC" shall mean the Office of the Comptroller of the
Currency of the U.S. Department of the Treasury, or any succes-
sor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corpo-
ration, or any successor thereto.
"Previously Disclosed" shall mean disclosed (i) in a
letter dated the date hereof delivered from the disclosing
party to the other party specifically referring to the ap-
propriate section of this Agreement and describing in reason-
able detail the matters contained therein, or (ii) a letter
dated after the date hereof from the disclosing party specifi-
cally referring to this Agreement and describing in reasonable
detail the matters contained therein and delivered by the other
party pursuant to Section 5.14 hereof.
"Proxy Statement" shall mean the joint prospectus/
proxy statement contained in the Form S-4, as amended or
supplemented, and to be delivered to shareholders of the Ac-
quiror and the Company in connection with the solicitation of
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their approval of this Agreement and the transactions contem-
plated hereby.
"Rights" shall mean warrants, options, rights, con-
vertible securities and other arrangements or commitments which
obligate an entity to issue or dispose of any of its capital
stock or other ownership interests.
"SAIF" means the Savings Association Insurance Fund
administered by the FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of
1933, as amended.
"Securities Documents" shall mean all reports, offer-
ing circulars, proxy statements, registration statements and
all similar documents filed, or required to be filed, pursuant
to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the
Exchange Act; the Investment Company Act of 1940, as amended;
the Investment Advisers Act of 1940, as amended; the Trust In-
denture Act of 1939, as amended, and the rules and regulations
of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have
the meanings set forth in Rule 1-02 of Regulation S-X of the
Commission.
"Superintendent" shall mean the Superintendent of the
Bureau of Banking of the State of Maine.
Other terms used herein are defined in the preamble
and elsewhere in this Agreement.
ARTICLE II
THE MERGER AND THE BANK MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 2.2
hereof), the Acquiror Sub shall be merged with and into the
Company (the "Merger") in accordance with the applicable provi-
sions of the NHBCA. The Company shall be the surviving corpo-
ration (hereinafter sometimes called the "Surviving Corpora-
tion") of the Merger, and shall continue its corporate exist-
ence under the laws of the State of New Hampshire. The name of
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the Surviving Corporation shall continue to be "Bank of New
Hampshire Corporation." Upon consummation of the Merger, the
separate corporate existence of the Acquiror Sub shall termi-
nate.
(b) From and after the Effective Time, the Merger
shall have the effects set forth in Section 293-A:11.06 of the
NHBCA.
(c) The Articles of Agreement and Bylaws of the Com-
pany, as in effect immediately prior to the Effective Time,
shall be the Articles of Agreement and Bylaws of the Surviving
Corporation, respectively, until altered, amended or repealed
in accordance with their terms and applicable law.
(d) Upon consummation of the Merger, (i) the direc-
tors of the Surviving Corporation shall include (x) Davis P.
Thurber, Paul R. Shea and seven of the directors of the Company
immediately prior to the Effective Time designated by the Com-
pany and who are willing to so serve and (y) up to seven of the
directors of the Acquiror Sub immediately prior to the Effec-
tive Time designated by the Acquiror and the Acquiror Sub and
who are willing to so serve, (ii) the executive officers of the
Surviving Corporation shall be the executive officers of the
Company immediately prior to the Effective Time, except that
Paul R. Shea shall be President and Chief Executive Officer of
the Surviving Corporation and Norman E. Bilodeau shall be Ex-
ecutive Vice President of the Surviving Corporation, and (iii)
Davis P. Thurber shall be Chairman of the Board of the Surviv-
ing Corporation. Directors and officers of the Surviving Cor-
poration shall serve for such terms as are specified in the
Articles of Agreement and Bylaws of the Surviving Corporation.
2.2 Effective Time; Closing
The Merger shall become effective upon the occurrence
of the filing of articles of merger (the "Articles of Merger")
with the Secretary of State of the State of New Hampshire pur-
suant to the NHBCA, unless a later date and time is specified
as the effective time in such Articles of Merger (the "Effec-
tive Time"). A closing (the "Closing") shall take place im-
mediately prior to the Effective Time at 10:00 a.m., Eastern
Time, on the fifth business day following the satisfaction or
waiver, to the extent permitted hereunder, of the conditions to
the consummation of the Merger specified in Article VI of this
Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the
Closing), at the principal executive offices of the Acquiror in
Portland, Maine, or at such other place, at such other time, or
on such other date as the parties may mutually agree upon. At
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the Closing, there shall be delivered to the Acquiror and the
Company the opinions, certificates and other documents required
to be delivered under Article VI hereof.
2.3 Treatment of Capital Stock
Subject to the provisions of this Agreement, at the
Effective Time, automatically by virtue of the Merger and with-
out any action on the part of any shareholder:
(a) each share of Acquiror Common Stock issued and
outstanding immediately prior to the Effective Time shall be
unchanged and shall remain issued and outstanding;
(b) each share of Acquiror Sub common stock issued
and outstanding immediately prior to the Effective Time shall
become and be converted into one share of Company Common Stock
and shall remain issued and outstanding; and
(c) subject to Sections 2.5 and 2.6 hereof, each
share of Company Common Stock issued and outstanding im-
mediately prior to the Effective Time (other than shares held
by the Acquiror or any of its Subsidiaries other than in a fi-
duciary capacity that are beneficially owned by third parties
or as a result of debts previously contracted, which shall be
cancelled and retired) shall become and be converted into the
right to receive two shares of Acquiror Common Stock (subject
to possible adjustment as set forth in Sections 2.8 and 7.1(f)
hereof, the "Exchange Ratio").
2.4 Shareholder Rights; Stock Transfers
Except as provided for in Section 2.5 hereof, at the
Effective Time, holders of Company Common Stock shall cease to
be and shall have no rights as shareholders of the Company,
other than to receive the consideration provided under this
Article II. After the Effective Time, there shall be no trans-
fers on the stock transfers books of the Company or the Surviv-
ing Corporation of shares of Company Common Stock.
2.5 Dissenting Shares
Each outstanding share of Company Common Stock the
holder of which has perfected his right to dissent under the
NHBCA and has not effectively withdrawn or lost such right as
of the Effective Time (the "Dissenting Shares") shall not be
converted into or represent a right to receive shares of Ac-
quiror Common Stock hereunder, and the holder thereof shall be
entitled only to such rights as are granted by the NHBCA. The
Company shall give the Acquiror prompt notice upon receipt by
-10-<PAGE>
the Company of any such written demands for payment of the fair
value of such shares of Company Common Stock and of withdrawals
of such demands and any other instruments provided pursuant to
the NHBCA (any shareholder duly making such demand being here-
inafter called a "Dissenting Shareholder"). If any Dissenting
Shareholder shall effectively withdraw or lose (through failure
to perfect or otherwise) his right to such payment at any time,
such holder's shares of Company Common Stock shall be converted
into the right to receive Acquiror Common Stock in accordance
with the applicable provisions of this Agreement. Any payments
made in respect of Dissenting Shares shall be made by the Sur-
viving Corporation.
2.6 Fractional Shares
Notwithstanding any other provision hereof, no frac-
tional shares of Acquiror Common Stock shall be issued to hold-
ers of Company Common Stock. In lieu thereof, each holder of
shares of Company Common Stock entitled to a fraction of a
share of Acquiror Common Stock shall, at the time of surrender
of the certificate or certificates representing such holder's
shares, receive an amount of cash (without interest) equal to
the product arrived at by multiplying such fraction of a share
of Acquiror Common Stock by the closing price of the Acquiror
Common Stock on the Nasdaq Stock Market's National Market on
the business day preceding the Effective Time, as reported in
The Wall Street Journal, or if not reported therein, in another
authoritative source, rounded to the nearest whole cent. No
such holder shall be entitled to dividends, voting rights or
any other rights in respect of any fractional share interest.
2.7 Exchange Procedures
(a) At or after the Effective Time, each holder of a
certificate or certificates theretofore evidencing issued and
outstanding shares of Company Common Stock, upon surrender of
the same to an agent, duly appointed by the Acquiror ("Exchange
Agent"), shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of full
shares of Acquiror Common Stock into which the shares of Com-
pany Common Stock theretofore represented by the certificate or
certificates so surrendered shall have been converted as pro-
vided in Section 2.3(c) hereof. As promptly as practicable
after the Effective Time (and in no event later than the fifth
business day following the Effective Time), the Exchange Agent
shall mail to each holder of record of an outstanding certifi-
cate which immediately prior to the Effective Time evidenced
shares of Company Common Stock, and which is to be exchanged
for Acquiror Common Stock as provided in Section 2.3 hereof, a
-11-<PAGE>
form of letter of transmittal (which shall specify that deliv-
ery shall be effected, and risk of loss and title to such cer-
tificate shall pass, only upon delivery of such certificate to
the Exchange Agent) advising such holder of the terms of the
exchange effected by the Merger and of the procedure for sur-
rendering to the Exchange Agent such certificate in exchange
for a certificate or certificates evidencing Acquiror Common
Stock or cash in lieu of any fractional share. Notwithstanding
anything in this Agreement to the contrary, certificates repre-
senting Company Common Stock surrendered for exchange by any
Affiliate of the Company (as defined in Section 5.13(a) hereof)
shall not be exchanged for certificates representing shares of
Acquiror Common Stock in accordance with the terms of this
Agreement until the Acquiror has received a written agreement
from such person as specified in Section 5.13(b).
(b) No holder of a certificate theretofore repre-
senting shares of Company Common Stock shall be entitled to
receive any dividends in respect of the Acquiror Common Stock
into which such shares shall have been converted by virtue of
the Merger until the certificate representing such shares is
surrendered in exchange for a certificate or certificates rep-
resenting shares of Acquiror Common Stock. In the event that
dividends are declared and paid by the Acquiror in respect of
Acquiror Common Stock after the Effective Time but prior to any
holder's surrender of certificates representing shares of Com-
pany Common Stock, dividends payable to such holder in respect
of shares of Acquiror Common Stock not then issued shall accrue
(without interest). Any such dividends shall be paid (without
interest) upon surrender of the certificates representing such
shares of Company Common Stock. The Acquiror shall be en-
titled, after the Effective Time, to treat certificates repre-
senting shares of Company Common Stock as evidencing ownership
of the number of full shares of Acquiror Common Stock into
which the shares of Company Common Stock represented by such
certificates shall have been converted pursuant to this Agree-
ment, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
(c) The Acquiror shall not be obligated to deliver a
certificate or certificates representing shares of Acquiror
Common Stock to which a holder of Company Common Stock would
otherwise be entitled as a result of the Merger until such
holder surrenders the certificate or certificates representing
the shares of Company Common Stock for exchange as provided in
this Section 2.7, or, in default thereof, an appropriate af-
fidavit of loss and indemnity agreement and/or a bond in an
amount as may be reasonably required in each case by the Ac-
quiror. If any certificate evidencing shares of Acquiror Com-
mon Stock is to be issued in a name other than that in which
-12-<PAGE>
the certificate evidencing Company Common Stock surrendered in
exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and
that the person requesting such exchange pay to the Exchange
Agent any transfer or other tax required by reason of the issu-
ance of a certificate for shares of Acquiror Common Stock in
any name other than that of the registered holder of the cer-
tificate surrendered or otherwise establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not
payable.
2.8 Anti-Dilution Provisions
If, between the date hereof and the Effective Time,
the shares of Acquiror Common Stock shall be changed into a
different number or class of shares by reason of any reclas-
sification, recapitalization, split-up, combination, exchange
of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the Exchange
Ratio shall be adjusted accordingly. Nothing contained herein
shall be deemed to permit any action which may be proscribed by
this Agreement.
2.9 Additional Actions
If, at any time after the Effective Time, the Surviv-
ing Corporation shall consider that any further assignments or
assurances in law or any other acts are necessary or desirable
to (i) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of the Acquiror
Sub acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger, or (ii) other-
wise carry out the purposes of this Agreement, the Acquiror Sub
and its proper officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such proper deeds, assign-
ments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Corporation
and otherwise to carry out the purposes of this Agreement; and
the proper officers and directors of the Surviving Corporation
are fully authorized in the name of the Acquiror Sub or other-
wise to take any and all such action.
2.10 The Bank Merger
The Acquiror and the Company shall take all action
necessary and appropriate, including causing the entering into
-13-<PAGE>
of a merger agreement by the Bank and the Acquiror New Hamp-
shire Bank (the "Bank Merger Agreement"), to cause the Acquiror
New Hampshire Bank to merge with and into the Bank (the "Bank
Merger") immediately after consummation of the Merger in ac-
cordance with the applicable laws of the State of New Hampshire
and the United States. The Bank shall be the surviving corpo-
ration in the Bank Merger, and shall continue its corporate
existence under the name "Bank of New Hampshire" under the laws
of the State of New Hampshire as a direct wholly-owned subsid-
iary of the Company and an indirect wholly-owned subsidiary of
the Acquiror. Upon consummation of the Bank Merger, the sepa-
rate corporate existence of the Acquiror New Hampshire Bank
shall cease. The directors and executive officers of the Bank
upon consummation of the Bank Merger shall be as set forth in
the Bank Merger Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror
that, except as Previously Disclosed:
3.1 Capital Structure
The authorized capital stock of the Company consists
of 6,000,000 shares of Company Common Stock and 500,000 shares
of Company Preferred Stock. As of the date hereof, there are
4,064,156 shares of Company Common Stock issued and outstand-
ing, no shares of Company Common Stock are directly or indi-
rectly held by the Company as treasury stock and no shares of
Company Preferred Stock are issued and outstanding. All out-
standing shares of Company Common Stock have been duly autho-
rized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Company Common Stock has
been issued in violation of the preemptive rights of any per-
son, firm or entity. Except by virtue of the Company Stock Op-
tion Agreement, there are no Rights authorized, issued or out-
standing with respect to the capital stock of the Company.
3.2 Organization, Standing and Authority of the Company
The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
New Hampshire with full corporate power and authority to own or
lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to
do business and is in good standing in each jurisdiction in
which its ownership or leasing of property or the conduct of
-14-<PAGE>
its business requires such licensing or qualification, except
where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Com-
pany. The Company is duly registered as a bank holding company
under the BHCA and the regulations of the FRB thereunder. The
Company has heretofore delivered to the Acquiror true and com-
plete copies of the Articles of Agreement and Bylaws of the
Company as in effect as of the date hereof.
3.3 Ownership of the Bank
The only direct or indirect Subsidiary of the Company
is the Bank. Except for capital stock of the Bank, securities
and other interests held in a fiduciary capacity and benefi-
cially owned by third parties or taken in consideration of
debts previously contracted and by virtue of the Acquiror Stock
Option Agreement, the Company does not own or have the right to
acquire, directly or indirectly, any outstanding capital stock
or other voting securities or ownership interests of any corpo-
ration, bank, savings association, partnership, joint venture
or other organization. The outstanding shares of capital stock
of the Bank have been duly authorized and validly issued, are
fully paid and nonassessable, and are directly owned by the
Company free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of
any kind whatsoever. No Rights are authorized, issued or out-
standing with respect to the capital stock of the Bank and
there are no agreements, understandings or commitments relating
to the right of the Company to vote or to dispose of such capi-
tal stock.
3.4 Organization, Standing and Authority of the Bank
The Bank is a commercial bank duly organized, validly
existing and in good standing under the laws of the State of
New Hampshire. The Bank (i) has full power and authority to
own or lease all of its properties and assets and to carry on
its business as now conducted, and (ii) is duly licensed or
qualified to do business and is in good standing in each juris-
diction in which its ownership or leasing of property or the
conduct of its business requires such qualification, except
where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Com-
pany. The deposit accounts of the Bank are insured by the BIF
to the maximum extent permitted by the FDIA, and the Bank has
paid all premiums and assessments required by the FDIA and the
regulations thereunder. The Company has heretofore delivered
or made available to the Acquiror true and complete copies of
the Certificate of Incorporation and Bylaws of the Bank as in
effect as of the date hereof.
-15-<PAGE>
3.5 Authorized and Effective Agreement
(a) The Company has all requisite corporate power
and authority to enter into this Agreement and (subject to re-
ceipt of all necessary governmental approvals and the approval
of the Company's shareholders of this Agreement) to perform all
of its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transac-
tions contemplated hereby have been duly and validly authorized
by all necessary corporate action in respect thereof on the
part of the Company, except for the approval of this Agreement
by the Company's shareholders. This Agreement has been duly
and validly executed and delivered by the Company and, assuming
due authorization, execution and delivery by the Acquiror and
the Acquiror Sub, constitutes a legal, valid and binding obli-
gation of the Company which is enforceable against the Company
in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general eq-
uity principles.
(b) Neither the execution and delivery of this
Agreement, nor consummation of the transactions contemplated
hereby (including the Merger and the Bank Merger), nor compli-
ance by the Company with any of the provisions hereof (i) does
or will conflict with or result in a breach of any provisions
of the Articles of Agreement or Bylaws of the Company or the
equivalent documents of the Bank, (ii) violate, conflict with
or result in a breach of any term, condition or provision of,
or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or ac-
celeration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the
Company or the Bank pursuant to, any material note, bond, mort-
gage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company or the Bank
is a party, or by which any of their respective properties or
assets may be bound or affected, or (iii) subject to receipt of
all required governmental and shareholder approvals, violate
any order, writ, injunction, decree, statute, rule or regula-
tion applicable to the Company or the Bank.
(c) Except for (i) the filing of applications and
notices with, and the consents and approvals of, as applicable,
the FRB, the FDIC, the OCC, the NHBTCI, the Bank Commissioner
and the Superintendent, (ii) the filing and effectiveness of
the Form S-4 with the Commission, (iii) compliance with ap-
plicable state securities or "blue sky" laws and the NASD By-
laws in connection with the issuance of Acquiror Common Stock
-16-<PAGE>
pursuant to this Agreement, (iv) the approval of this Agreement
by the requisite vote of the shareholders of the Company and
the Acquiror, (v) the filing of Articles of Merger with the
Secretary of State of New Hampshire pursuant to the NHBCA in
connection with the Merger and (vi) the filing of a certificate
issued by the Bank Commissioner approving the Bank Merger with
the Secretary of State of New Hampshire, and except for such
filings, authorizations or approvals which are Previously Dis-
closed, no consents or approvals of or filings or registrations
with any Governmental Entity or with any third party are neces-
sary on the part of the Company or the Bank in connection with
(i) the execution and delivery by the Company of this Agreement
and the consummation by the Company of the transactions contem-
plated hereby and (ii) the execution and delivery by the Bank
of the Bank Merger Agreement and the consummation by the Bank
of the transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor
the Bank is aware of any reasons relating to the Company or the
Bank (including without limitation Community Reinvestment Act
compliance) why all consents and approvals shall not be pro-
cured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be neces-
sary for (i) consummation of the transactions contemplated by
this Agreement and the Bank Merger Agreement and (ii) the con-
tinuation by the Acquiror after the Effective Time of the busi-
ness of each of the Acquiror and the Company as such business
is carried on immediately prior to the Effective Time, free of
any conditions or requirements which, in the reasonable opinion
of the Company, could have a Material Adverse Effect on the
Acquiror or the Company or materially impair the value of the
Company and the Bank to the Acquiror.
3.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1993, the Company has timely
filed with the Commission all Securities Documents required by
the Securities Laws and such Securities Documents complied in
all material respects with the Securities Laws and did not con-
tain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circum-
stances under which they were made, not misleading.
(b) Since January 1, 1993, each of the Company and
the Bank has duly filed with the FRB, the FDIC and the Bank
Commissioner, as the case may be, in correct form the reports
required to be filed under applicable laws and regulations and
such reports were in all material respects complete and ac-
curate and in compliance with the requirements of applicable
-17-<PAGE>
laws and regulations. In connection with the most recent ex-
aminations of the Company and the Bank by the FRB, the FDIC or
the Bank Commissioner, neither the Company nor the Bank was
required to correct or change any action, procedure or proceed-
ing which the Company or the Bank believes has not been cor-
rected or changed as required.
3.7 Financial Statements
(a) The Company has previously delivered or made
available to the Acquiror accurate and complete copies of the
Company Financial Statements which, in the case of the consoli-
dated statements of financial condition of the Company as of
December 31, 1994, 1993 and 1992 and the consolidated state-
ments of operations, shareholders' equity and cash flows for
each of the three years ended December 31, 1994, 1993 and 1992,
are accompanied by the audit reports of Ernst & Young LLP, in-
dependent public accountants with respect to the Company. The
Company Financial Statements referred to herein, as well as the
Company Financial Statements to be delivered pursuant to Sec-
tion 5.7 hereof, fairly present or will fairly present, as the
case may be, the consolidated financial condition of the Com-
pany as of the respective dates set forth therein, and the con-
solidated results of operations, shareholders' equity and cash
flows of the Company for the respective periods or as of the
respective dates set forth therein.
(b) Each of the Company Financial Statements re-
ferred to in Section 3.7(a) has been or will be, as the case
may be, prepared in accordance with generally accepted account-
ing principles consistently applied during the periods in-
volved, except as stated therein. The audits of the Company
and the Company Subsidiaries have been conducted in all mate-
rial respects in accordance with generally accepted auditing
standards. The books and records of the Company and the Com-
pany Subsidiaries are being maintained in material compliance
with applicable legal and accounting requirements, and such
books and records accurately reflect in all material respects
all dealings and transactions in respect of the business, as-
sets, liabilities and affairs of the Company and the Bank.
(c) Except and to the extent (i) reflected, dis-
closed or provided for in the consolidated statement of finan-
cial condition of the Company as of June 30, 1995 (including
related notes) and (ii) of liabilities incurred since June 30,
1995 in the ordinary course of business, neither the Company
nor the Bank has any liabilities, whether absolute, accrued,
contingent or otherwise, material to the financial condition,
results of operations or business of the Company on a consoli-
dated basis.
-18-<PAGE>
3.8 Material Adverse Change
Since June 30, 1995, (i) the Company and the Bank
have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses in connec-
tion with this Agreement and the transactions contemplated
hereby) and (ii) no event has occurred or circumstance arisen
that, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on the Company.
3.9 Environmental Matters
(a) To the best of the Company's knowledge, the Com-
pany and the Bank are in compliance with all Environmental
Laws, except for any violations of any Environmental Law which
would not, singly or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor the Bank has
received any communication alleging that the Company or the
Bank is not in such compliance and, to the best knowledge of
the Company, there are no present circumstances that would pre-
vent or interfere with the continuation of such compliance.
(b) To the best of the Company's knowledge, none of
the properties owned, leased or operated by the Company or the
Bank has been or is in violation of or liable under any Envi-
ronmental Law, except any such violations or liabilities which
would not singly or in the aggregate have a Material Adverse
Effect on the Company.
(c) To the best of the Company's knowledge, there
are no past or present actions, activities, circumstances, con-
ditions, events or incidents that could reasonably form the
basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition
of any liability arising under any Environmental Law against
the Company or the Bank or against any person or entity whose
liability for any Environmental Claim the Company or the Bank
has or may have retained or assumed either contractually or by
operation of law, except such which would not have a Material
Adverse Effect on the Company.
(d) Except as Previously Disclosed, the Company has
not conducted any environmental studies during the past five
years with respect to any properties owned by it or the Bank as
of the date hereof or which secure loans of the Bank as of the
date hereof.
-19-<PAGE>
3.10 Tax Matters
(a) The Company and the Bank have timely filed all
federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and
other tax returns required by applicable law to be filed by
them (including, without limitation, estimated tax returns,
income tax returns, information returns and withholding and
employment tax returns) and have paid, or where payment is not
required to have been made, have set up an adequate reserve or
accrual for the payment of, all taxes required to be paid in
respect of the periods covered by such returns and, as of the
Effective Time, will have paid, or where payment is not re-
quired to have been made, will have set up an adequate reserve
or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Time. Neither the
Company nor the Bank will have any material liability for any
such taxes in excess of the amounts so paid or reserves or ac-
cruals so established.
(b) All federal, state and local (and, if ap-
plicable, foreign) income, franchise, bank, excise, real prop-
erty, personal property and other tax returns filed by the Com-
pany and the Bank are complete and accurate in all material
respects. Neither the Company nor the Bank is delinquent in
the payment of any tax, assessment or governmental charge, and
except as Previously Disclosed neither of them has requested
any extension of time within which to file any tax returns in
respect of any fiscal year or portion thereof which have not
since been filed. Except as Previously Disclosed, the federal,
state and local income tax returns of the Company and the Bank
have been examined by the applicable tax authorities (or are
closed to examination due to the expiration of the applicable
statute of limitations) and no deficiencies for any tax, as-
sessment or governmental charge have been proposed, asserted or
assessed (tentatively or otherwise) against the Company or the
Bank as a result of such examinations or otherwise which have
not been settled and paid. There are currently no agreements
in effect with respect to the Company or the Bank to extend the
period of limitations for the assessment or collection of any
tax. As of the date hereof, no audit, examination or defi-
ciency or refund litigation with respect to such return is
pending or, to the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, none of the Com-
pany or the Bank (i) is a party to any agreement providing for
the allocation or sharing of taxes, (ii) is required to include
in income any adjustment pursuant to Section 481(a) of the Code
by reason of a voluntary change in accounting method initiated
by the Company or the Bank (nor does the Company have any
-20-<PAGE>
knowledge that the Internal Revenue Service has proposed any
such adjustment or change of accounting method) or (iii) has
filed a consent pursuant to Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply.
3.11 Legal Proceedings
There are no actions, suits, claims, governmental
investigations or proceedings instituted, pending or, to the
best knowledge of the Company, threatened against the Company
or the Bank or against any asset, interest or right of the Com-
pany or the Bank, or against any officer, director or employee
of any of them that in any such case, if decided adversely,
would have a Material Adverse Effect on the Company. Neither
the Company nor the Bank is a party to any order, judgment or
decree which has or could reasonably be expected to have a Ma-
terial Adverse Effect on the Company.
3.12 Compliance with Laws
(a) Each of the Company and the Bank has all per-
mits, licenses, certificates of authority, orders and approvals
of, and has made all filings, applications and registrations
with, federal, state, local and foreign governmental or regula-
tory bodies that are required in order to permit it to carry on
its business as it is presently being conducted and the absence
of which could reasonably be expected to have a Material Ad-
verse Effect on the Company; all such permits, licenses, cer-
tificates of authority, orders and approvals are in full force
and effect; and to the best knowledge of the Company, no sus-
pension or cancellation of any of the same is threatened.
(b) Neither the Company nor the Bank is in violation
of its respective Articles of Agreement, Certificate of Incor-
poration or Bylaws, or of any applicable federal, state or lo-
cal law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (in-
cluding, without limitation, all banking (including without
limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordi-
nances, orders, rules and regulations), or in default with re-
spect to any order, writ, injunction or decree of any court, or
in default under any order, license, regulation or demand of
any governmental agency, any of which violations or defaults
could reasonably be expected to have a Material Adverse Effect
on the Company; and neither the Company nor the Bank has re-
ceived any notice or communication from any federal, state or
local governmental authority asserting that the Company or the
-21-<PAGE>
Bank is in violation of any of the foregoing which could rea-
sonably be expected to have a Material Adverse Effect on the
Company. Neither the Company nor the Bank is subject to any
regulatory or supervisory cease and desist order, agreement,
written directive, memorandum of understanding or written com-
mitment (other than those of general applicability to all banks
or bank holding companies issued by governmental authorities),
and neither of them has received any written communication re-
questing that it enter into any of the foregoing.
3.13 Certain Information
None of the information relating to the Company and
the Bank supplied or to be supplied for inclusion or incorpora-
tion by reference in (i) the Form S-4 will, at the time the
Form S-4 and any amendment thereto becomes effective under the
Securities Act, contain any untrue statement of a material fact
or omit to state a material fact necessary to make the state-
ments therein, in light of the circumstances under which they
were made, not misleading, and (ii) the Proxy Statement, as of
the date(s) such Proxy Statement is mailed to shareholders of
the Company and the Acquiror and up to and including the
date(s) of the meetings of shareholders to which such Proxy
Statement relates, will contain any untrue statement of a mate-
rial fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information
as of a later date shall be deemed to modify information as of
an earlier date. The Proxy Statement mailed by the Company to
its shareholders in connection with the meeting of shareholders
at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Ex-
change Act and the rules and regulations promulgated thereun-
der.
3.14 Employee Benefit Plans
(a) The Company has Previously Disclosed all stock
option, employee stock purchase and stock bonus plans, quali-
fied pension or profit-sharing plans, any deferred compensa-
tion, consultant, bonus or group insurance contract or any
other incentive, welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of
the Company or the Bank (the "Company Employee Plans"), and the
Company has previously furnished or made available to the Ac-
quiror accurate and complete copies of the same together with
(i) the most recent actuarial and financial reports prepared
with respect to any qualified plans, (ii) the most recent an-
nual reports filed with any governmental agency, and (iii) all
-22-<PAGE>
rulings and determination letters and any open requests for
rulings or letters that pertain to any qualified plan.
(b) None of the Company, the Bank, any pension plan
maintained by either of them and qualified under Section 401 of
the Code or, to the best of the Company's knowledge, any fidu-
ciary of such plan has incurred any material liability to the
PBGC or the Internal Revenue Service with respect to any em-
ployees of the Company or the Bank. To the best of the
Company's knowledge, no reportable event under Section 4043(b)
of ERISA has occurred with respect to any such pension plan.
(c) Neither the Company nor the Bank participates in
or has incurred any liability under Section 4201 of ERISA for a
complete or partial withdrawal from a multi-employer plan (as
such term is defined in ERISA).
(d) A favorable determination letter has been issued
by the Internal Revenue Service with respect to each Company
Employee Plan which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) (a "Company Pension Plan")
which is intended to qualify under Section 401 of the Code to
the effect that such plan is qualified under Section 401 of the
Code and the trust associated with such employee pension plan
is tax exempt under Section 501 of the Code. No such letter
has been revoked or, to the best of the Company's knowledge, is
threatened to be revoked and the Company does not know of any
ground on which such revocation may be based. Neither the Com-
pany nor the Bank has any liability under any such plan that is
not reflected on the consolidated statement of financial condi-
tion of the Company at June 30, 1995 included in the Company
Financial Statements, other than liabilities incurred in the
ordinary course of business in connection therewith subsequent
to the date thereof.
(e) To the best of the Company's knowledge, no pro-
hibited transaction (which shall mean any transaction prohib-
ited by Section 406 of ERISA and not exempt under Section 408
of ERISA or Section 4975 of the Code) has occurred with respect
to any Company Employee Plan which would result in the imposi-
tion, directly or indirectly, of a material excise tax under
Section 4975 of the Code or otherwise have a Material Adverse
Effect on the Company.
(f) Full payment has been made (or proper accruals
have been established) of all contributions which are required
for periods prior to the date hereof, and full payment will be
so made (or proper accruals will be so established) of all con-
tributions which are required for periods after the date hereof
-23-<PAGE>
and prior to the Effective Time, under the terms of each Com-
pany Employee Plan or ERISA; no accumulated funding deficiency
(as defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived, exists with respect to any Com-
pany Pension Plan, and there is no "unfunded current liability"
(as defined in Section 412 of the Code) with respect to any
Company Pension Plan.
(g) To the best of the Company's knowledge, the Com-
pany Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the
Code, all regulations, rulings and announcements promulgated or
issued thereunder and all other applicable governmental laws
and regulations.
(h) There are no pending or, to the best knowledge
of the Company, threatened claims (other than routine claims
for benefits) by, on behalf of or against any of the Company
Employee Plans or any trust related thereto or any fiduciary
thereof.
3.15 Certain Contracts
(a) Except as Previously Disclosed, neither the Com-
pany nor the Bank is a party to, is bound or affected by, re-
ceives, or is obligated to pay, benefits under (i) any agree-
ment, arrangement or commitment, including without limitation
any agreement, indenture or other instrument, relating to the
borrowing of money by the Company or the Bank (other than de-
posits, federal funds purchased and securities sold under
agreements to repurchase) or the guarantee by the Company or
the Bank of any obligation, (ii) any agreement, arrangement or
commitment relating to the employment of a consultant or the
employment, election or retention in office of any present or
former director, officer or employee of the Company or the
Bank, (iii) any agreement, arrangement or understanding pursu-
ant to which any payment (whether of severance pay or other-
wise) became or may become due to any director, officer or em-
ployee of the Company or the Bank upon execution of this Agree-
ment or upon or following consummation of the transactions con-
templated by this Agreement (either alone or in connection with
the occurrence of any additional acts or events); (iv) any
agreement, arrangement or understanding pursuant to which the
Company or the Bank is obligated to indemnify any director,
officer, employee or agent of the Company or the Bank; (v) any
agreement, arrangement or understanding to which the Company or
the Bank is a party or by which any of the same is bound which
limits the freedom of the Company or the Bank to compete in any
-24-<PAGE>
line of business or with any person, (vi) any assistance agree-
ment, supervisory agreement, memorandum of understanding, con-
sent order, cease and desist order or condition of any regula-
tory order or decree with or by the FRB, the FDIC, the Bank
Commissioner or any other regulatory agency, or (vii) any other
agreement, arrangement or understanding which would be required
to be filed as an exhibit to the Company's Annual Report on
Form 10-K under the Exchange Act and which has not been so
filed.
(b) Neither the Company nor the Bank is in default
or in non-compliance, which default or non-compliance could
reasonably be expected to have a Material Adverse Effect on the
Company, under any contract, agreement, commitment, arrange-
ment, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may
be bound or affected, whether entered into in the ordinary
course of business or otherwise and whether written or oral,
and there has not occurred any event that with the lapse of
time or the giving of notice, or both, would constitute such a
default or non-compliance.
3.16 Brokers and Finders
Except as Previously Disclosed, neither the Company
nor the Bank, nor any of their respective directors, officers
or employees, has employed any broker or finder or incurred any
liability for any broker or finder fees or commissions in con-
nection with the transactions contemplated hereby.
3.17 Insurance
Each of the Company and the Bank is insured for rea-
sonable amounts with financially sound and reputable insurance
companies against such risks as companies engaged in a similar
business would, in accordance with good business practice, cus-
tomarily be insured and has maintained all insurance required
by applicable laws and regulations.
3.18 Properties
All real and personal property owned by the Company
or the Bank or presently used by either of them in its respec-
tive business is in an adequate condition (ordinary wear and
tear excepted) and is sufficient to carry on the business of
the Company and the Bank in the ordinary course of business
consistent with their past practices. The Company has good and
marketable title free and clear of all liens, encumbrances,
charges, defaults or equities (other than equities of redemp-
tion under applicable foreclosure laws) to all of the material
-25-<PAGE>
properties and assets, real and personal, reflected on the con-
solidated statement of financial condition of the Company as of
June 30, 1995 included in the Company Financial Statements or
acquired after such date, except (i) liens for current taxes
not yet due or payable (ii) pledges to secure deposits and
other liens incurred in the ordinary course of its banking
business, (iii) such imperfections of title, easements and en-
cumbrances, if any, as are not material in character, amount or
extent and (iv) as reflected on the consolidated statement of
financial condition of the Company as of June 30, 1995 included
in the Company Financial Statements. All real and personal
property which is material to the Company's business on a con-
solidated basis and leased or licensed by the Company or the
Bank is held pursuant to leases or licenses which are valid and
enforceable in accordance with their respective terms and such
leases will not terminate or lapse prior to the Effective Time.
3.19 Labor
No work stoppage involving the Company or the Bank is
pending or, to the best knowledge of the Company, threatened.
Neither the Company nor the Bank is involved in, or threatened
with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding involving the employees of the Com-
pany or the Bank which could have a Material Adverse Effect on
the Company. Employees of the Company and the Bank are not
represented by any labor union nor are any collective bargain-
ing agreements otherwise in effect with respect to such employ-
ees, and to the best of the Company's knowledge, there have
been no efforts to unionize or organize any employees of the
Company or the Bank during the past five years.
3.20 Required Vote
(a) The affirmative vote of the holders of a major-
ity of the issued and outstanding shares of Company Common
Stock is necessary to approve this Agreement and the transac-
tions contemplated hereby on behalf of the Company (assuming
the accuracy of the representation and warranty of the Acquiror
contained in the second sentence of Section 4.3 hereof).
(b) A majority of the Continuing Directors (as de-
fined in the Articles of Agreement of the Company) has approved
the Merger and this Agreement such that the provisions of Ar-
ticle VII of the Articles of Agreement of the Company requiring
the approval of certain transactions by the affirmative vote of
holders representing two-thirds of the capital stock of the
Company shall be inapplicable to this Agreement and the trans-
actions contemplated hereby.
-26-<PAGE>
3.21 Accounting for the Merger; Reorganization
As of the date hereof, neither the Company nor the
Bank has any reason to believe that the Merger will fail to
qualify (i) for pooling-of-interests accounting treatment under
generally accepted accounting principles or (ii) as a reorgani-
zation under Section 368(a) of the Code.
3.22 Disclosures
None of the representations and warranties of the
Company or any of the written information or documents fur-
nished or to be furnished by the Company to the Acquiror in
connection with or pursuant to this Agreement or the consumma-
tion of the transactions contemplated hereby, when considered
as a whole, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact
required to be stated or necessary to make any such information
or document, in light of the circumstances, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company
that, except as Previously Disclosed:
4.1 Capital Structure
The authorized capital stock of the Acquiror consists
of 30,000,000 shares of Acquiror Common Stock and 5,000,000
shares of Acquiror Preferred Stock. As of September 30, 1995,
there were 16,918,120 shares of Acquiror Common Stock issued
and outstanding, 550,100 shares of Acquiror Common Stock were
held as treasury stock and not outstanding and there were no
shares of Acquiror Preferred Stock issued and outstanding. All
outstanding shares of Acquiror Common Stock have been duly au-
thorized and validly issued and are fully paid and nonassess-
able, and none of the outstanding shares of Acquiror Common
Stock has been issued in violation of the preemptive rights of
any person, firm or entity. As of the date hereof, there are
no Rights authorized, issued or outstanding with respect to the
capital stock of the Acquiror, except for (i) shares of Ac-
quiror Common Stock issuable pursuant to the Acquiror Employee
Stock Benefit Plans, now or hereafter, (ii) shares of Acquiror
Common Stock issuable pursuant to the Acquiror Rights Agreement
and (iii) by virtue of this Agreement and the Acquiror Stock
Option Agreement.
-27-<PAGE>
4.2 Organization, Standing and Authority of the Acquiror
The Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Maine with full corporate power and authority to own or lease
all of its properties and assets and to carry on its business
as now conducted and is duly licensed or qualified to do busi-
ness and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business
requires such licensing or qualification, except where the
failure to be so licensed, qualified or in good standing would
not have a Material Adverse Effect on the Acquiror. The Ac-
quiror is duly registered as a bank holding company under the
BHCA and the regulations of the FRB thereunder. The Acquiror
has heretofore delivered to the Company true and complete cop-
ies of the Articles of Incorporation and Bylaws of the Acquiror
as in effect as of the date hereof.
4.3 Ownership of the Acquiror Subsidiaries
The Acquiror has Previously Disclosed each direct or
indirect Acquiror Subsidiary, and identified Acquiror Sub, Ac-
quiror Maine Bank and Acquiror New Hampshire Bank as its only
Significant Subsidiaries. Except for capital stock of the Ac-
quiror Subsidiaries, stock in the FHLB of Boston and the Fed-
eral Reserve Bank of Boston, securities and other interests
held in a fiduciary capacity or taken in consideration of debts
previously contracted and by virtue of this Agreement and the
Company Stock Option Agreement, the Acquiror does not own or
have the right to acquire, directly or indirectly, any out-
standing capital stock or other voting securities or ownership
interests of any corporation, bank, savings association, part-
nership, joint venture or other organization. The outstanding
shares of capital stock of each of the Acquiror Subsidiaries
which is a Significant Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable (except as
otherwise provided with respect to the capital stock of the
Acquiror Maine Bank and the Acquiror New Hampshire Bank by the
MRSA and the National Bank Act, respectively) and are directly
or indirectly owned by the Acquiror free and clear of all
liens, claims, encumbrances, charges, pledges, restrictions or
rights of third parties of any kind whatsoever. No Rights are
authorized, issued or outstanding with respect to the capital
stock or other ownership interests of any Acquiror Subsidiary
which is a Significant Subsidiary and there are no agreements,
understandings or commitments relating to the right of the Ac-
quiror to vote or to dispose of said shares or other ownership
interests.
-28-<PAGE>
4.4 Organization, Standing and Authority of the Acquiror
Subsidiaries
Each Acquiror Subsidiary which is a Significant Sub-
sidiary is a corporation duly organized, validly existing and
in good standing under the laws of the United States or the
laws of the jurisdiction in which it is organized, as ap-
plicable. Each of the Acquiror Subsidiaries which is a Sig-
nificant Subsidiary (i) has full power and authority to own or
lease all of its properties and assets and to carry on its
business as now conducted, and (ii) is duly licensed or quali-
fied to do business and is in good standing in each jurisdic-
tion in which its ownership or leasing of property or the con-
duct of its business requires such qualification and where the
failure to be so licensed, qualified or in good standing would
have a Material Adverse Effect on the Acquiror. The deposit
accounts of each Acquiror Subsidiary which is an insured de-
pository institution under the FDIA are insured by either the
BIF or, in the case of certain deposits of each such institu-
tion, the SAIF to the maximum extent permitted by the FDIA, and
each such entity has paid all premiums and assessments required
by the FDIA and the regulations thereunder. The Acquiror has
heretofore delivered or made available to the Company true and
complete copies of the Articles of Incorporation and Bylaws of
it, Acquiror Sub and Acquiror New Hampshire Bank.
4.5 Authorized and Effective Agreement
(a) Each of the Acquiror and the Acquiror Sub has
all requisite corporate power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Acquiror's shareholders of
this Agreement) to perform all of its obligations under this
Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate
action in respect thereof on the part of the Acquiror and the
Acquiror Sub, except for the approval of this Agreement by the
Acquiror's shareholders. This Agreement has been duly and val-
idly executed and delivered by the Acquiror and the Acquiror
Sub and, assuming due authorization, execution and delivery by
the Company, constitutes a legal, valid and binding obligation
of the Acquiror and the Acquiror Sub which is enforceable
against the Acquiror in accordance with its terms, subject, as
to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors'
rights and to general equity principles.
(b) Neither the execution and delivery of this
Agreement, nor consummation of the transactions contemplated
-29-<PAGE>
hereby (including the Merger and the Bank Merger), nor compli-
ance by the Acquiror and the Acquiror Sub with any of the pro-
visions hereof (i) does or will conflict with or result in a
breach of any provisions of the Articles of Incorporation or
Bylaws of the Acquiror, Acquiror Sub or Acquiror New Hampshire
Bank, (ii) except as Previously Disclosed, violate, conflict
with or result in a breach of any term, condition or provision
of, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or ac-
celeration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the
Acquiror, Acquiror Sub or Acquiror New Hampshire Bank pursuant
to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obliga-
tion to which the Acquiror, Acquiror Sub or Acquiror New Hamp-
shire Bank is a party, or by which any of their respective
properties or assets may be bound or affected, or (iii) subject
to receipt of all required governmental and shareholder approv-
als, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Acquiror, Acquiror Sub or Ac-
quiror New Hampshire Bank.
(c) Except for (i) the filing of applications and
notices with, and the consents and approvals of, as applicable,
the FRB, the FDIC, the OCC, the NHBTCI, the Bank Commissioner
and the Superintendent, (ii) the filing and effectiveness of
the Form S-4 with the Commission, (iii) compliance with ap-
plicable state securities or "blue sky" laws and the NASD By-
laws in connection with the issuance of Acquiror Common Stock
pursuant to this Agreement, (iv) the approval of this Agreement
by the requisite vote of the shareholders of the Company and
the Acquiror, (v) the filing of Articles of Merger with the
Secretary of State of New Hampshire pursuant to the NHBCA in
connection with the Merger and (vi) the filing of a certificate
issued by the Bank Commissioner approving the Bank Merger with
the Secretary of State of New Hampshire, and except for such
filings, authorizations or approvals as are Previously Dis-
closed, no consents or approvals of or filings or registrations
with any Governmental Entity or with any third party are neces-
sary on the part of the Acquiror, the Acquiror Sub or Acquiror
New Hampshire Bank in connection with (i) the execution and
delivery by the Acquiror and the Acquiror Sub of this Agreement
and the consummation by the Acquiror of the transactions con-
templated hereby and (ii) the execution and delivery by the
Acquiror New Hampshire Bank of the Bank Merger Agreement and
the consummation by the Acquiror New Hampshire Bank of the
transactions contemplated thereby.
-30-<PAGE>
(d) As of the date hereof, neither the Acquiror nor
Acquiror Sub is aware of any reasons relating to the Acquiror
or any of its Subsidiaries (including without limitation Com-
munity Reinvestment Act compliance) why all consents and ap-
provals shall not be procured from all regulatory agencies hav-
ing jurisdiction over the transactions contemplated by this
Agreement as shall be necessary for (i) consummation of the
transactions contemplated by this Agreement and the Bank Merger
Agreement and (ii) the continuation by the Acquiror after the
Effective Time of the business of each of the Acquiror and the
Company as such business is carried on immediately prior to the
Effective Time, free of any conditions or requirements which,
in the reasonable opinion of the Acquiror, could have a Mate-
rial Adverse Effect on the Acquiror or the Company or materi-
ally impair the value of the Company and the Bank to the Ac-
quiror.
4.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1993, the Acquiror has timely
filed with the Commission all Securities Documents required by
the Securities Laws and such Securities Documents complied in
all material respect with the Securities Laws and did not con-
tain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circum-
stances under which they were made, not misleading.
(b) Since January 1, 1993, the Acquiror, the Ac-
quiror Sub and each Acquiror Subsidiary which is an insured
depository institution under the FDIA has duly filed with the
FRB, the OCC, the FDIC and the Superintendent, as the case may
be, in correct form the reports required to be filed under ap-
plicable laws and regulations and such reports were in all ma-
terial respects complete and accurate and in compliance with
the requirements of applicable laws and regulations. In con-
nection with the most recent examinations of the Acquiror or an
Acquiror Subsidiary by the FRB, the OCC, the FDIC or the Super-
intendent, neither the Acquiror nor any Acquiror Subsidiary was
required to correct or change any action, procedure or proceed-
ing which the Acquiror or the Acquiror Subsidiary believes has
not been corrected or changed as required.
4.7 Financial Statements
(a) The Acquiror has previously delivered or made
available to the Company accurate and complete copies of the
Acquiror Financial Statements which, in the case of the con-
solidated statements of financial condition of the Acquiror as
-31-<PAGE>
of December 31, 1994, 1993 and 1992 and the consolidated state-
ments of operations, shareholders' equity and cash flows for
each of the three years ended December 31, 1994, 1993 and 1992,
are accompanied by the audit reports of KPMG Peat Marwick LLP,
independent public accountants with respect to the Acquiror.
The Acquiror Financial Statements referred to herein, as well
as the Acquiror Financial Statements to be delivered pursuant
to Section 5.7 hereof, fairly present or will fairly present,
as the case may be, the consolidated financial condition of the
Acquiror as of the respective dates set forth therein, and the
consolidated results of operations, shareholders' equity and
cash flows of the Acquiror for the respective periods or as of
the respective dates set forth therein.
(b) Each of the Acquiror Financial Statements re-
ferred to in Section 4.7(a) has been or will be, as the case
may be, prepared in accordance with generally accepted account-
ing principles consistently applied during the periods in-
volved, except as stated therein. The audits of the Acquiror
and the Acquiror Subsidiaries have been conducted in all mate-
rial respects in accordance with generally accepted auditing
standards. The books and records of the Acquiror and the Ac-
quiror Subsidiaries are being maintained in material compliance
with applicable legal and accounting requirements, and all such
books and records accurately reflect in all material respects
all dealings and transactions in respect of the business, as-
sets, liabilities and affairs of the Acquiror and the Acquiror
Subsidiaries.
(c) Except and to the extent (i) reflected, dis-
closed or provided for in the consolidated statement of finan-
cial condition of the Acquiror as of June 30, 1995 (including
related notes) and (ii) of liabilities incurred since June 30,
1995 in the ordinary course of business, neither the Acquiror
nor any Acquiror Subsidiary has any liabilities, whether abso-
lute, accrued, contingent or otherwise, material to the finan-
cial condition, results of operations or business of the Ac-
quiror on a consolidated basis.
4.8 Material Adverse Change
Since June 30, 1995, (i) the Acquiror and the Ac-
quiror Subsidiaries which are Significant Subsidiaries have
conducted their respective businesses in the ordinary and usual
course (excluding the incurrence of expenses in connection with
this Agreement and the transactions contemplated hereby) and
(ii) no event has occurred or circumstance arisen that, indi-
vidually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on the Acquiror.
-32-<PAGE>
4.9 Environmental Matters
(a) To the best of the Acquiror's knowledge, the
Acquiror and the Acquiror Subsidiaries are in compliance with
all Environmental Laws, except for any violations of any Envi-
ronmental Law which would not, singly or in the aggregate, have
a Material Adverse Effect on the Acquiror. Neither the Ac-
quiror nor any Acquiror Subsidiary has received any communica-
tion alleging that the Acquiror or any Acquiror Subsidiary is
not in such compliance and, to the best knowledge of the Ac-
quiror, there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
(b) To the best of the Acquiror's knowledge, none of
the properties owned, leased or operated by the Acquiror or the
Acquiror Subsidiaries has been or is in violation of or liable
under any Environmental Law, except any such violations or li-
abilities which would not singly or in the aggregate have a
Material Adverse Effect on the Acquiror.
(c) Except as Previously Disclosed, to the best of
the Acquiror's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or
other claim or action or governmental investigation that could
result in the imposition of any liability arising under any
Environmental Law against the Acquiror or any Acquiror Subsid-
iary or against any person or entity whose liability for any
Environmental Claim the Acquiror or any Acquiror Subsidiary has
or may have retained or assumed either contractually or by op-
eration of law, except such which would not have a Material
Adverse Effect on the Acquiror.
4.10 Tax Matters
The Acquiror and the Acquiror Subsidiaries, and each
of their predecessors, have timely filed all federal, state and
local (and, if applicable, foreign) income, franchise, bank,
excise, real property, personal property and other tax returns
required by applicable law to be filed by them (including,
without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns)
and have paid, or where payment is not required to have been
made, have set up an adequate reserve or accrual for the pay-
ment of, all taxes required to be paid in respect of the peri-
ods covered by such returns and, as of the Effective Time, will
have paid, or where payment is not required to have been made,
will have set up an adequate reserve or accrual for the payment
of, all taxes for any subsequent periods ending on or prior to
-33-<PAGE>
the Effective Time. Neither the Acquiror nor any of the Ac-
quiror Subsidiaries will have any material liability for any
such taxes in excess of the amounts so paid or reserves or ac-
cruals so established. Except as Previously Disclosed, as of
the date hereof, no audit, examination or deficiency or refund
litigation with respect to any federal, state and local (and,
if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns filed by the
Acquiror and the Acquiror Subsidiaries is pending or, to the
best of the Acquiror's knowledge, threatened.
4.11 Legal Proceedings
There are no actions, suits, claims, governmental
investigations or proceedings instituted, pending or, to the
best knowledge of the Acquiror threatened against the Acquiror
or any Acquiror Subsidiary or against any asset, interest or
right of the Acquiror or any Acquiror Subsidiary, or against
any officer, director or employee of any of them that in any
such case, if decided adversely, would have a Material Adverse
Effect on the Acquiror. Neither the Acquiror nor any of the
Acquiror Subsidiaries is a party to any order, judgment or de-
cree which has or could reasonably be expected to have a Mate-
rial Adverse Effect on the Acquiror.
4.12 Compliance with Laws
(a) Each of the Acquiror and each of the Acquiror
Subsidiaries has all permits, licenses, certificates of author-
ity, orders and approvals of, and has made all filings, ap-
plications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in
order to permit it to carry on its business as it is presently
being conducted and the absence of which could reasonably be
expected to have a Material Adverse Effect on the Acquiror;
all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect; and to the best
knowledge of the Acquiror, no suspension or cancellation of any
of the same is threatened.
(b) Neither the Acquiror nor any of the Acquiror
Subsidiaries is in violation of its respective Articles of In-
corporation, Charter or other chartering instrument or Bylaws,
or of any applicable federal, state or local law or ordinance
or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limi-
tation, all banking (including without limitation all regula-
tory capital requirements), securities, municipal securities,
safety, health, environmental, zoning, anti-discrimination,
antitrust, and wage and hour laws, ordinances, orders, rules
-34-<PAGE>
and regulations), or in default with respect to any order,
writ, injunction or decree of any court, or in default under
any order, license, regulation or demand of any governmental
agency, any of which violations or defaults could reasonably be
expected to have a Material Adverse Effect on the Acquiror; and
neither the Acquiror nor any Acquiror Subsidiary has received
any notice or communication from any federal, state or local
governmental authority asserting that the Acquiror or any Ac-
quiror Subsidiary is in violation of any of the foregoing which
could reasonably be expected to have a Material Adverse Effect
on the Acquiror. Neither the Acquiror nor any Acquiror Subsid-
iary is subject to any regulatory or supervisory cease and de-
sist order, agreement, written directive, memorandum of under-
standing or written commitment (other than those of general
applicability to all banks, savings associations or holding
companies thereof, as applicable, issued by governmental au-
thorities), and none of them has received any written com-
munication requesting that it enter into any of the foregoing.
4.13 Certain Information
None of the information relating to the Acquiror and
the Acquiror Subsidiaries to be included or incorporated by
reference in (i) the Form S-4 will, at the time the Form S-4
and any amendment thereto becomes effective under the Securi-
ties Act, contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, and (ii) the Proxy Statement, as of the
date(s) such Proxy Statement is mailed to shareholders of the
Acquiror and the Company and up to and including the date(s) of
the meetings of shareholders to which such Proxy Statement re-
lates, will contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier
date. The Proxy Statement mailed by the Acquiror to sharehold-
ers of the Company and the Acquiror in connection with the
meetings of shareholders at which this Agreement will be con-
sidered by such shareholders will comply as to form in all ma-
terial respects with the Securities Act and the Exchange Act
and the rules and regulations promulgated thereunder.
4.14 Employee Benefit Plans
(a) The Acquiror has Previously Disclosed all stock
option, employee stock purchase and stock bonus plans, quali-
fied pension or profit-sharing plans, any deferred compensa-
tion, consultant, bonus or group insurance contract or any
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other incentive, welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of
the Acquiror or any Acquiror Subsidiary (the "Acquiror Employee
Plans").
(b) None of the Acquiror, any Acquiror Subsidiary,
any pension plan maintained by any of them and qualified under
Section 401 of the Code or, to the best of the Acquiror's
knowledge, any fiduciary of such plan has incurred any material
liability to the PBGC or the Internal Revenue Service with re-
spect to any employees of the Acquiror or any Acquiror Subsid-
iary. To the best of the Acquiror's knowledge, no reportable
event under Section 4043(b) of ERISA has occurred with respect
to any such pension plan.
(c) Neither the Acquiror nor any Acquiror Subsidiary
participates in or has incurred any liability under Section
4201 of ERISA for a complete or partial withdrawal from a
multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued
by the Internal Revenue Service with respect to each Acquiror
Employee Plan which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) (a "Acquiror Pension Plan")
which is intended to qualify under Section 401 of the Code to
the effect that such plan is qualified under Section 401 of the
Code and the trust associated with such employee pension plan
is tax exempt under Section 501 of the Code. No such letter
has been revoked or, to the best of the Acquiror's knowledge,
is threatened to be revoked and the Acquiror does not know of
any ground on which such revocation may be based. Neither the
Acquiror nor any Acquiror Subsidiary has any liability under
any such plan that is not reflected on the consolidated state-
ment of financial condition of the Acquiror at June 30, 1995
included in the Acquiror Financial Statements, other than li-
abilities incurred in the ordinary course of business in con-
nection therewith subsequent to the date thereof.
(e) To the best of the Acquiror's knowledge, no pro-
hibited transaction (which shall mean any transaction prohib-
ited by Section 406 of ERISA and not exempt under Section 408
of ERISA or Section 4975 of the Code) has occurred with respect
to any Acquiror Employee Plan which would result in the imposi-
tion, directly or indirectly, of a material excise tax under
Section 4975 of the Code or otherwise have a Material Adverse
Effect on the Acquiror.
(f) Full payment has been made (or proper accruals
have been established) of all contributions which are required
for periods prior to the date hereof, and full payment will be
-36-<PAGE>
so made (or proper accruals will be so established) of all con-
tributions which are required for periods after the date hereof
and prior to the Effective Time, under the terms of each Ac-
quiror Employee Plan or ERISA; no accumulated funding defi-
ciency (as defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived, exists with respect to any
Acquiror Pension Plan, and there is no "unfunded current li-
ability" (as defined in Section 412 of the Code) with respect
to any Acquiror Pension Plan.
(g) To the best of the Acquiror's knowledge, the
Acquiror Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the
Code, all regulations, rulings and announcements promulgated or
issued thereunder and all other applicable governmental laws
and regulations.
(h) There are no pending or, to the best knowledge
of the Acquiror, threatened claims (other than routine claims
for benefits) by, on behalf of or against any of the Acquiror
Employee Plans or any trust related thereto or any fiduciary
thereof.
4.15 Certain Contracts
Neither the Acquiror nor any Acquiror Subsidiary is
in default or in non-compliance, which default or non-
compliance could reasonably be expected to have a Material Ad-
verse Effect on the Acquiror, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other in-
strument to which it is a party or by which its assets, busi-
ness or operations may be bound or affected, whether entered
into in the ordinary course of business or otherwise and
whether written or oral, and there has not occurred any event
that with the lapse of time or the giving of notice, or both,
would constitute such a default or non-compliance.
4.16 Brokers and Finders
Except as Previously Disclosed, neither the Acquiror
nor any Acquiror Subsidiary, nor any of their respective direc-
tors, officers or employees, has employed any broker or finder
or incurred any liability for any broker or finder fees or com-
missions in connection with the transactions contemplated
hereby.
4.17 Insurance
The Acquiror and each Acquiror Subsidiary is insured
for reasonable amounts with financially sound and reputable
-37-<PAGE>
insurance companies against such risks as companies engaged in
a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insur-
ance required by applicable laws and regulations.
4.18 Properties
All real and personal property owned by the Acquiror
or each Acquiror Subsidiary which is a Significant Subsidiary
or presently used by any of them in its respective business is
in an adequate condition (ordinary wear and tear excepted) and
is sufficient to carry on its business in the ordinary course
of business consistent with their past practices. The Acquiror
has good and marketable title free and clear of all liens, en-
cumbrances, charges, defaults or equities (other than equities
of redemption under applicable foreclosure laws) to all of the
material properties and assets, real and personal, reflected on
the consolidated statement of financial condition of the Ac-
quiror as of June 30, 1995 included in the Acquiror Financial
Statements or acquired after such date, except (i) liens for
current taxes not yet due or payable (ii) pledges to secure
deposits and other liens incurred in the ordinary course of its
banking business, (iii) such imperfections of title, easements
and encumbrances, if any, as are not material in character,
amount or extent and (iv) as reflected on the consolidated
statement of financial condition of the Acquiror as of June 30,
1995 included in the Acquiror Financial Statements. All real
and personal property which is material to the Acquiror's busi-
ness on a consolidated basis and leased or licensed by the Ac-
quiror or an Acquiror Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with
their respective terms and such leases will not terminate or
lapse prior to the Effective Time.
4.19 Labor
No work stoppage involving the Acquiror or an Ac-
quiror Subsidiary which is a Significant Subsidiary is pending
or, to the best knowledge of the Acquiror, threatened. Neither
the Acquiror nor any Acquiror Subsidiary is involved in, or
threatened with or affected by, any labor dispute, arbitration,
lawsuit or administrative proceeding involving its employees
which could have a Material Adverse Effect on the Acquiror.
Employees of the Acquiror and any Acquiror Subsidiary are not
represented by any labor union nor are any collective bargain-
ing agreements otherwise in effect with respect to such employ-
ees, and to the best of the Acquiror's knowledge, there have
been no efforts to unionize or organize any employees of the
Acquiror or any Acquiror Subsidiary during the past five years.
-38-<PAGE>
4.20 Required Vote; Acquiror Rights Agreement
(a) A majority of the total votes cast on the pro-
posal by the holders of the issued and outstanding shares of
Acquiror Common Stock is necessary to approve this Agreement
and the transactions contemplated hereby on behalf of the Ac-
quiror.
(b) There is no Acquiring Person, and none of a
Stock Acquisition Date, a Distribution Date or a Triggering
Event has occurred, in each case as such terms are defined in
the Acquiror Rights Agreement.
4.21 Accounting for the Merger; Reorganization
As of the date hereof, neither the Acquiror nor any
Acquiror Subsidiary has any reason to believe that the Merger
will fail to qualify (i) for pooling-of-interests treatment
under generally accepted accounting principles or (ii) as a
reorganization under Section 368(a) of the Code.
4.22 Disclosures
None of the representations and warranties of the
Acquiror or any of the written information or documents fur-
nished or to be furnished by the Acquiror to the Company in
connection with or pursuant to this Agreement or the consumma-
tion of the transactions contemplated hereby, when considered
as a whole, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact
required to be stated or necessary to make any such information
or document, in light of the circumstances, not misleading.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agree-
ment, each of the Company, the Acquiror and the Acquiror Sub
shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done,
all things necessary or advisable under applicable laws and
regulations so as to permit consummation of the Merger and the
Bank Merger as promptly as reasonably practicable and to other-
wise enable consummation of the transactions contemplated
hereby, and shall cooperate fully with the other party or par-
ties hereto to that end.
-39-<PAGE>
5.2 Shareholder Meetings
Each of the Acquiror and the Company shall take all
action necessary to properly call and convene a meeting of its
shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions con-
templated hereby. The Board of Directors of the Acquiror and
the Board of Directors of the Company will recommend that the
shareholders of the Acquiror and the Company, respectively,
approve this Agreement and the transactions contemplated
hereby, provided that the Board of Directors of the Company may
fail to make such recommendation, or withdraw, modify or change
any such recommendation, if such Board of Directors, after hav-
ing consulted with and considered the advice of outside coun-
sel, has determined that the making of such recommendation, or
the failure to withdraw, modify or change such recommendation,
would constitute a breach of the fiduciary duties of such di-
rectors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with
each other in the preparation and filing of the Form S-4, in-
cluding the Proxy Statement. Each of the Acquiror and the Com-
pany shall use its reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as
practicable after such filing, and the Acquiror and the Company
each shall thereafter promptly mail the Proxy Statement to its
respective shareholders. The Acquiror also shall use its rea-
sonable best efforts to obtain all necessary state securities
law or "blue sky" permits and approvals required to carry out
the issuance of Acquiror Common Stock pursuant to the Merger
and all other transactions contemplated by this Agreement, and
the Company shall furnish all information concerning the Com-
pany and the holders of the Company Common Stock as may be rea-
sonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each
other and use their reasonable best efforts to promptly prepare
and file all necessary documentation, to effect all applica-
tions, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties
which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including without limitation
the Merger and the Bank Merger). The Acquiror and the Company
shall have the right to review in advance, and to the extent
practicable each will consult with the other on, in each case
subject to applicable laws relating to the exchange of informa-
tion, all the information which appears in any filing made with
-40-<PAGE>
or written materials submitted to any third party or any Gov-
ernmental Entity in connection with the transactions contem-
plated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly
as practicable. The parties hereto agree that they will con-
sult with each other with respect to the obtaining of all per-
mits, consents, approvals and authorizations of all third par-
ties and Governmental Entities necessary or advisable to con-
summate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of mat-
ters relating to completion of the transactions contemplated
herein.
(c) The Acquiror and the Company shall, upon re-
quest, furnish each other with all information concerning them-
selves, their respective Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably neces-
sary or advisable in connection with the Proxy Statement, the
Form S-4 or any other statement, filing, notice or application
made by or on behalf of the Acquiror, the Company or any of
their respective Subsidiaries to any Governmental Entity in
connection with the Merger, the Bank Merger and the other
transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly fur-
nish each other with copies of written communications received
by the Acquiror or the Company, as the case may be, or any of
their respective Subsidiaries from, or delivered by any of the
foregoing to, any Governmental Entity in respect of the trans-
actions contemplated hereby.
5.4 Investigation and Confidentiality
(a) Each party shall permit the other party and its
representatives reasonable access to its properties and person-
nel, and shall disclose and make available to such other party
all books, papers and records relating to the assets, stock
ownership, properties, operations, obligations and liabilities
of it and its Subsidiaries, including, but not limited to, all
books of account (including the general ledger), tax records,
minute books of meetings of boards of directors (and any com-
mittees thereof) and shareholders, organizational documents,
bylaws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation
files, loan files, plans affecting employees, and any other
business activities or prospects in which the other party may
have a reasonable interest, provided that such access shall be
reasonably related to the transactions contemplated hereby and,
in the reasonable opinion of the respective parties providing
such access, not unduly interfere with normal operations. Each
-41-<PAGE>
party and its Subsidiaries shall make their respective direc-
tors, officers, employees and agents and authorized representa-
tives (including counsel and independent public accountants)
available to confer with the other party and its representa-
tives, provided that such access shall be reasonably related to
the transactions contemplated hereby and shall not unduly in-
terfere with normal operations.
(b) All information furnished previously in connec-
tion with the transactions contemplated by this Agreement or
pursuant hereto shall be treated as the sole property of the
party furnishing the information until consummation of the
transactions contemplated hereby and, if such transactions
shall not occur, the party receiving the information shall re-
turn to the party which furnished such information all docu-
ments or other materials containing, reflecting or referring to
such information, shall use its best efforts to keep confiden-
tial all such information, and shall not directly or indirectly
use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential
shall continue for five years from the date the proposed trans-
actions are abandoned but shall not apply to (i) any informa-
tion which (x) the party receiving the information can estab-
lish by convincing evidence was already in its possession prior
to the disclosure thereof by the party furnishing the informa-
tion; (y) was then generally known to the public; or (z) became
known to the public through no fault of the party receiving the
information; or (ii) disclosures pursuant to a legal require-
ment or in accordance with an order of a court of competent
jurisdiction, provided that the party which is the subject of
any such legal requirement or order shall use its best efforts
to give the other party at least ten business days prior notice
thereof.
5.5 Press Releases
The Acquiror and the Company shall agree with each
other as to the form and substance of any press release related
to this Agreement or the transactions contemplated hereby, and
consult with each other as to the form and substance of other
public disclosures which may relate to the transactions contem-
plated by this Agreement, provided, however, that nothing con-
tained herein shall prohibit either party, following notifica-
tion to the other party, from making any disclosure which is
required by law or regulation.
-42-<PAGE>
5.6 Business of the Parties
(a) During the period from the date of this Agree-
ment and continuing until the Effective Time, except as ex-
pressly contemplated or permitted by this Agreement or with the
prior written consent of the Acquiror, the Company and the Bank
shall carry on their respective businesses in the ordinary
course consistent with past practice. The Company will use all
reasonable efforts to (x) preserve its business organization
and that of the Bank intact, (y) keep available to itself and
the Acquiror the present services of the employees of the Com-
pany and the Bank and (z) preserve for itself and the Acquiror
the goodwill of the customers of the Company and the Bank and
others with whom business relationships exist. Without limit-
ing the generality of the foregoing, except with the prior
written consent of the Acquiror, as expressly contemplated
hereby or as Previously Disclosed as of the date hereof, be-
tween the date hereof and the Effective Time, the Company shall
not, and shall cause the Bank not to:
(i) declare, set aside, make or pay any
dividend or other distribution (whether in cash,
stock or property or any combination thereof) in re-
spect of the Company Common Stock, except for regular
quarterly cash dividends at a rate per share of Com-
pany Common Stock not in excess of $.18 per share,
which shall have the same record and payment dates as
the record and payment dates relating to dividends on
the Acquiror Common Stock (as Previously Disclosed by
the Acquiror), it being the intention of the parties
that the shareholders of the Company receive divi-
dends for any particular quarter on either the Com-
pany Common Stock or the Acquiror Common Stock but
not both, provided, however, that if the Effective
Time does not occur prior to the record date for the
dividend which relates to the second quarter of 1996
(on or about August 2, 1996), the regular per share
quarterly dividend on the Company Common Stock for
such quarter (and any subsequent quarterly dividends
prior to the Effective Time) may be increased to up
to $.20 per share, and further provided that nothing
contained herein shall be deemed to affect the abil-
ity of the Bank to pay dividends on its common stock
to the Company;
(ii) issue any shares of its capital stock,
other than pursuant to the Company Stock Option
Agreement, or issue, grant, modify or authorize any
Rights, other than the Company Stock Option Agree-
ment; purchase any shares of Company Common Stock; or
-43-<PAGE>
effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitaliza-
tion;
(iii) amend its Articles of Agreement, Cer-
tificate of Incorporation or Bylaws; impose, or suf-
fer the imposition, on any share of stock held by the
Company in the Bank of any material lien, charge or
encumbrance or permit any such lien, charge or encum-
brance to exist; or waive or release any material
right or cancel or compromise any material debt or
claim;
(iv) increase the rate of compensation of any
of its directors, officers or employees, or pay or
agree to pay any bonus or severance to, or provide
any other new employee benefit or incentive to, any
of its directors, officers or employees, except (i)
as may be required pursuant to binding commitments
existing on the date hereof and (ii) such as may be
granted in the ordinary course of business consistent
with past practice;
(v) except as Previously Disclosed, enter
into or, except as may be required by law, modify any
pension, retirement, stock option, stock purchase,
stock appreciation right, savings, profit sharing,
deferred compensation, supplemental retirement, con-
sulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or ar-
rangement, or any trust agreement related thereto, in
respect of any of its directors, officers or employ-
ees; or make any contributions to the Company's de-
fined benefit Pension Plan not in the ordinary course
of business consistent with past practice;
(vi) enter into (w) any agreement, arrange-
ment or commitment not made in the ordinary course of
business, (x) any agreement, indenture or other in-
strument relating to the borrowing of money by the
Company or the Bank or guarantee by the Company or
the Bank of any such obligation, except in the case
of the Bank for deposits, federal funds purchased and
securities sold under agreements to repurchase in the
ordinary course of business consistent with past
practice, (y) any agreement, arrangement or commit-
ment relating to the employment of an employee, or,
except as contemplated by Section 5.10(b) hereof,
amend any such existing agreement, arrangement or
commitment, provided that the Company and the Bank
-44-<PAGE>
may employ an employee if necessary to operate the
business of the Company or the Bank in the ordinary
course of business consistent with past practice and
if the employment of such employee is terminable by
the Company or the Bank at will without liability,
other than as required by law; or (z) any contract,
agreement or understanding with a labor union;
(vii) change its method of accounting in ef-
fect for the year ended December 31, 1994, except as
required by changes in laws or regulations or gener-
ally accepted accounting principles, or change any of
its methods of reporting income and deductions for
federal income tax purposes from those employed in
the preparation of its federal income tax return for
the year ended December 31, 1994, except as required
by changes in laws or regulations;
(viii) make any capital expenditures in excess
of $100,000 individually or $250,000 in the ag-
gregate, other than pursuant to binding commitments
existing on the date hereof and other than expendi-
tures necessary to maintain existing assets in good
repair;
(ix) file any applications or make any con-
tract with respect to branching or site location or
relocation;
(x) acquire in any manner whatsoever (other
than to realize upon collateral for a defaulted loan)
any business or entity;
(xi) enter into any futures contract, option
contract, interest rate caps, interest rate floors,
interest rate exchange agreement or other agreement
for purposes of hedging the exposure of its interest-
earning assets and interest-bearing liabilities to
changes in market rates of interest (other than for-
ward commitments to sell loans in the ordinary course
of business);
(xii) enter or agree to enter into any agree-
ment or arrangement granting any preferential right
to purchase any of its assets or rights or requiring
the consent of any party to the transfer and assign-
ment of any such assets or rights;
-45-<PAGE>
(xiii) take any action that would prevent or
impede the Merger from qualifying (A) for pooling-of-
interests accounting treatment under generally ac-
cepted accounting principles or (B) as a reorganiza-
tion within the meaning of Section 368 of the Code,
provided, however, that nothing contained herein
shall limit the ability of the Company to exercise
its rights under the Acquiror Stock Option Agreement;
(xiv) take any action that would result in any
of the representations and warranties of the Company
contained in this Agreement not to be true and cor-
rect in any material respect at the Effective Time;
or
(xv) agree to do any of the foregoing.
(b) During the period from the date of this Agree-
ment and continuing until the Effective Time, except as ex-
pressly contemplated or permitted by this Agreement or with the
prior written consent of the Company, the Acquiror and the Ac-
quiror Subsidiaries which are Significant Subsidiaries shall
carry on their respective businesses in the ordinary course
consistent with past practice and use all reasonable efforts to
preserve intact their present business organizations and rela-
tionships. Without limiting the generality of the foregoing,
except with the prior written consent of the Company or as ex-
pressly contemplated hereby, between the date hereof and the
Effective Time, the Acquiror shall not, and shall cause each
Acquiror Subsidiary which is a Significant Subsidiary not to:
(i) declare, set aside, make or pay any
dividend or other distribution (whether in cash,
stock or property or any combination thereof) in re-
spect of the Acquiror Common Stock, except for regu-
lar quarterly cash dividends which are not in excess
of $.20 per share of Acquiror Common Stock, provided,
however, that nothing contained herein shall be
deemed to affect the ability of the Acquiror's bank-
ing subsidiaries to pay dividends on their respective
common stocks to the Acquiror;
(ii) issue any shares of its capital stock or
issue, grant, modify or authorize any Rights, other
than in each case pursuant to (i) Rights granted pur-
suant to the Acquiror Employee Stock Benefit Plans,
(ii) the Acquiror Rights Agreement, (iii) the Ac-
quiror Stock Option Agreement or (iv) any acquisition
to the extent permitted under subsection (v) below;
-46-<PAGE>
(iii) effect any recapitalization, reclas-
sification, stock split or like change in capitaliza-
tion;
(iv) amend its Articles of Incorporation,
Charter or other governing instrument or Bylaws in a
manner which would adversely affect in any manner the
terms of the Acquiror Common Stock or the ability of
the Acquiror to consummate the transactions contem-
plated hereby;
(v) except as Previously Disclosed, make any
acquisition (including acquisitions of branch offices
and related deposit liabilities) or take any other
action that individually or in the aggregate could
materially adversely affect the ability of the Ac-
quiror to consummate the transactions contemplated
hereby in a reasonably timely manner;
(vi) take any action that would prevent or
impede the Merger from qualifying (A) for pooling-of-
interests accounting treatment under generally ac-
cepted accounting principles or (B) as a reorganiza-
tion within the meaning of Section 368 of the Code;
provided, however, that nothing contained herein
shall limit the ability of the Acquiror to exercise
its rights under the Company Stock Option Agreement;
(vii) take any action that would result in any
of the representations and warranties of the Acquiror
contained in this Agreement not to be true and cor-
rect in any material respect at the Effective Time;
or
(viii) agree to do any of the foregoing.
(c) Neither the Company nor the Acquiror shall, and
each of them shall cause its respective Subsidiaries not to,
solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any ne-
gotiations or discussions concerning, any acquisition, lease or
purchase of all or a substantial portion of the assets of, or
any equity interest in, such party or any of its Significant
Subsidiaries (other than in the case of the Company with the
Acquiror or an affiliate thereof and in the case of the Ac-
quiror as permitted by Section 5.6(b)(v) hereof), provided,
however, that the Board of Directors of the Company or the Ac-
quiror, on behalf of the Company and the Acquiror, respec-
tively, may furnish such information or participate in such
negotiations or discussions if such Board of Directors, after
-53-<PAGE>
having consulted with and considered the advice of outside
counsel, has determined that the failure to do the same would
cause the members of such Board of Directors to breach their
fiduciary duties under applicable laws, and provided further
that any such actions may only be taken by the Board of Direc-
tors following expiration of the period referred to in Section
7.1(g) hereof unless otherwise required by the fiduciary duties
of its members as determined above. Each of the Company and
the Acquiror will promptly inform the other party of any such
request for information or of any such negotiations or discus-
sions, as well as instruct its and its Significant Subsidiar-
ies' directors, officers, representatives and agents to refrain
from taking any action prohibited by this Section 5.6(c).
5.7 Current Information
During the period from the date of this Agreement to
the Effective Time, each party shall, upon the request of the
other party, cause one or more of its designated representa-
tives to confer on a monthly or more frequent basis with repre-
sentatives of the other party regarding its financial condi-
tion, operations and business and matters relating to the
completion of the transactions contemplated hereby. As soon as
reasonably available, but in no event more than 45 days after
the end of each calendar quarter ending after the date of this
Agreement (other than the last quarter of each fiscal year end-
ing December 31), the Company and the Acquiror will deliver to
the other party its quarterly report on Form 10-Q under the
Exchange Act, and, as soon as reasonably available, but in no
event more than 90 days after the end of each fiscal year, the
Company and the Acquiror will deliver to the other party its
Annual Report on Form 10-K. Within 25 days after the end of
each month, the Company and the Acquiror will deliver to the
other party a consolidated balance sheet and a consolidated
statement of operations, without related notes, for such month
prepared in accordance with generally accepted accounting prin-
ciples.
5.8 Indemnification; Insurance
(a) From and after the Effective Time through the
sixth anniversary of the Effective Time, the Acquiror (the "In-
demnifying Party") shall indemnify and hold harmless each
present and former director, officer and employee of the Com-
pany or the Bank determined as of the Effective Time (the "In-
demnified Parties") against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in con-
nection with any claim, action, suit, proceeding or investiga-
tion, whether civil, criminal, administrative or investigative,
-48-<PAGE>
arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent to which such
Indemnified Parties were entitled under (i) the Articles of
Agreement, Certificate of Incorporation and Bylaws of the Com-
pany and the Bank and (ii) each Director Indemnity Agreement
which has been Previously Disclosed pursuant to Section 3.15
hereof, in each case as in effect on the date hereof.
(b) Any Indemnified Party wishing to claim indemni-
fication under Section 5.8(a), upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly no-
tify the Indemnifying Party, but the failure to so notify shall
not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially
prejudice the Indemnifying Party. In the event of any such
claim, action, suit, proceeding or investigation (whether aris-
ing before or after the Effective Time), (i) the Indemnifying
Party shall have the right to assume the defense thereof and
the Indemnifying Party shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if the Indem-
nifying Party elects not to assume such defense or counsel for
the Indemnified Parties advises that there are issues which
raise conflicts of interest between the Indemnifying Party and
the Indemnified Parties, the Indemnified Parties may retain
counsel which is reasonably satisfactory to the Indemnifying
Party, and the Indemnifying Party shall pay, promptly as state-
ments therefor are received, the reasonable fees and expenses
of such counsel for the Indemnified Parties (which may not ex-
ceed one firm in any jurisdiction unless the use of one counsel
for such Indemnified Parties would present such counsel with a
conflict of interest), (ii) the Indemnified Parties will coop-
erate in the defense of any such matter and (iii) the Indemni-
fying Party shall not be liable for any settlement effected
without its prior written consent. In the event of any con-
flict between this Section 5.8(b) and any of the above-
mentioned Director Indemnity Agreements, the terms of the Di-
rector Indemnity Agreement shall control.
(c) The Acquiror shall cause the Company to maintain
the Company's existing directors' and officers' liability in-
surance policy (or a policy providing coverage on substantially
the same terms and conditions) for acts or omissions occurring
prior to the Effective Time by persons who are currently cov-
ered by such insurance policy maintained by the Company for a
period of three years following the Effective Time.
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(d) In the event that the Acquiror or any of its
respective successors or assigns (i) consolidates with or
merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties
and assets to any person, then, and in each such case the suc-
cessors and assigns of such entity shall assume the obligations
set forth in this Section 5.8, which obligations are expressly
intended to be for the irrevocable benefit of, and shall be
enforceable by, each director and officer covered hereby.
5.9 Certain Directors and Officers
(a) The Acquiror agrees to take all action necessary
to appoint or elect, effective as of the Effective Time, Davis
P. Thurber and Paul R. Shea as directors of the Acquiror. Such
persons shall serve until the first annual meeting of share-
holders of the Acquiror following the Effective Time and until
their successors are elected and qualified. The Acquiror shall
include such persons on the list of nominees for director pre-
sented by the Board of Directors of the Acquiror and for which
said Board shall solicit proxies at the first annual meeting of
shareholders of the Acquiror following the Effective Time,
which persons shall be nominated for three-year terms, or if
necessary in an individual case to ensure that the number of
directors in each class of directors of the Acquiror is as
nearly equal in number as possible, a two-year term. During
the one-year period following the Effective Time, the Acquiror
agrees to consider for election to its Board of Directors a
nominee who is a resident of the State of New Hampshire and
recommended by the Board of Directors of the Surviving Corpora-
tion.
(b) The Acquiror shall cause the Company and the
Bank, as necessary in accordance with their respective Bylaws,
to elect Paul R. Shea as President and Chief Executive Officer
of the Company and the Bank until the earlier of his retirement
and the date he attains age 65.
5.10 Benefit Plans and Arrangements
(a) As soon as administratively practicable after
the Effective Time, the Acquiror shall take all reasonable ac-
tion so that employees of the Company and the Bank shall be
entitled to participate in the Acquiror Employee Plans of gen-
eral applicability, and until such time the Company Employee
Plans shall remain in effect, provided that no employee of the
Company or the Bank who becomes an employee of the Acquiror and
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subject to the Acquiror's medical insurance plans shall be ex-
cluded coverage thereunder on the basis of a preexisting condi-
tion that was not also excluded under the Company's medical
insurance plans, except to the extent such preexisting condi-
tion was excluded from coverage under the Company's medical
insurance plans, in which case this Section 5.10(a) shall not
require coverage for such preexisting condition. For purposes
of determining eligibility to participate in and the vesting of
benefits under the Acquiror Employee Plans, the Acquiror shall
recognize years of service with the Company and the Bank as
such service is recognized by the Company and the Bank.
(b) Following the Merger, the Acquiror shall, or
shall cause the Surviving Corporation to, assume and satisfy
any obligations with respect to, (i) the Amended and Restated
Agreement as to Future Employment between the Company and each
of Davis P. Thurber, Paul R. Shea and Gregory D. Landroche, as
Previously Disclosed pursuant to Section 3.15 hereof and as
modified by the letter agreements dated as of the date hereof
among the Acquiror, the Company and each of Messrs. Thurber,
Shea and Landroche, and (ii) the Company's Executive Excess
Benefit Plan as it relates to the rights of Messrs. Thurber,
Shea and Landroche thereunder.
5.11 Accountants' Letters
Each of the Company and the Acquiror shall use its
reasonable best efforts to cause to be delivered to the other
party, and such other party's directors and officers who sign
the Form S-4, a letter of its respective independent public
accountants, dated (i) the date on which the Form S-4 shall
become effective and (ii) a date shortly prior to the Effective
Time, and addressed to such other party, and such directors and
officers, in form and substance customary for "comfort" letters
delivered by independent accountants in accordance with State-
ment of Accounting Standards No. 72.
5.12 Certain Policies; Integration
(a) If requested by the Acquiror, on the business
day immediately prior to the Effective Time, the Company shall,
consistent with generally accepted accounting principles, es-
tablish such additional accruals and reserves as may be neces-
sary to conform the Company's accounting and credit loss re-
serve practices and methods to those of the Acquiror (as such
practices and methods are to be applied to the Company or its
Subsidiaries from and after the Effective Time) and reflect the
Acquiror's plans with respect to the conduct of the Company's
business following the Merger and to provide for the costs and
expenses relating to the consummation by the Company of the
-51-<PAGE>
transactions contemplated by this Agreement; provided, however,
that the Company shall not be required to take such action (i)
if such action is prohibited by applicable law or (ii) unless
the Acquiror informs the Company that it has no reason to be-
lieve that all conditions to the Acquiror's obligations to con-
summate the transactions contemplated by this Agreement set
forth in Article VI hereof will not be satisfied or waived.
The establishment of such accruals and reserves shall not, in
and of itself, constitute a breach of any representation or
warranty of the Company contained in this Agreement. Nothing
contained in this Section 5.12(a) shall be deemed to modify the
Company's obligations under the letter agreements referred to
in Section 5.10(b)(i) hereof.
(b) During the period from the date of this Agree-
ment to the Effective Time, the Company shall, and shall cause
its directors, officers and employees to, cooperate with and
assist the Company in the formulation of a plan of integration
for the Acquiror and the Company and their respective banking
subsidiaries.
5.13 Restrictions on Resale
(a) The Company has Previously Disclosed to the Ac-
quiror, and the Acquiror has Previously Disclosed to the Com-
pany, a schedule of each person that, to the best of its knowl-
edge, is deemed to be an "affiliate" of the Company and the
Acquiror, respectively (each an "Affiliate"), as that term is
used in Rule 145 under the Securities Act or Accounting Series
Releases 130 and 135 of the Commission.
(b) Each of the Company and the Acquiror shall use
its reasonable best efforts to cause each person who may be
deemed to be an Affiliate of the Company and the Acquiror, re-
spectively, to execute and deliver to the Acquiror on or before
the date of the mailing of the Proxy Statement an agreement in
the form of Exhibit D and Exhibit E, respectively.
(c) If requested by an Affiliate of the Company in
connection with a proposed sale of Acquiror Common Stock which
in the reasonable judgment of the Acquiror cannot be effected
without jeopardizing the manner in which the Merger was ac-
counted for under generally accepted accounting principles, the
Surviving Corporation shall use its reasonable best efforts to
publish as promptly as reasonably practicable but in no event
later than 90 days after the end of the first month after the
Effective Time in which there are at least 30 days of post-
Merger combined operations (which month may be the month in
which the Effective Time occurs), combined sales and net income
-52-<PAGE>
figures as contemplated by and in accordance with the terms of
Accounting Series Release No. 135 of the Commission.
5.14 Disclosure Supplements
From time to time prior to the Effective Time, each
party shall promptly supplement or amend any materials Previ-
ously Disclosed and delivered to the other party pursuant
hereto with respect to any matter hereafter arising which, if
existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in mate-
rials Previously Disclosed to the other party or which is nec-
essary to correct any information in such materials which has
been rendered materially inaccurate thereby; no such supplement
or amendment to such materials shall be deemed to have modified
the representations, warranties and covenants of the parties
for the purpose of determining whether the conditions set forth
in Article VI hereof have been satisfied.
5.15 Failure to Fulfill Conditions
In the event that either of the parties hereto deter-
mines that a condition to its respective obligations to consum-
mate the transactions contemplated hereby cannot be fulfilled
on or prior to the termination of this Agreement, it will
promptly notify the other party or parties. Each party will
promptly inform the other party or parties of any facts ap-
plicable to it that would be likely to prevent or materially
delay approval of the Merger or the Bank Merger by any Govern-
mental Entity or third party or which would otherwise prevent
or materially delay completion of the Merger or the Bank
Merger.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - The Acquiror, the Acquiror Sub
and the Company
The respective obligations of the Acquiror, the Ac-
quiror Sub and the Company to effect the transactions contem-
plated by this Agreement shall be subject to satisfaction of
the following conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the
execution and delivery of this Agreement and consummation of
the transactions contemplated hereby shall have been duly and
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validly taken by the Acquiror and the Company, including ap-
proval by the requisite vote of the respective shareholders of
the Acquiror and the Company of this Agreement, and all corpo-
rate and shareholder action necessary to authorize the execu-
tion and delivery of the Bank Merger Agreement and consummation
of the transactions contemplated thereby shall have been duly
and validly taken by the Bank and the Acquiror New Hampshire
Bank.
(b) All approvals and consents for the transactions
contemplated hereby and the Bank Merger Agreement from the FRB,
the FDIC, the OCC, the NHBTCI, the Bank Commissioner, the Su-
perintendent and any other Governmental Entity the approval or
consent of which is required for the consummation of the
Merger, the Bank Merger and the other transactions contemplated
hereby shall have been received and all statutory waiting peri-
ods in respect thereof shall have expired; and the Acquiror and
the Company shall have procured all other approvals, consents
and waivers of each person (other than the Governmental Enti-
ties referred to above) whose approval, consent or waiver is
necessary to the consummation of the Merger, the Bank Merger
and the other transactions contemplated hereby and the failure
of which to obtain would have the effects set forth in the fol-
lowing proviso clause; provided, however, that no approval or
consent referred to in this Section 6.1(b) shall be deemed to
have been received if it shall include any condition or re-
quirement that, individually or in the aggregate, would so ma-
terially reduce the economic or business benefits of the trans-
actions contemplated by this Agreement to the Acquiror that had
such condition or requirement been known the Acquiror, in its
reasonable judgment, would not have entered into this Agree-
ment.
(c) None of the Acquiror, the Company or their re-
spective Subsidiaries shall be subject to any statute, rule,
regulation, injunction or other order or decree which shall
have been enacted, entered, promulgated or enforced by any gov-
ernmental or judicial authority which prohibits, restricts or
makes illegal consummation of the Merger or the Bank Merger or
any of the other transactions contemplated hereby.
(d) The Form S-4 shall have become effective under
the Securities Act, and the Acquiror shall have received all
state securities laws or "blue sky" permits and other authori-
zations or there shall be exemptions from registration require-
ments necessary to issue the Acquiror Common Stock in connec-
tion with the Merger, and neither the Form S-4 nor any such
permit, authorization or exemption shall be subject to a stop
order or threatened stop order by the Commission or any state
securities authority.
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(e) The shares of Acquiror Common Stock to be issued
in connection with the Merger shall have been approved for
listing on the Nasdaq Stock Market's National Market.
(f) Each of KPMG Peat Marwick LLP, the Acquiror's
independent public accountants, and Ernst & Young LLP, the
Company's independent public accountants, shall have issued a
letter dated as of the Effective Time, to the Acquiror and to
the Company, respectively, to the effect that, based on a re-
view of this Agreement and related agreements (including with-
out limitation the agreements referred to in Section 5.13(b)
hereof) and the facts and circumstances then known to it (in-
cluding without limitation the number of Dissenting Shares, if
any, in relation to the number of outstanding shares of Company
Common Stock immediately prior to the Effective Time), the
Merger shall be accounted for as a pooling-of-interests under
generally accepted accounting principles.
(g) The Acquiror shall have received the written
opinion of Elias, Matz, Tiernan & Herrick L.L.P. to the effect
that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code, and the Company shall have
received the written opinion of Wachtell, Lipton, Rosen & Katz
to such effect and to the effect that (i) except for cash re-
ceived in lieu of fractional share interests, holders of Com-
pany Common Stock who receive Acquiror Common Stock in the
Merger will not recognize income, gain or loss for federal in-
come tax purposes, (ii) the basis of such Acquiror Common Stock
will equal the basis of the Company Common Stock for which it
is exchanged, and (iii) the holding period of such Acquiror
Common Stock will include the holding period of the Company
Common Stock for which it is exchanged, assuming that such
stock is a capital asset in the hands of the holder thereof at
the Effective Time. Each such opinion shall be based on such
written representations from the Acquiror, the Company and oth-
ers as such counsel shall reasonably request as to factual mat-
ters.
6.2 Conditions Precedent - The Company
The obligations of the Company to effect the transac-
tions contemplated by this Agreement shall be subject to satis-
faction of the following conditions at or prior to the Effec-
tive Time unless waived by the Company pursuant to Section 7.4
hereof.
(a) The representations and warranties of the Ac-
quiror as set forth in Article IV hereof shall be true and cor-
rect as of the date of this Agreement and as of the Effective
Time as though made on and as of the Effective Time (or on the
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date when made in the case of any representation and warranty
which specifically relates to an earlier date), provided, how-
ever, that notwithstanding anything herein to the contrary,
this Section 6.2(a) shall be deemed to have been satisfied even
if such representations or warranties are not true and correct
unless the failure of any of the representations or warranties
to be so true and correct would have, individually or in the
aggregate, a Material Adverse Effect on the Acquiror.
(b) The Acquiror shall have performed in all mate-
rial respects all obligations and complied with all covenants
required to be performed and complied with by it pursuant to
this Agreement on or prior to the Effective Time.
(c) The Acquiror shall have delivered to the Company
a certificate, dated the date of the Closing and signed by its
Chairman and President and by its Chief Financial Officer, to
the effect that the conditions set forth in Sections 6.2(a) and
6.2(b) have been satisfied.
(d) The Company shall have received the written
opinions of Elias, Matz, Tiernan & Herrick L.L.P. and/or of
Carol L. Mitchell, Esq., dated the date of the Closing, that
collectively address the matters set forth in Exhibit F hereto.
(e) The Acquiror and the Acquiror Sub shall have
furnished the Company with such certificates of its respective
officers or others and such other documents to evidence ful-
fillment of the conditions set forth in Sections 6.1 and 6.2 as
such conditions relate to the Acquiror and the Acquiror Sub as
the Company may reasonably request.
6.3 Conditions Precedent - The Acquiror and the Acquiror Sub
The obligations of the Acquiror and the Acquiror Sub
to effect the transactions contemplated by this Agreement shall
be subject to satisfaction of the following conditions at or
prior to the Effective Time unless waived by the Acquiror or
the Acquiror Sub pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Com-
pany set forth in Article III hereof shall be true and correct
as of the date of this Agreement and as of the Effective Time
as though made on and as of the Effective Time (or on the date
when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however,
that notwithstanding anything herein to the contrary, this Sec-
tion 6.3(a) shall be deemed to have been satisfied even if such
representations or warranties are not true and correct unless
the failure of any of the representations or warranties to be
-56-<PAGE>
so true and correct would have, individually or in the ag-
gregate, a Material Adverse Effect on the Company.
(b) The Company shall have performed in all material
respects all obligations and covenants required to be performed
by it pursuant to this Agreement and the letter agreements re-
ferred to in Section 5.10(b)(i) hereof on or prior to the Ef-
fective Time.
(c) The Company shall have delivered to the Acquiror
a certificate, dated the date of the Closing and signed by its
Chairman and President and by its Chief Financial Officer, to
the effect that the conditions set forth in Sections 6.3(a) and
6.3(b) have been satisfied.
(d) The Acquiror shall have received the written
opinions of Wachtell, Lipton, Rosen & Katz and/or of Sheehan,
Phinney, Bass + Green, P.A., dated the date of the Closing,
that collectively address the matters set forth in Exhibit G
hereto.
(e) The Company shall have furnished the Acquiror
with such certificates of its officers or others and such other
documents to evidence fulfillment of the conditions set forth
in Sections 6.1 and 6.3 as such conditions relate to the Com-
pany as the Acquiror may reasonably request.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time,
by the mutual consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time,
by the Acquiror or the Acquiror Sub in writing if the Company
has, or by the Company in writing if the Acquiror or the Ac-
quiror Sub has, in any material respect, breached (i) any mate-
rial covenant or undertaking contained herein or (ii) any rep-
resentation or warranty contained herein, in any case if such
breach has not been cured by the earlier of 30 days after the
date on which written notice of such breach is given to the
party committing such breach or the Effective Time;
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(c) at any time, by any party hereto in writing, if
any of the applications for prior approval referred to in Sec-
tion 5.3 hereof are denied or are approved in a manner which
does not satisfy the requirements of Section 6.1(b) hereof, and
the time period for appeals and requests for reconsideration
has run;
(d) at any time, by any party hereto in writing, if
the shareholders of the Acquiror or the Company do not approve
this Agreement after a vote taken thereon at a meeting duly
called for such purpose (or at any adjournment thereof), unless
the failure of such occurrence shall be due to the failure of
the party seeking to terminate to perform or observe in any
material respect its agreements set forth herein to be per-
formed or observed by such party at or before the Effective
Time;
(e) by either the Company or the Acquiror in writing
if the Effective Time has not occurred by the close of business
on the first anniversary of the date hereof, provided that this
right to terminate shall not be available to any party whose
failure to perform an obligation in breach of such party's ob-
ligations under this Agreement has been the cause of, or re-
sulted in, the failure of the Merger and the other transactions
contemplated hereby to be consummated by such date (the Ac-
quiror and the Acquiror Sub being treated as a single entity
for purposes of this Section 7.1(e));
(f) by the Company at any time during the ten-day
period commencing with the Determination Date (as defined be-
low) if the Average Closing Price (as defined below) shall be
less than $16.00, subject, however, to the following three sen-
tences. If the Company elects to exercise its termination
right pursuant to this Section 7.1(f), it shall give written
notice to the Acquiror (provided that such notice of election
to terminate may be withdrawn at any time within the aforemen-
tioned ten-day period). During the five-day period commencing
with its receipt of such notice, the Acquiror shall have the
option to increase the consideration to be received by the
holders of the Company Common Stock hereunder by adjusting the
Exchange Ratio to equal a number (calculated to the nearest
one-thousandth) obtained by dividing (A) $32.00 by (B) the Av-
erage Closing Price. If the Acquiror so elects within such
five-day period, it shall give prompt written notice to the
Company of such election and the revised Exchange Ratio, where-
upon no termination shall have occurred pursuant to this Sec-
tion 7.1(f) and this Agreement shall remain in effect in ac-
cordance with its terms (except as the Exchange Ratio shall
have been so modified). For purposes of this Section 7.1(f),
(i) the term "Average Closing Price" means the average of the
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daily closing prices of a share of Acquiror Common Stock, as
reported by the Nasdaq Stock Market's National Market (as re-
ported in The Wall Street Journal or, if not reported thereby,
another authoritative source) during the period of 20 consecu-
tive trading days ending on the Determination Date and (ii) the
term "Determination Date" means the date on which the approval
of the FRB for consummation of the Merger is received; and
(g) by the Company or the Acquiror, as applicable,
if during the nine-day period following the date of this Agree-
ment it provides written notice to the other party to the ef-
fect that as a result of the due diligence review of such other
party during such period it reasonably believes that the condi-
tion to the terminating party's obligations set forth in Sec-
tion 6.2(a) or Section 6.3(a), as applicable, cannot be satis-
fied as of the date of this Agreement and describes to the
other party in reasonable detail the basis for such determi-
nation.
7.2 Effect of Termination
In the event that this Agreement is terminated pursu-
ant to Section 7.1 hereof, this Agreement shall become void and
have no effect, except that (i) the provisions relating to con-
fidentiality and expenses set forth in Section 5.4 and Section
8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b),
(d) or (e) shall not relieve the breaching party from liability
for willful breach of any covenant, undertaking, representation
or warranty giving rise to such termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this
Agreement or in any instrument delivered pursuant hereto or
thereto shall expire on, and be terminated and extinguished at,
the Effective Time other than covenants that by their terms are
to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.8, 5.9 and
5.10 hereof), provided that no such representations, warranties
or covenants shall be deemed to be terminated or extinguished
so as to deprive the Acquiror, the Acquiror Sub or the Company
(or any director, officer or controlling person thereof) of any
defense at law or in equity which otherwise would be available
against the claims of any person, including, without limita-
tion, any shareholder or former shareholder of either the Ac-
quiror or the Company.
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7.4 Waiver
Each party hereto by written instrument signed by an
executive officer of such party, may at any time (whether be-
fore or after approval of this Agreement by the shareholders of
the Acquiror and the Company) extend the time for the perfor-
mance of any of the obligations or other acts of the other
party hereto and may waive (i) any inaccuracies of the other
party in the representations or warranties contained in this
Agreement or any document delivered pursuant hereto, (ii) com-
pliance with any of the covenants, undertakings or agreements
of the other party, (iii) to the extent permitted by law, sat-
isfaction of any of the conditions precedent to its obligations
contained herein or (iv) the performance by the other party of
any of its obligations set forth herein, provided that any such
waiver granted, or any amendment or supplement pursuant to Sec-
tion 7.5 hereof executed after shareholders of the Acquiror or
the Company have approved this Agreement shall not modify ei-
ther the amount or form of the consideration to be provided
hereby to the holders of Company Common Stock upon consummation
of the Merger or otherwise materially adversely affect such
shareholders without the approval of the shareholders who would
be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any
time by mutual agreement of the Acquiror, the Acquiror Sub and
the Company, subject to the proviso to Section 7.4 hereof. Any
such amendment or supplement must be in writing and authorized
by their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses
Each party hereto shall bear and pay all costs and
expenses incurred by it in connection with the transactions
contemplated by this Agreement, including fees and expenses of
its own financial consultants, accountants and counsel, except
that expenses of printing the Form S-4 and the registration fee
to be paid to the Commission in connection therewith shall be
shared equally between the Company and the Acquiror.
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8.2 Entire Agreement
This Agreement contains the entire agreement among
the parties with respect to the transactions contemplated
hereby and supersedes all prior arrangements or understandings
with respect thereto, written or oral, other than documents
referred to herein and therein. The terms and conditions of
this Agreement shall inure to the benefit of and be binding
upon the parties hereto and thereto and their respective suc-
cessors. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties
hereto, and their respective successors, any rights, remedies,
obligations or liabilities other than as set forth in Sections
5.8, 5.9 (other than the last sentence of paragraph (a)
thereof) and 5.10(b) hereof.
8.3 No Assignment
None of the parties hereto may assign any of its
rights or obligations under this Agreement to any other person.
8.4 Notices
All notices or other communications which are re-
quired or permitted hereunder shall be in writing and suf-
ficient if delivered personally, telecopied (with confirmation)
or sent by overnight mail service or by registered or certified
mail (return receipt requested), postage prepaid, addressed as
follows:
If to the Acquiror or the Acquiror Sub:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief
Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
-61-<PAGE>
If to the Company:
Bank of New Hampshire Corporation
300 Franklin Street
Manchester, New Hampshire 03101
Attn: Davis P. Thurber
Chairman and President
Fax: 603-645-0026
With a required copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attn: Craig M. Wasserman
Fax: 212-403-2000
and
Sheehan, Phinney, Bass + Green, P.A.
1000 Elm Street
P.O. Box 3701
Manchester, New Hampshire 03105-3701
Attn: Robert B. Field, Jr.
Fax: 603-668-0300
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to
the contrary, the Acquiror may, with the written consent of the
Company, which shall not be unreasonably withheld, elect, sub-
ject to the filing of all necessary applications and the re-
ceipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company and the Bank set
forth herein (including without limitation restructuring the
Bank Merger so that the Bank merges with and into the Acquiror
New Hampshire Bank or delaying the Bank Merger), provided that
(i) the federal income tax consequences of any transactions
created by such modification shall not be other than those set
forth in Section 6.1(g) hereof, (ii) any such modification will
not jeopardize pooling-of-interests accounting treatment, (iii)
the consideration to be paid to the holders of the Company Com-
mon Stock is not thereby changed in kind or reduced in amount
as a result of such modification and (iv) such modification
will not materially delay or jeopardize receipt of any required
regulatory approvals or any other condition to the obligations
of the Acquiror and the Acquiror Sub set forth in Sections 6.1
and 6.3 hereof.
-62-<PAGE>
8.6 Interpretation
The captions contained in this Agreement are for ref-
erence purposes only and are not part of this Agreement.
8.7 Counterparts
This Agreement may be executed in any number of coun-
terparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall
constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of the State of Maine applicable to
agreements made and entirely to be performed within such juris-
diction.
-63-<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed in counterparts by their duly
authorized officers and their corporate seal to be hereunto
affixed and attested by their officers thereunto duly autho-
rized, all as of the day and year first above written.
PEOPLES HERITAGE FINANCIAL
Attest: GROUP, INC.
/s/ Peter J. Verrill By:/s/ William J. Ryan
Name: Peter J. Verrill Name: William J. Ryan
Title: Senior Executive Vice Title: Chairman, President
President and Chief and Chief Executive
Financial Officer Officer
FIRST COASTAL BANKS, INC.
Attest:
/s/ John E. Menario By:/s/ Norman E. Bilodeau
Name: John E. Menario Name: Norman E. Bilodeau
Title: Director Title: President and Chief
Executive Officer
BANK OF NEW HAMPSHIRE
Attest: CORPORATION
/s/ Paul R. Shea By:/s/ Davis P. Thurber
Name: Paul R. Shea Name: Davis P. Thurber
Title: Senior Executive Vice Title: Chairman and President
President
-64-
EXHIBIT 2
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of October 25, 1995
(the "Agreement"), by and between Peoples Heritage Financial
Group, Inc., a Maine corporation ("Issuer"), and Bank of New
Hampshire Corporation, a New Hampshire corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee, Issuer and First Coastal Banks,
Inc., a wholly-owned subsidiary of Issuer, have entered into an
Agreement and Plan of Merger, dated as of October 25, 1995 (the
"Plan"), providing for, among other things, the merger of First
Coastal Banks, Inc. with and into Grantee (the "Merger"), with
Grantee as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's
execution of the Plan and Grantee's agreement referred to in
the next WHEREAS clause, Grantee has required that Issuer
agree, and Issuer has agreed, to grant to Grantee the Option
(as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's
execution of the Plan and this Agreement, Grantee has agreed to
grant an option to Issuer on terms and conditions which are
substantially identical to those of the Option and this
Agreement with respect to 19.9% of the common stock of Grantee;
NOW THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth herein and in the Plan, and intending to
be legally bound hereby, Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used
but not defined herein shall have the meanings ascribed to such
terms in the Plan.
2. Grant of Option. Subject to the terms and
conditions set forth herein, Issuer hereby grants to Grantee an
irrevocable option (the "Option") to purchase up to 1,674,894
shares (as adjusted as set forth herein) (the "Option Shares,"
which shall include the Option Shares before and after any
transfer of such Option Shares) of Common Stock, par value $.01
per share ("Issuer Common Stock"), of Issuer at a purchase
price per Option Share (the "Purchase Price") of $19.75,
provided, however, that in no event shall the number of Option
Shares for which the Option is exercisable exceed 9.9% of the
issued and outstanding shares of Issuer Common Stock without
giving effect to any shares subject to or issued pursuant to<PAGE>
the Option. Each Option Share issued upon exercise of the
Option shall be accompanied by Acquiror Rights as provided in
the Acquiror Rights Agreement.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as herein-
after defined), as applicable, shall not be in material breach
of the agreements or covenants contained in this Agreement or
the Plan, and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the
Option issued by any court of competent jurisdiction in the
United States shall be in effect, Grantee may exercise the
Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no
further force and effect upon the earliest to occur of (A) the
Effective Time of the Merger, (B) termination of the Plan in
accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section
7.1(b)(i) (a "Default Termination"), (C) 12 months after the
termination of the Plan by Grantee pursuant to a Default
Termination, and (D) 12 months after termination of the Plan
(other than pursuant to a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event;
and provided, further, that any purchase of shares upon exer-
cise of the Option shall be subject to compliance with appli-
cable laws, including without limitation the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The term
"Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee. The rights set
forth in Section 8 hereof shall terminate when the right to
exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of
the following events:
(i) Without Grantee's prior written consent,
Issuer shall have authorized, recommended or
publicly-proposed, or publicly announced an intention
to authorize, recommend or propose, or entered into
an agreement with any person (other than Grantee or
any subsidiary of Grantee) to effect (A) a merger,
consolidation or similar transaction involving Issuer
or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of
Issuer or any of its subsidiaries representing in
either case 20% or more of the consolidated assets of
-2-<PAGE>
Issuer and its subsidiaries, or (C) the issuance,
sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar
transaction) securities representing 20% or more of
the voting power of Issuer or any of its subsidiaries
(any of the foregoing an "Acquisition Transaction");
or
(ii) any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) of or the right
to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the
Exchange Act) shall have been formed which bene-
ficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding
shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event"
means any of the following events:
(i) any person (other than Grantee or any
subsidiary of Grantee) shall have commenced (as such
term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender
offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 10% or
more of the then outstanding shares of Issuer Common
Stock (such an offer being referred to herein as a
"Tender Offer" and an "Exchange Offer,"
respectively); or
(ii) (A) the holders of Issuer Common Stock
shall not have approved the Plan at the meeting of
such stockholders held for the purpose of voting on
the Plan, (B) such meeting shall not have been held
or shall have been canceled prior to termination of
the Plan, (C) Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors
with respect to the Plan or (D) Issuer shall have
terminated the Plan pursuant to Section 7.1(g) there-
of, in each case after it shall have been publicly
announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or dis-
closed an intention to make, a proposal to engage in
an Acquisition Transaction, (y) commenced a Tender
-3-<PAGE>
Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or
(z) filed an application (or given notice), whether
in draft or final form, under the BHC Act, the Bank
Merger Act, as amended, or the Change in Bank Control
Act of 1978, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) (A) Issuer shall have breached any
representation, warranty, covenant or obligation
contained in the Plan and such breach would entitle
Grantee to terminate the Plan under Section 7.1(b)
thereof (without regard to the cure period provided
for therein unless such cure is promptly effected
without jeopardizing consummation of the Merger
pursuant to the terms of the Plan) or (B) Issuer
shall have terminated the Plan pursuant to Section
7.1(g) thereof, in each case after (x) a bona fide
proposal is made by any person (other than Grantee or
any subsidiary of Grantee) to Issuer or its stock-
holders to engage in an Acquisition Transaction, (y)
any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stock-
holders to make a proposal to engage in an Acquisi-
tion Transaction if the Plan terminates, or (z) any
person (other than Grantee or any subsidiary of
Grantee) shall have filed an application or notice
with any Governmental Entity to engage in an
Acquisition Transaction.
As used in this Agreement, "person" shall have the
meaning specified in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act.
(d) Issuer shall notify Grantee promptly in writing
of the occurrence of any Preliminary Purchase Event or Purchase
Event, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Holder to
exercise the Option.
(e) In the event Holder wishes to exercise the
Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying
(i) the total number of Option Shares it intends to purchase
pursuant to such exercise, and (ii) a place and date not
earlier than three business days nor later than 15 business
days from the Notice Date for the closing (the "Closing") of
such purchase (the "Closing Date"). If prior notification to
or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") or any other Governmental
-4-<PAGE>
Entity is required in connection with such purchase, Issuer
shall cooperate with Grantee in the filing of the required
notice of application for approval and the obtaining of such
approval and the Closing shall occur immediately following such
regulatory approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to
Issuer, in immediately available funds by wire transfer to a
bank account designated by Issuer, an amount equal to the
Purchase Price multiplied by the number of Option Shares to be
purchased on such Closing Date, and (ii) present and surrender
this Agreement to Issuer at the address of Issuer specified in
Section 12(f) hereof.
(b) At each Closing, simultaneously with the
delivery of immediately available funds and surrender of this
Agreement as provided in Section 4(a), (i) Issuer shall deliver
to Holder (A) a certificate or certificates representing the
Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever and subject to no
preemptive rights, and (B) if the Option is exercised in part
only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii)
Holder shall deliver to Issuer a letter agreeing that Holder
shall not offer to sell or otherwise dispose of such Option
Shares in violation of applicable federal and state law or of
the provisions of this Agreement.
(c) In addition to any other legend that is required
by applicable law, certificates for the Option Shares delivered
at each Closing shall be endorsed with a restrictive legend
which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF
OCTOBER 25, 1995. A COPY OF SUCH AGREEMENT WILL BE
PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend
shall be removed by delivery of substitute certificate(s)
without such legend if Holder shall have delivered to Issuer a
copy of a letter from the staff of the Commission, or an
-5-<PAGE>
opinion of counsel in form and substance reasonably satisfac-
tory to Issuer and its counsel, to the effect that such legend
is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the
written notice of exercise of the Option provided for under
Section 3(e), the tender of the applicable purchase price in
immediately available funds and the tender of this Agreement to
Issuer, Holder shall be deemed to be the holder of record of
the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of
Issuer Common Stock shall not then be actually delivered to
Holder.
(e) Issuer agrees (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized
but unissued or treasury shares of Issuer Common Stock so that
the Option may be exercised without additional authorization of
Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase
Issuer Common Stock, (ii) that it will not, by charter amend-
ment or through reorganization, consolidation, merger, dissolu-
tion or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or per-
formed hereunder by Issuer, (iii) promptly to take all action
as may from time to time be required (including (A) complying
with all premerger notification, reporting and waiting period
requirements and (B) in the event prior approval of or notice
to any Governmental Entity is necessary before the Option may
be exercised, cooperating fully with Holder in preparing such
applications or notices and providing such information to such
Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively
to issue shares of Issuer Common Stock pursuant hereto, and
(iv) promptly to take all action provided herein to protect the
rights of Holder against dilution.
5. Representations and Warranties of Issuer.
Issuer hereby represents and warrants to Grantee (and Holder,
if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite
corporate power and authority to enter into this Agree-
ment, and subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consum-
mation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the
-6-<PAGE>
part of Issuer, and this Agreement has been duly executed
and delivered by Issuer.
(b) No Violations. The execution and delivery of
this Agreement, the consummation of the transactions
contemplated hereby and compliance by Issuer with any of
the provisions hereof will not (i) conflict with or result
in a breach of any provision of its Articles of Incorpo-
ration or Bylaws or a default (or give rise to any right
of termination, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, bond,
debenture, mortgage, indenture, license, material agree-
ment or other material instrument or obligation to which
Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable
to Issuer or any of its properties or assets.
(c) Authorized Stock. Issuer has taken all neces-
sary corporate and other action to authorize and reserve
and to permit it to issue, and at all times from the date
hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have
reserved for issuance upon exercise of the Option that
number of shares of Issuer Common Stock equal to the maxi-
mum number of shares of Issuer Common Stock at any time
and from time to time purchasable upon exercise of the
Option, and all such shares, upon issuance pursuant to the
Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or
nature whatsoever and not subject to any preemptive
rights.
6. Representations and Warranties of Grantee.
Grantee hereby represents and warrants to Issuer that Grantee
has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part
of Grantee, and this Agreement has been duly executed and
delivered by Grantee.
7. Adjustment upon Changes in Issuer
Capitalization, etc.
(a) In the event of any change in Issuer Common
Stock by reason of a stock dividend, stock split, split-up,
-7-<PAGE>
recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall
be adjusted appropriately, and proper provision shall be made
in the agreements governing such transactions so that Holder
shall receive, upon exercise of the Option, the number and
class of shares or other securities or property that Holder
would have received in respect of Issuer Common Stock if the
Option had been exercised immediately prior to such event, or
the record date therefor, as applicable. If any additional
shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the
first sentence of this Section 7(a)), the number of shares of
Issuer Common Stock subject to the Option shall be adjusted so
that, after such issuance, it, together with any shares of
Issuer Common Stock previously issued pursuant hereto, equals
9.9% of the number of shares of Issuer Common Stock then issued
and outstanding, without giving effect to any shares subject to
or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an
agreement: (i) to consolidate with or merge into any person,
other than Grantee or one of its subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation
or merger, (ii) to permit any person, other than Grantee or one
of its subsidiaries, to merge into Issuer and Issuer shall be
the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of Issuer Common
Stock shall be changed into or exchanged for stock or other
securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock
immediately prior to such merger shall after such merger repre-
sent less than 50% of the outstanding shares and share equiva-
lents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person,
other than Grantee or one of its subsidiaries, then, and in
each such case, the agreement governing such transaction shall
make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged
for, an option (the "Substitute Option"), at the election of
Holder, of any of (x) the Acquiring Corporation (as hereinafter
defined), (y) any person that controls the Acquiring Corpora-
tion or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "Substitute Option
Issuer").
(c) The Substitute Option shall have the same terms
as the Option, provided that, if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option,
-8-<PAGE>
such terms shall be as similar as possible and in no event less
advantageous to Holder. Substitute Option Issuer also shall
enter into an agreement with Holder in substantially the same
form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock (as herein-
after defined) as is equal to the Assigned Value (as herein-
after defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The
exercise price of Substitute Option per share of Substitute
Common Stock (the "Substitute Option Price") shall then be
equal to the Purchase Price multiplied by a fraction in which
the numerator is the number of shares of Issuer Common Stock
for which the Option was theretofore exercisable and the
denominator is the number of shares of the Substitute Common
Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolida-
tion or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the con-
tinuing or surviving person, or (iii) the transferee
of all or substantially all of Issuer's assets (or a
substantial part of the assets of its subsidiaries
taken as a whole).
(2) "Substitute Common Stock" shall mean the
shares of capital stock (or similar equity interest)
with the greatest voting power in respect of the
election of directors (or persons similarly respon-
sible for the direction of the business and affairs)
of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of
(w) the price per share of Issuer Common Stock at
which a Tender Offer or an Exchange Offer therefor
has been made, (x) the price per share of Issuer
Common Stock to be paid by any third party pursuant
to an agreement with Issuer, (y) the highest closing
price for shares of Issuer Common Stock within the
six-month period immediately preceding the consolida-
tion, merger or sale in question and (z) in the event
of a sale of all or substantially all of Issuer's
assets or deposits, an amount equal to (i) the sum of
the price paid in such sale for such assets (and/or
-9-<PAGE>
deposits) and the current market value of the remain-
ing assets of Issuer, as determined by a nationally-
recognized investment banking firm selected by Hold-
er, divided by (ii) the number of shares of Issuer
Common Stock outstanding at such time. In the event
that a Tender Offer or an Exchange Offer is made for
Issuer Common Stock or an agreement is entered into
for a merger or consolidation involving consideration
other than cash, the value of the securities or other
property issuable or deliverable in exchange for
Issuer Common Stock shall be determined by a
nationally-recognized investment banking firm
selected by Holder.
(4) "Average Price" shall mean the average
closing price of a share of Substitute Common Stock
for the one year immediately preceding the consoli-
dation, merger or sale in question, but in no event
higher than the closing price of the shares of
Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a
share of common stock issued by Issuer, the person
merging into Issuer or by any company which controls
such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 9.9% of the aggregate of the shares of Substitute Common
Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable
for more than 9.9% of the aggregate of the shares of Substitute
Common Stock but for the limitation in the first sentence of
this Section 7(f), Substitute Option Issuer shall make a cash
payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in
the first sentence of this Section 7(f) over (ii) the value of
the Substitute Option after giving effect to the limitation in
the first sentence of this Section 7(f). This difference in
value shall be determined by a nationally-recognized investment
banking firm selected by Holder.
(g) Issuer shall not enter into any transaction
described in Section 7(b) unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assume in
writing all the obligations of Issuer hereunder and take all
other actions that may be necessary so that the provisions of
this Section 7 are given full force and effect (including,
without limitation, any action that may be necessary so that
-10-<PAGE>
the holders of the other shares of common stock issued by
Substitute Option Issuer are not entitled to exercise any
rights by reason of the issuance or exercise of the Substitute
Option and the shares of Substitute Common Stock are otherwise
in no way distinguishable from or have lesser economic value
(other than any diminution in value resulting from the fact
that the shares of Substitute Common Stock are restricted
securities, as defined in Rule 144 under the Securities Act or
any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at
the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d))
and ending 12 months immediately thereafter, Issuer shall
repurchase from Holder (i) the Option and (ii) all shares of
Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The
date on which Holder exercises its rights under this Section 8
is referred to as the "Request Date." Such repurchase shall be
at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder
for any shares of Issuer Common Stock acquired pursuant to
the Option with respect to which Holder then has
beneficial ownership;
(ii) the excess, if any, of (x) the Applicable
Price (as defined below) for each share of Issuer Common
Stock over (y) the Purchase Price (subject to adjustment
pursuant to Section 7), multiplied by the number of shares
of Issuer Common Stock with respect to which the Option
has not been exercised; and
(iii) the excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to
Section 7) paid (or, in the case of Option Shares with
respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each
share of Issuer Common Stock with respect to which the
Option has been exercised and with respect to which Holder
then has beneficial ownership, multiplied by the number of
such shares.
(b) If Holder exercises its rights under this
Section 8, Issuer shall, within 10 business days after the
Request Date, pay the Section 8 Repurchase Consideration to
-11-<PAGE>
Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common
Stock purchased thereunder with respect to which Holder then
has beneficial ownership, and shall warrant that it has sole
record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the fore-
going, to the extent that prior notification to or approval of
the Federal Reserve Board or any other Governmental Entity is
required in connection with the payment of all or any portion
of the Section 8 Repurchase Consideration, Holder shall have
the ongoing option to revoke its request for repurchase pur-
suant to Section 8, in whole or in part, or to require that
Issuer deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party
shall cooperate with the other in the filing of any such notice
or application and the obtaining of any such approval). If the
Federal Reserve Board or any other Governmental Entity dis-
approves of any part of Issuer's proposed repurchase pursuant
to this Section 8, Issuer shall promptly give notice of such
fact to Holder. If the Federal Reserve Board or any other
Governmental Entity prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the re-
purchase request or (ii) to the extent permitted by the Federal
Reserve Board or other Governmental Entity, determine whether
the repurchase should apply to the Option and/or Option Shares
and to what extent to each, and Holder shall thereupon have the
right to exercise the Option as to the number of Option Shares
for which the Option was exercisable at the Request Date less
the sum of the number of shares covered by the Option in re-
spect of which payment has been made pursuant to Section
8(a)(ii) and the number of shares covered by the portion of the
Option (if any) that has been repurchased. Holder shall notify
Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the
repurchase.
Notwithstanding anything herein to the contrary, all
of Grantee's rights under this Section 8 shall terminate on the
date of termination of the Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of
Issuer Common Stock paid for any such share by the person or
groups described in Section 8(d)(i), (ii) the price per share
of Issuer Common Stock received by holders of Issuer Common
-12-<PAGE>
Stock in connection with any merger or other business combina-
tion transaction described in Section 7(b)(i), 7(b)(ii) or
7(b)(iii), or (iii) the highest closing sales price per share
of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is
not quoted on NASDAQ/NMS, the highest bid price per share as
quoted on the principal trading market or securities exchange
on which such shares are traded as reported by a recognized
source chosen by Holder during the 60 business days preceding
the Request Date); provided, however, that in the event of a
sale of less than all of Issuer's assets, the Applicable Price
shall be the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of Issuer
as determined by a nationally-recognized investment banking
firm selected by Holder, divided by the number of shares of
Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to
either of the foregoing clauses (i) or (ii) shall be other than
in cash, the value of such consideration shall be determined in
good faith by an independent nationally-recognized investment
banking firm selected by Holder and reasonably acceptable to
Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur
if (i) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership of (as such
term is defined in Rule 13d-3 promulgated under the Exchange
Act), or the right to acquire beneficial ownership of, or any
"group" (as such term is defined in Section 13(d)(3) of the
Exchange Act) shall have been formed which beneficially owns or
has the right to acquire beneficial ownership of, 50% or more
of the then outstanding shares of Issuer Common Stock, or (ii)
any of the transactions described in Section 7(b)(i), Section
7(b)(ii) or Section 7(b)(iii) shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall,
subject to the conditions of Section 9(c), if requested by any
Holder, as expeditiously as possible prepare and file a regis-
tration statement under the Securities Act if such registration
is necessary in order to permit the sale or other disposition
of any or all shares of Issuer Common Stock or other securities
that have been acquired by or are issuable to Holder upon
exercise of the Option in accordance with the intended method
of sale or other disposition stated by Holder in such request,
including without limitation a "shelf" registration statement
under Rule 415 under the Securities Act or any successor
provision, and Issuer shall use its best efforts to qualify
-13-<PAGE>
such shares or other securities for sale under any applicable
state securities laws.
(b) Additional Registration Rights. If Issuer at
any time after the exercise of the Option proposes to register
any shares of Issuer Common Stock under the Securities Act in
connection with an underwritten public offering of such Issuer
Common Stock, Issuer will promptly give written notice to
Holder of its intention to do so and, upon the written request
of Holder given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares
for which a Holder shall have requested participation in such
registration to be so registered and included in such under-
written public offering; provided, however, that Issuer may
elect to not cause any such shares to be so registered (i) if
the underwriters in good faith object for valid business
reasons, or (ii) in the case of a registration solely to
implement an employee benefit plan or a registration filed on
Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to
clause (i) may only be made one time. If some but not all the
shares of Issuer Common Stock with respect to which Issuer
shall have received requests for registration pursuant to this
Section 9(b) shall be excluded from such registration, Issuer
shall make appropriate allocation of shares to be registered
among Holders permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in
the proportion that the number of shares requested to be
registered by each such Holder bears to the total number of
shares requested to be registered by all such Holders then
desiring to have Issuer Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer
shall use all reasonable efforts to cause each registration
statement referred to in Section 9(a) to become effective and
to obtain all consents or waivers of other parties which are
required therefor and to keep such registration statement
effective; provided, however, that Issuer may delay any regi-
stration of Option Shares required pursuant to Section 9(a) for
a period not exceeding 90 days if Issuer shall in good faith
determine that any such registration would adversely affect an
offering or contemplated offering of other securities by
Issuer, and Issuer shall not be required to register Option
Shares under the Securities Act pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of
the Plan pursuant to Article VII thereof, and (B) a
Purchase Event or a Preliminary Purchase Event;
-14-<PAGE>
(ii) on more than one occasion during any
calendar year;
(iii) within 90 days after the effective date of
a registration referred to in Section 9(b) pursuant to
which the Holder or Holders concerned were afforded the
opportunity to register such shares under the Securities
Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer
by the Holder or Holders of at least 25% or more of the
aggregate number of Option Shares (including shares of
Issuer Common Stock issuable upon exercise of the Option)
then outstanding.
In addition to the foregoing, Issuer shall not be
required to maintain the effectiveness of any registration
statement after the expiration of nine months from the
effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all
steps, under all applicable state securities laws to the extent
necessary to permit the sale or other disposition of the Option
Shares so registered in accordance with the intended method of
distribution for such shares, provided, however, that Issuer
shall not be required to consent to general jurisdiction or to
qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to
do business.
(d) Expenses. Issuer will pay all expenses (includ-
ing without limitation registration fees, qualification fees,
blue sky fees and expenses, accounting expenses, legal expenses
and printing expenses incurred by it) in connection with each
registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section
9(a) or (b). Underwriting discounts and commissions relating
to Option Shares, fees and disbursements of counsel to the
Holder(s) of Option Shares being registered and any other
expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any regi-
stration under Section 9(a) or (b), Issuer hereby indemnifies
each Holder, and each underwriter thereof, including each
person, if any, who controls such Holder or underwriter within
the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any
-15-<PAGE>
untrue, or alleged untrue, statement of a material fact con-
tained in any registration statement or prospectus or notifica-
tion or offering circular (including any amendments or supple-
ments thereto) or any preliminary prospectus, or caused by any
omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the state-
ments therein not misleading, except insofar as such expenses,
losses, claims, damages or liabilities of such indemnified
party are caused by any untrue statement or alleged untrue
statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance
upon, and in conformity with, information furnished in writing
to Issuer by such indemnified party expressly for use therein,
and Issuer and each officer, director and controlling person of
Issuer shall be indemnified by such Holder, or by such under-
writer, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or
alleged untrue, statement that was included by Issuer in any
such registration statement or prospectus or notification or
offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such Holder or such under-
writer, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under
this Section 9(e) of notice of the commencement of any action
against such indemnified party in respect of which indemnity or
reimbursement may be sought against any indemnifying party
under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such
action, but, except to the extent of any actual prejudice to
the indemnifying party, the failure so to notify the indemnify-
ing party shall not relieve it of any liability which it may
otherwise have to any indemnified party under this Section
9(e). In case notice of commencement of any such action shall
be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and, to
the extent it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense of such action
at its own expense, with counsel chosen by it and reasonably
satisfactory to such indemnified party. The indemnified party
shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and
expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless
(i) the indemnifying party agrees to pay the same, (ii) the
indemnifying party fails to assume the defense of such action
with counsel reasonably satisfactory to the indemnified party,
or (iii) the indemnified party has been advised by counsel that
-16-<PAGE>
one or more legal defenses may be available to the indemnifying
party that may be contrary to the interest of the indemnified
party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obli-
gation to bear fees and expenses of such counsel. No indemni-
fying party shall be liable for any settlement entered into
without its consent, which consent may not be unreasonably
withheld.
If the indemnification provided for in this Section
9(e) is unavailable to a party otherwise entitled to be indem-
nified in respect of any expenses, losses, claims, damages or
liabilities referred to herein, then the indemnifying party, in
lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by
such party to be indemnified as a result of such expenses,
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received by
Issuer, the selling Holders and the underwriters from the
offering of the securities and also the relative fault of
Issuer, the selling Holders and the underwriters in connection
with the statement or omissions which results in such expenses,
losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable
by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action
or claim; provided, however, that in no case shall the selling
Holders be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option
Shares included in the offering. No person guilty of fraudu-
lent misrepresentation (within the meaning of Section 11(g) of
the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
Any obligation by any Holder to indemnify shall be several and
not joint with other Holders.
In connection with any registration pursuant to
Section 9(a) or (b) above, Issuer and each selling Holder
(other than Grantee) shall enter into an agreement containing
the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply
with all reporting requirements and will do all such other
things as may be necessary to permit the expeditious sale at
any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation
permitting nonregistered sales of securities promulgated by the
Commission from time to time, including, without limitation,
-17-<PAGE>
Rule 144A. Issuer shall at its expense provide the Holder with
any information necessary in connection with the completion and
filing of any reports or forms required to be filed by them
under the Securities Act or the Exchange Act, or required
pursuant to any state securities laws or the rules of any stock
exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in
connection with the issuance and the sale of the Option Shares
and in connection with the exercise of the Option, and will
save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such
taxes.
10. Quotation; Listing. If Issuer Common Stock or
any other securities to be acquired upon exercise of the Option
are then authorized for quotation or trading or listing on
NASDAQ/NMS or any securities exchange, Issuer, upon the request
of Holder, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of
Issuer Common Stock or other securities to be acquired upon
exercise of the Option on NASDAQ/NMS or such other securities
exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a
Purchase Event or a Preliminary Purchase Event, this Agreement
(and the Option granted hereby) are exchangeable, without
expense, at the option of Holder, upon presentation and sur-
render of this Agreement at the principal office of the Issuer
for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options
for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutila-
tion of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if muti-
lated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered
shall constitute an additional contractual obligation on the
part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by
anyone.
-18-<PAGE>
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in
Section 9, each of the parties hereto shall bear and pay all
costs and expenses incurred by it or on its behalf in connec-
tion with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is
entitled to the benefits of such provision. This Agreement may
not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by
the parties hereto.
(c) Entire Agreement; No Third Party Beneficiaries;
Severability. This Agreement, together with the Plan and the
other documents and instruments referred to herein and therein,
between Grantee and Issuer (i) constitutes the entire agreement
and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the sub-
ject matter hereof, and (ii) is not intended to confer upon any
person other than the parties hereto (other than the indemni-
fied parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement
pursuant to Section 12(h)) any rights or remedies hereunder.
If any term, provision, covenant or restriction of this Agree-
ment is held by a court of competent jurisdiction or a federal
or state regulatory agency to be invalid, void or unenforce-
able, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invali-
dated. If for any reason such court or regulatory agency
determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of
shares of Issuer Common Stock as provided in Sections 3 and 8
(as adjusted pursuant to Section 7), it is the express inten-
tion of Issuer to allow Holder to acquire or to require Issuer
to repurchase such lesser number of shares as may be permis-
sible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Maine
without regard to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings
contained herein are for convenience of reference only and
shall not affect in any way the meaning or interpretation of
this Agreement.
-19-<PAGE>
(f) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or sent by
overnight mail service or mailed by registered or certified
mail (return receipt requested) postage prepaid, to the parties
at the following address (or at such other address for a party
as shall be specified by like notice):
If to Grantee:
Bank of New Hampshire Corporation
300 Franklin Street
Manchester, New Hampshire 03101
Attn: Davis P. Thurber
Chairman and President
Fax: 603-645-0026
With a required copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attn: Craig M. Wasserman
Fax: 212-403-2000
and
Sheehan, Phinney, Bass & Green, P.A.
1000 Elm Street
P.O. Box 3701
Manchester, New Hampshire 03105-3701
Attn: Robert B. Field, Jr.
Fax: 603-668-0300
If to Issuer:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and
Chief Executive Officer
Fax: 207-761-8587
-20-<PAGE>
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
(g) Counterparts. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed, it being
understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder or under the
Option shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written
consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may
assign its rights hereunder in whole or in part after the
occurrence of a Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their
respective successors and assigns.
(i) Further Assurances. In the event of any
exercise of the Option by Holder, Issuer and Holder shall
execute and deliver all other documents and instruments and
take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree
that this Agreement may be enforced by either party through
specific performance, injunctive relief and other equitable
relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision
is without prejudice to any other rights that the parties
hereto may have for any failure to perform this Agreement.
-21-<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused
this Stock Option Agreement to be signed by their respective
officers thereunto duly authorized, all as of the day and year
first written above.
BANK OF NEW HAMPSHIRE
Attest: CORPORATION
/s/ Paul R. Shea By:/s/ Davis P. Thurber
Name: Paul R. Shea Name: Davis P. Thurber
Title: Senior Executive Title: Chairman and President
Vice President
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ Peter J. Verrill By:/s/ William J. Ryan
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice Title: Chairman, President
President and Chief Executive
Officer
-22-
EXHIBIT 3
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of October 25, 1995 (the
"Agreement"), by and between Bank of New Hampshire Corporation,
a New Hampshire corporation ("Issuer"), and Peoples Heritage
Financial Group, Inc., a Maine corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer, Grantee and First Coastal Banks, Inc., a
wholly-owned subsidiary of Grantee, have entered into an
Agreement and Plan of Merger, dated as of October 25, 1995 (the
"Plan"), providing for, among other things, the merger of First
Coastal Banks, Inc. with and into Issuer (the "Merger"), with
Issuer as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's
execution of the Plan and Grantee's agreement referred to in
the next WHEREAS clause, Grantee has required that Issuer
agree, and Issuer has agreed, to grant to Grantee the Option
(as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's
execution of the Plan and this Agreement, Grantee has agreed to
grant an option to Issuer on terms and conditions which are
substantially identical to those of the Option and this
Agreement with respect to 9.9% of the common stock of Grantee;
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and
agreements set forth herein and in the Plan, and intending to
be legally bound hereby, Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but
not defined herein shall have the meanings ascribed to such
terms in the Plan.
2. Grant of Option. Subject to the terms and conditions
set forth herein, Issuer hereby grants to Grantee an
irrevocable option (the "Option") to purchase up to 808,767
shares (as adjusted as set forth herein) (the "Option Shares,"
which shall include the Option Shares before and after any
transfer of such Option Shares) of Common Stock, no par value
and stated value of $2.50 per share ("Issuer Common Stock"), of
Issuer at a purchase price per Option Share (the "Purchase
Price") of $33.50, provided, however, that in no event shall
the number of Option Shares for which the Option is exercisable
exceed 19.9% of the issued and outstanding shares of Issuer<PAGE>
Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the
agreements or covenants contained in this Agreement or the
Plan, and (ii) no preliminary or permanent injunction or other
order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United
States shall be in effect, Grantee may exercise the Option, in
whole or in part, at any time and from time to time following
the occurrence of a Purchase Event (as hereinafter defined);
provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of (A) the
Effective Time of the Merger, (B) termination of the Plan in
accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section
7.1(b)(i) (a "Default Termination"), (C) 12 months after the
termination of the Plan by Grantee pursuant to a Default
Termination, and (D) 12 months after termination of the Plan
(other than pursuant to a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event;
and provided, further, that any purchase of shares upon
exercise of the Option shall be subject to compliance with
applicable laws, including without limitation the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The term
"Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee. The rights set
forth in Section 8 hereof shall terminate when the right to
exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent, Issuer
shall have authorized, recommended or publicly-proposed,
or publicly announced an intention to authorize, recommend
or propose, or entered into an agreement with any person
(other than Grantee or any subsidiary of Grantee) to
effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the
disposition, by sale, lease, exchange or otherwise, of
assets of Issuer or any of its subsidiaries representing
in either case 20% or more of the consolidated assets of
Issuer and its subsidiaries, or (C) the issuance, sale or
other disposition of (including by way of merger,
- 2 -<PAGE>
consolidation, share exchange or any similar transaction)
securities representing 20% or more of the voting power of
Issuer or any of its subsidiaries (any of the foregoing an
"Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary
of Grantee) shall have acquired beneficial ownership (as
such term is defined in Rule 13d-3 promulgated under the
Exchange Act) of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined in
Section 13(d)(3) of the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire
beneficial ownership of, 25% or more of the then
outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means
any of the following events:
(i) any person (other than Grantee or any subsidiary
of Grantee) shall have commenced (as such term is defined
in Rule 14d-2 under the Exchange Act), or shall have filed
a registration statement under the Securities Act with
respect to, a tender offer or exchange offer to purchase
any shares of Issuer Common Stock such that, upon con-
summation of such offer, such person would own or control
10% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a
"Tender Offer" and an "Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not
have approved the Plan at the meeting of such stockholders
held for the purpose of voting on the Plan, (B) such
meeting shall not have been held or shall have been
canceled prior to termination of the Plan, (C) Issuer's
Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Plan or (D) Issuer
shall have terminated the Plan pursuant to Section 7.1(g)
thereof, in each case after it shall have been publicly
announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed
an intention to make, a proposal to engage in an
Acquisition Transaction, (y) commenced a Tender Offer or
filed a registration statement under the Securities Act
with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final
form, under the BHC Act, the Bank Merger Act, as amended,
or the Change in Bank Control Act of 1978, as amended, for
approval to engage in an Acquisition Transaction; or
- 3 -<PAGE>
(iii) (A) Issuer shall have breached any
representation, warranty, covenant or obligation contained
in the Plan and such breach would entitle Grantee to
terminate the Plan under Section 7.1(b) thereof (without
regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing
consummation of the Merger pursuant to the terms of the
Plan) or (B) Issuer shall have terminated the Plan
pursuant to Section 7.1(g) thereof, in each case after (x)
a bona fide proposal is made by any person (other than
Grantee or any subsidiary of Grantee) to Issuer or its
stockholders to engage in an Acquisition Transaction, (y)
any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its
stockholders to make a proposal to engage in an
Acquisition Transaction if the Plan terminates, or (z) any
person (other than Grantee or any subsidiary of Grantee)
shall have filed an application or notice with any Govern-
mental Entity to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Preliminary Purchase Event or Purchase
Event, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Holder to
exercise the Option.
(e) In the event Holder wishes to exercise the Option, it
shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the
total number of Option Shares it intends to purchase pursuant
to such exercise, and (ii) a place and date not earlier than
three business days nor later than 15 business days from the
Notice Date for the closing (the "Closing") of such purchase
(the "Closing Date"). If prior notification to or approval of
the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") or any other Governmental Entity is
required in connection with such purchase, Issuer shall
cooperate with Grantee in the filing of the required notice of
application for approval and the obtaining of such approval and
the Closing shall occur immediately following such regulatory
approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer,
in immediately available funds by wire transfer to a bank
account designated by Issuer, an amount equal to the Purchase
- 4 -<PAGE>
Price multiplied by the number of Option Shares to be purchased
on such Closing Date, and (ii) present and surrender this
Agreement to Issuer at the address of Issuer specified in
Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as
provided in Section 4(a), (i) Issuer shall deliver to Holder
(A) a certificate or certificates representing the Option
Shares to be purchased at such Closing, which Option Shares
shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no
preemptive rights, and (B) if the Option is exercised in part
only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii)
Holder shall deliver to Issuer a letter agreeing that Holder
shall not offer to sell or otherwise dispose of such Option
Shares in violation of applicable federal and state law or of
the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at
each Closing shall be endorsed with a restrictive legend which
shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS ARISING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF
OCTOBER 25, 1995. A COPY OF SUCH AGREEMENT WILL BE
PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be
removed by delivery of substitute certificate(s) without such
legend if Holder shall have delivered to Issuer a copy of a
letter from the staff of the Commission, or an opinion of
counsel in form and substance reasonably satisfactory to Issuer
and its counsel, to the effect that such legend is not required
for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written
notice of exercise of the Option provided for under Section
3(e), the tender of the applicable purchase price in
immediately available funds and the tender of this Agreement to
Issuer, Holder shall be deemed to be the holder of record of
the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of
- 5 -<PAGE>
Issuer Common Stock shall not then be actually delivered to
Holder.
(e) Issuer agrees (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized
but unissued or treasury shares of Issuer Common Stock so that
the Option may be exercised without additional authorization of
Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase
Issuer Common Stock, (ii) that it will not, by charter
amendment or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act,
avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or
performed hereunder by Issuer, (iii) promptly to take all
action as may from time to time be required (including (A)
complying with all premerger notification, reporting and
waiting period requirements and (B) in the event prior approval
of or notice to any Governmental Entity is necessary before the
Option may be exercised, cooperating fully with Holder in
preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in
order to permit Holder to exercise the Option and Issuer duly
and effectively to issue shares of Issuer Common Stock pursuant
hereto, and (iv) promptly to take all action provided herein to
protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer
hereby represents and warrants to Grantee (and Holder, if
different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite
corporate power and authority to enter into this Agreement, and
subject to any approvals referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Issuer, and this Agreement has
been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this
Agreement, the consummation of the transactions contemplated
hereby and compliance by Issuer with any of the provisions
hereof will not (i) conflict with or result in a breach of any
provision of its Articles of Agreement or Bylaws or a default
(or give rise to any right of termination, cancellation or ac-
celeration) under any of the terms, conditions or provisions of
any note, bond, debenture, mortgage, indenture, license,
material agreement or other material instrument or obligation
to which Issuer is a party, or by which it or any of its
- 6 -<PAGE>
properties or assets may be bound, or (ii) violate any order,
writ, injunction, decree, statute, rule or regulation
applicable to Issuer or any of its properties or assets.
(c) Authorized Stock. Issuer has taken all necessary
corporate and other action to authorize and reserve and to
permit it to issue, and at all times from the date hereof until
the obligation to deliver Issuer Common Stock upon the exercise
of the Option terminates, will have reserved for issuance upon
exercise of the Option that number of shares of Issuer Common
Stock equal to the maximum number of shares of Issuer Common
Stock at any time and from time to time purchasable upon
exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully
paid and nonassessable, and will be delivered free and clear of
all liens, claims, charges and encumbrances of any kind or
nature whatsoever and not subject to any preemptive rights.
6. Representations and Warranties of Grantee. Grantee
hereby represents and warrants to Issuer that Grantee has all
requisite corporate power and authority to enter into this
Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the con-
summation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part
of Grantee, and this Agreement has been duly executed and
delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization,
etc.
(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up,
recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall
be adjusted appropriately, and proper provision shall be made
in the agreements governing such transactions so that Holder
shall receive, upon exercise of the Option, the number and
class of shares or other securities or property that Holder
would have received in respect of Issuer Common Stock if the
Option had been exercised immediately prior to such event, or
the record date therefor, as applicable. If any additional
shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the
first sentence of this Section 7(a)), the number of shares of
Issuer Common Stock subject to the Option shall be adjusted so
that, after such issuance, it, together with any shares of
Issuer Common Stock previously issued pursuant hereto, equals
- 7 -<PAGE>
19.9% of the number of shares of Issuer Common Stock then
issued and outstanding, without giving effect to any shares
subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement:
(i) to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and shall not be the con-
tinuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other
securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock
immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share
equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to
any person, other than Grantee or one of its subsidiaries,
then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into,
or exchanged for, an option (the "Substitute Option"), at the
election of Holder, of any of (x) the Acquiring Corporation (as
hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described
in clause (ii), Issuer (such person being referred to as
"Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as
the Option, provided that, if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option,
such terms shall be as similar as possible and in no event less
advantageous to Holder. Substitute Option Issuer also shall
enter into an agreement with Holder in substantially the same
form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock (as hereinafter
defined) as is equal to the Assigned Value (as hereinafter de-
fined) multiplied by the number of shares of Issuer Common
Stock for which the Option was theretofore exercisable, divided
by the Average Price (as hereinafter defined). The exercise
price of Substitute Option per share of Substitute Common Stock
(the "Substitute Option Price") shall then be equal to the
Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the
- 8 -<PAGE>
Option was theretofore exercisable and the denominator is the
number of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in
a merger in which Issuer is the continuing or surviving
person, or (iii) the transferee of all or substantially
all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares
of capital stock (or similar equity interest) with the
greatest voting power in respect of the election of direc-
tors (or persons similarly responsible for the direction
of the business and affairs) of the Substitute Option
Issuer.
(3) "Assigned Value" shall mean the highest of (w)
the price per share of Issuer Common Stock at which a
Tender Offer or an Exchange Offer therefor has been made,
(x) the price per share of Issuer Common Stock to be paid
by any third party pursuant to an agreement with Issuer,
(y) the highest closing price for shares of Issuer Common
Stock within the six-month period immediately preceding
the consolidation, merger or sale in question and (z) in
the event of a sale of all or substantially all of
Issuer's assets or deposits, an amount equal to (i) the
sum of the price paid in such sale for such assets (and/or
deposits) and the current market value of the remaining
assets of Issuer, as determined by a nationally-recognized
investment banking firm selected by Holder, divided by
(ii) the number of shares of Issuer Common Stock
outstanding at such time. In the event that a Tender
Offer or an Exchange Offer is made for Issuer Common Stock
or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the
value of the securities or other property issuable or
deliverable in exchange for Issuer Common Stock shall be
determined by a nationally-recognized investment banking
firm selected by Holder.
(4) "Average Price" shall mean the average closing
price of a share of Substitute Common Stock for the one
year immediately preceding the consolidation, merger or
sale in question, but in no event higher than the closing
price of the shares of Substitute Common Stock on the day
- 9 -<PAGE>
preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of
common stock issued by Issuer, the person merging into
Issuer or by any company which controls such person, as
Holder may elect.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the aggregate of the shares of Substitute Common
Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of
Substitute Common Stock but for the limitation in the first
sentence of this Section 7(f), Substitute Option Issuer shall
make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the
limitation in the first sentence of this Section 7(f) over (ii)
the value of the Substitute Option after giving effect to the
limitation in the first sentence of this Section 7(f). This
difference in value shall be determined by a nationally-
recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described
in Section 7(b) unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all
the obligations of Issuer hereunder and take all other actions
that may be necessary so that the provisions of this Section 7
are given full force and effect (including, without limitation,
any action that may be necessary so that the holders of the
other shares of common stock issued by Substitute Option Issuer
are not entitled to exercise any rights by reason of the
issuance or exercise of the Substitute Option and the shares of
Substitute Common Stock are otherwise in no way distinguishable
from or have lesser economic value (other than any diminution
in value resulting from the fact that the shares of Substitute
Common Stock are restricted securities, as defined in Rule 144
under the Securities Act or any successor provision) than other
shares of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the
request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d))
and ending 12 months immediately thereafter, Issuer shall
repurchase from Holder (i) the Option and (ii) all shares of
Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The
date on which Holder exercises its rights under this Section 8
- 10 -<PAGE>
is referred to as the "Request Date." Such repurchase shall be
at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for
any shares of Issuer Common Stock acquired pursuant to the
Option with respect to which Holder then has beneficial
ownership;
(ii) the excess, if any, of (x) the Applicable Price
(as defined below) for each share of Issuer Common Stock
over (y) the Purchase Price (subject to adjustment pursu-
ant to Section 7), multiplied by the number of shares of
Issuer Common Stock with respect to which the Option has
not been exercised; and
(iii) the excess, if any, of the Applicable Price over
the Purchase Price (subject to adjustment pursuant to
Section 7) paid (or, in the case of Option Shares with
respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each
share of Issuer Common Stock with respect to which the
Option has been exercised and with respect to which Holder
then has beneficial ownership, multiplied by the number of
such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within 10 business days after the Request Date,
pay the Section 8 Repurchase Consideration to Holder in im-
mediately available funds, and contemporaneously with such
payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Holder then has
beneficial ownership, and shall warrant that it has sole record
and beneficial ownership of such shares and that the same are
then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or approval
of the Federal Reserve Board or any other Governmental Entity
is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall
have the ongoing option to revoke its request for repurchase
pursuant to Section 8, in whole or in part, or to require that
Issuer deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from
paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party
shall cooperate with the other in the filing of any such notice
or application and the obtaining of any such approval). If the
Federal Reserve Board or any other Governmental Entity
- 11 -<PAGE>
disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice
of such fact to Holder. If the Federal Reserve Board or any
other Governmental Entity prohibits the repurchase in part but
not in whole, then Holder shall have the right (i) to revoke
the repurchase request or (ii) to the extent permitted by the
Federal Reserve Board or other Governmental Entity, determine
whether the repurchase should apply to the Option and/or Option
Shares and to what extent to each, and Holder shall thereupon
have the right to exercise the Option as to the number of
Option Shares for which the Option was exercisable at the
Request Date less the sum of the number of shares covered by
the Option in respect of which payment has been made pursuant
to Section 8(a)(ii) and the number of shares covered by the
portion of the Option (if any) that has been repurchased.
Holder shall notify Issuer of its determination under the
preceding sentence within five business days of receipt of
notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of
Grantee's rights under this Section 8 shall terminate on the
date of termination of the Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of
Issuer Common Stock paid for any such share by the person or
groups described in Section 8(d)(i), (ii) the price per share
of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business
combination transaction described in Section 7(b)(i), 7(b)(ii)
or 7(b)(iii), or (iii) the highest closing sales price per
share of Issuer Common Stock quoted on the Nasdaq Stock
Market's National Market ("NASDAQ/NMS") (or if Issuer Common
Stock is not quoted on NASDAQ/NMS, the highest bid price per
share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a
recognized source chosen by Holder during the 60 business days
preceding the Request Date); provided, however, that in the
event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally-
recognized investment banking firm selected by Holder, divided
by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered,
paid or received pursuant to either of the foregoing clauses
(i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer, which
- 12 -<PAGE>
determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, a "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership of (as such
term is defined in Rule 13d-3 promulgated under the Exchange
Act), or the right to acquire beneficial ownership of, or any
"group" (as such term is defined in Section 13(d)(3) of the
Exchange Act) shall have been formed which beneficially owns or
has the right to acquire beneficial ownership of, 50% or more
of the then outstanding shares of Issuer Common Stock, or (ii)
any of the transactions described in Section 7(b)(i), Section
7(b)(ii) or Section 7(b)(iii) shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to
the conditions of Section 9(c), if requested by any Holder, as
expeditiously as possible prepare and file a registration
statement under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities
that have been acquired by or are issuable to Holder upon
exercise of the Option in accordance with the intended method
of sale or other disposition stated by Holder in such request,
including without limitation a "shelf" registration statement
under Rule 415 under the Securities Act or any successor
provision, and Issuer shall use its best efforts to qualify
such shares or other securities for sale under any applicable
state securities laws.
(b) Additional Registration Rights. If Issuer at any
time after the exercise of the Option proposes to register any
shares of Issuer Common Stock under the Securities Act in
connection with an underwritten public offering of such Issuer
Common Stock, Issuer will promptly give written notice to
Holder of its intention to do so and, upon the written request
of Holder given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares
for which a Holder shall have requested participation in such
registration to be so registered and included in such
underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i)
if the underwriters in good faith object for valid business
reasons, or (ii) in the case of a registration solely to
implement an employee benefit plan or a registration filed on
Form S-4 under the Securities Act or any successor form;
- 13 -<PAGE>
provided, further, however, that such election pursuant to
clause (i) may only be made one time. If some but not all the
shares of Issuer Common Stock with respect to which Issuer
shall have received requests for registration pursuant to this
Section 9(b) shall be excluded from such registration, Issuer
shall make appropriate allocation of shares to be registered
among Holders permitted to register their shares of Issuer Com-
mon Stock in connection with such registration pro rata in the
proportion that the number of shares requested to be registered
by each such Holder bears to the total number of shares re-
quested to be registered by all such Holders then desiring to
have Issuer Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall
use all reasonable efforts to cause each registration statement
referred to in Section 9(a) to become effective and to obtain
all consents or waivers of other parties which are required
therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of
Option Shares required pursuant to Section 9(a) for a period
not exceeding 90 days if Issuer shall in good faith determine
that any such registration would adversely affect an offering
or contemplated offering of other securities by Issuer, and
Issuer shall not be required to register Option Shares under
the Securities Act pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the
Plan pursuant to Article VII thereof, and (B) a Purchase
Event or a Preliminary Purchase Event;
(ii) on more than one occasion during any calendar
year;
(iii) within 90 days after the effective date of a
registration referred to in Section 9(b) pursuant to which
the Holder or Holders concerned were afforded the opportu-
nity to register such shares under the Securities Act and
such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by
the Holder or Holders of at least 25% or more of the
aggregate number of Option Shares (including shares of
Issuer Common Stock issuable upon exercise of the Option)
then outstanding.
In addition to the foregoing, Issuer shall not be required
to maintain the effectiveness of any registration statement
after the expiration of nine months from the effective date of
such registration statement. Issuer shall use all reasonable
efforts to make any filings, and take all steps, under all
- 14 -<PAGE>
applicable state securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so
registered in accordance with the intended method of distri-
bution for such shares, provided, however, that Issuer shall
not be required to consent to general jurisdiction or to
qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to
do business.
(d) Expenses. Issuer will pay all expenses (including
without limitation registration fees, qualification fees, blue
sky fees and expenses, accounting expenses, legal expenses and
printing expenses incurred by it) in connection with each
registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section
9(a) or (b). Underwriting discounts and commissions relating
to Option Shares, fees and disbursements of counsel to the
Holder(s) of Option Shares being registered and any other
expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration
under Section 9(a) or (b), Issuer hereby indemnifies each
Holder, and each underwriter thereof, including each person, if
any, who controls such Holder or underwriter within the meaning
of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue,
or alleged untrue, statement of a material fact contained in
any registration statement or prospectus or notification or
offering circular (including any amendments or supplements
thereto) or any preliminary prospectus, or caused by any
omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged
untrue statement that was included by Issuer in any such
registration statement or prospectus or notification or
offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such indemnified party
expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified
by such Holder, or by such underwriter, as the case may be, for
all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement that was
included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by
- 15 -<PAGE>
such Holder or such underwriter, as the case may be, expressly
for such use.
Promptly upon receipt by a party indemnified under this
Section 9(e) of notice of the commencement of any action
against such indemnified party in respect of which indemnity or
reimbursement may be sought against any indemnifying party
under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such
action, but, except to the extent of any actual prejudice to
the indemnifying party, the failure so to notify the
indemnifying party shall not relieve it of any liability which
it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such
action shall be given to the indemnifying party as above
provided, the indemnifying party shall be entitled to
participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the
defense of such action at its own expense, with counsel chosen
by it and reasonably satisfactory to such indemnified party.
The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the
indemnified party unless (i) the indemnifying party agrees to
pay the same, (ii) the indemnifying party fails to assume the
defense of such action with counsel reasonably satisfactory to
the indemnified party, or (iii) the indemnified party has been
advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the
interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of
such action notwithstanding its obligation to bear fees and
expenses of such counsel. No indemnifying party shall be
liable for any settlement entered into without its consent,
which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e)
is unavailable to a party otherwise entitled to be indemnified
in respect of any expenses, losses, claims, damages or
liabilities referred to herein, then the indemnifying party, in
lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by
such party to be indemnified as a result of such expenses,
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received by
Issuer, the selling Holders and the underwriters from the
offering of the securities and also the relative fault of
Issuer, the selling Holders and the underwriters in connection
with the statement or omissions which results in such expenses,
- 16 -<PAGE>
losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable
by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action
or claim; provided, however, that in no case shall the selling
Holders be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option
Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section
11(g) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any Holder to indemnify
shall be several and not joint with other Holders.
In connection with any registration pursuant to Section
9(a) or (b) above, Issuer and each selling Holder (other than
Grantee) shall enter into an agreement containing the
indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with
all reporting requirements and will do all such other things as
may be necessary to permit the expeditious sale at any time of
any Option Shares by the Holder(s) in accordance with and to
the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission
from time to time, including, without limitation, Rule 144A.
Issuer shall at its expense provide the Holder with any
information necessary in connection with the completion and
filing of any reports or forms required to be filed by them
under the Securities Act or the Exchange Act, or required
pursuant to any state securities laws or the rules of any stock
exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in
connection with the issuance and the sale of the Option Shares
and in connection with the exercise of the Option, and will
save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such
taxes.
10. Quotation; Listing. If Issuer Common Stock or any
other securities to be acquired upon exercise of the Option are
then authorized for quotation or trading or listing on NASDAQ/
NMS or any securities exchange, Issuer, upon the request of
Holder, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of
Issuer Common Stock or other securities to be acquired upon
exercise of the Option on NASDAQ/NMS or such other securities
- 17 -<PAGE>
exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a
Purchase Event or a Preliminary Purchase Event, this Agreement
(and the Option granted hereby) are exchangeable, without
expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the
Issuer for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options
for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if
mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable
by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9,
each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is
entitled to the benefits of such provision. This Agreement may
not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by
the parties hereto.
(c) Entire Agreement; No Third Party Beneficiaries;
Severability. This Agreement, together with the Plan and the
other documents and instruments referred to herein and therein,
between Grantee and Issuer (i) constitutes the entire agreement
and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the
subject matter hereof, and (ii) is not intended to confer upon
any person other than the parties hereto (other than the
- 18 -<PAGE>
indemnified parties under Section 9(e) and any transferee of
the Option Shares or any permitted transferee of this Agreement
pursuant to Section 12(h)) any rights or remedies hereunder.
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unen-
forceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency
determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of
shares of Issuer Common Stock as provided in Sections 3 and 8
(as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Maine
without regard to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings
contained herein are for convenience of reference only and
shall not affect in any way the meaning or interpretation of
this Agreement.
(f) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or sent by
overnight mail service or mailed by registered or certified
mail (return receipt requested) postage prepaid, to the parties
at the following address (or at such other address for a party
as shall be specified by like notice):
If to Grantee:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
- 19 -<PAGE>
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to Issuer:
Bank of New Hampshire Corporation
300 Franklin Street
Manchester, New Hampshire 03101
Attn: Davis P. Thurber
Chairman and President
Fax: 603-645-0026
With a required copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attn: Craig M. Wasserman
Fax: 212-403-2000
and
Sheehan, Phinney, Bass & Green, P.A.
1000 Elm Street
P.O. Box 3701
Manchester, New Hampshire 03105-3701
Attn: Robert B. Field, Jr.
Fax: 603-668-0300
(g) Counterparts. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed, it being
understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written
consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may
assign its rights hereunder in whole or in part after the
occurrence of a Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the
- 20 -<PAGE>
benefit of and be enforceable by the parties and their
respective successors and assigns.
(i) Further Assurances. In the event of any exercise of
the Option by Holder, Issuer and Holder shall execute and
deliver all other documents and instruments and take all other
action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that
this Agreement may be enforced by either party through specific
performance, injunctive relief and other equitable relief.
Both parties further agree to waive any requirement for the
securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision
is without prejudice to any other rights that the parties
hereto may have for any failure to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this
Stock Option Agreement to be signed by their respective
officers thereunto duly authorized, all as of the day and year
first written above.
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ Peter J. Verrill By:/s/ William J. Ryan
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President Title: Chairman, President
and Chief Executive
Officer
BANK OF NEW HAMPSHIRE
Attest: CORPORATION
/s/ Paul R. Shea By:/s/ Davis P. Thurber
Name: Paul R. Shea Name: Davis P. Thurber
Title: Senior Executive Title: Chairman and President
Vice President
- 21 -
EXHIBIT 4
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of October 25, 1995, by
and among Peoples Heritage Financial Group, Inc. (the
"Acquiror"), a Maine corporation, and certain stockholders of
Bank of New Hampshire Corporation (the "Company"), a New
Hampshire corporation, named on Schedule I hereto (collectively
the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror, First Coastal Banks, Inc. (the
"Acquiror Sub") and the Company have entered into an Agreement
and Plan of Merger, dated as of the date hereof (the
"Agreement"), which is being executed simultaneously with the
execution of this Stockholder Agreement and provides for, among
other things, the merger of the Acquiror Sub with and into the
Company (the "Merger"); and
WHEREAS, in order to induce the Acquiror to enter into the
Agreement, each of the Stockholders agrees to, among other
things, vote in favor of the Agreement in his or her capacities
as stockholders of the Company;
NOW, THEREFORE, in consideration of the premises, the
mutual covenants and agreements set forth herein and other good
and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. OWNERSHIP OF COMPANY COMMON STOCK. Each Stockholder
represents and warrants that the Stockholder has or shares the
right to vote and dispose of the number of shares of common
stock of the Company, no par value and stated value of $2.50
per share ("Company Common Stock"), set forth opposite such
Stockholder's name on Schedule I hereto.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder
covenants and agrees that:
(a) such Stockholder shall, at any meeting of the
Company's stockholders called for the purpose, vote, or
cause to be voted, all shares of Company Common Stock in
which such stockholder has the right to vote (whether
owned as of the date hereof or hereafter acquired) in
favor of the Agreement;
(b) except as otherwise expressly permitted hereby,
such Stockholder shall not, prior to the meeting of the
Company's stockholders referred to in Section 2(a) hereof
or the earlier termination of the Agreement in accordance
with its terms, sell, pledge, transfer or otherwise
dispose of the Stockholder's shares of Company Common
Stock;<PAGE>
(c) such Stockholder shall not in his capacity as a
stockholder of the Company directly or indirectly
encourage or solicit or hold discussions or negotiations
with, or provide any information to, any person, entity or
group (other than the Acquiror or an affiliate thereof)
concerning any merger, sale of substantial assets or
liabilities not in the ordinary course of business, sale
of shares of capital stock or similar transactions
involving the Company or any subsidiary of the Company
(provided that nothing herein shall be deemed to affect
the ability of any Stockholder to fulfill his duties as a
director or officer of the Company); and
(d) such Stockholder shall use his reasonable best
efforts to take or cause to be taken all action, and to do
or cause to be done all things, necessary, proper or
advisable under applicable laws and regulations to
consummate and make effective the agreements contemplated
by this Stockholder Agreement.
Each Stockholder further agrees that the Company's
transfer agent shall be given an appropriate stop transfer
order and shall not be required to register any attempted
transfer of shares of Company Common Stock, unless the transfer
has been effected in compliance with the terms of this letter
agreement.
3. SUCCESSORS AND ASSIGNS. Subject to Section 5.13 of
the Agreement and the terms of the agreement with affiliates of
the Company referred to therein, a Stockholder may sell,
pledge, transfer or otherwise dispose of his shares of Company
Common Stock, provided that, with respect to any sale, transfer
or disposition which would occur on or before the meeting of
the Company's stockholders referred to in Section 2(a) hereof,
such Stockholder obtains the prior written consent of the
Acquiror and that any acquiror of such Company Common Stock
agree in writing to be bound by the terms of this Stockholder
Agreement.
4. TERMINATION. The parties agree and intend that this
Stockholder Agreement be a valid and binding agreement
enforceable against the parties hereto and that damages and
other remedies at law for the breach of this Stockholder
Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger
by mutual written consent of the parties hereto and shall be
automatically terminated in the event that the Agreement is
terminated in accordance with its terms.
5. NOTICES. Notices may be provided to the Acquiror and
the Stockholders in the manner specified in Section 8.4 of the
Agreement, with all notices to the Stockholders being provided
to them at the Company in the manner specified in such section.
2<PAGE>
6. GOVERNING LAW. This Stockholder Agreement shall be
governed by the laws of the State of Maine without giving
effect to the principles of conflicts of laws thereof.
7. COUNTERPARTS. This Stockholder Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same and each of which shall be deemed
an original.
8. HEADINGS AND GENDER. The Section headings contained
herein are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Stockholder
Agreement. Use of the masculine gender herein shall be
considered to represent the masculine, feminine or neuter
gender wherever appropriate.
IN WITNESS WHEREOF, the Acquiror, by a duly authorized
officer, and each of the Stockholders have caused this
Stockholder Agreement to be executed as of the day and year
first above written.
PEOPLES HERITAGE FINANCIAL
GROUP, INC.
By: /s/ William J. Ryan
_______________________________
Name: William J. Ryan
Title: Chairman, President and
Chief Executive Officer
COMPANY STOCKHOLDERS:
/s/ Sidney Thurber Cox
____________________________________
Sidney Thurber Cox
/s/ Constance T. Prudden
____________________________________
Constance T. Prudden
/s/ Davis P. Thurber
____________________________________
Davis P. Thurber
3<PAGE>
SCHEDULE I
Number of Shares of
Company Common Stock
Name of Stockholder Beneficially Owned
Sidney Thurber Cox 173,680
Constance T. Prudden 100,037
Davis P. Thurber 167,451
4
Exhibit 5
NEWS RELEASE
For Immediate Release
Contacts at Bank of New Hampshire Corporation:
Gregory D. Landroche, Chief Financial Officer
(603) 695-3300
Contact at Peoples Heritage:
Peter J. Verrill, Chief Financial Officer
(207) 761-8507
or
Brian Arsenault, Corporate Communications Officer
(207) 761-8517
Peoples Heritage Financial Group, Inc.
and Bank of New Hampshire Corporation
Agree to Combine and Create
a $4.2 Billion Banking Company
PORTLAND, Maine and Manchester, New Hampshire, Peoples
Heritage Financial Group, Inc. (NASDAQ: PHBK) and Bank of New
Hampshire Corporation (NASDAQ: BNHC) today announced a defini-
tive agreement to engage in a strategic business combination.
The combination will result in Peoples Heritage becoming a
$4.2 billion banking company with a New Hampshire-based banking
subsidiary of approximately $1.7 billion in assets and a sig-
nificant market presence in the southern, central, seacoast and
lakes regions of New Hampshire. The merger would expand the
Company's market coverage in New Hampshire from about 40% cur-
rently to 80% of the state's population.
The transaction would be a tax-free exchange of two shares
of Peoples Heritage common stock for each share of BNHC common
stock. Based on a closing share price of $20.75 on October 25,
1995 of Peoples Heritage common stock, the transaction would be
valued at approximately $168.7 million and BNHC shareholders
would receive $41.50 in Peoples Heritage common stock for each
share of BNHC common stock. This price equates to 2.04 times
BNHC's book value at September 30, 1995 and 13.2 times its
annualized earnings through the nine months ended September 30,
1995.
Based on a 20-day average closing share price of Peo-
ples Heritage common stock on October 25, 1995 of $19.68, the
transaction would be valued at approximately $160.0 million and
BNHC shareholders would receive $39.36 in Peoples Heritage com-
mon stock for each share of BNHC common stock. This price
equates to 1.93 times BNHC's book value at September 30, 1995 <PAGE>
and 12.6 times its annualized earnings through the nine months
ended September 30, 1995.
"The merger with BNHC is an important strategic move for
Peoples Heritage because we will now have a community banking
franchise in New Hampshire which is comparable to our statewide
community banking franchise in Maine," said William J. Ryan,
Chairman, President and Chief Executive Officer of Peoples
Heritage. "The combination of these two highly profitable and
strongly capitalized companies is expected to be accretive to
operating earnings right from the start."
Under the definitive agreement, Peoples' New
Hampshire-based holding company, First Coastal Banks Inc., will
merge into BNHC. Immediately following, The First National
Bank of Portsmouth will be merged into Bank of New Hampshire.
It is intended that the transaction will be accounted for as a
pooling of interests.
Davis P. Thurber, Chairman of BNHC, said: "We are pleased
to be merging with Peoples Heritage which shares our community
banking orientation and will provide our customers a greater
range of products and services. We are also pleased that the
Bank of New Hampshire name and tradition of serving our many
New Hampshire communities will continue."
The agreement is subject to approval by shareholders of
both companies and by regulatory authorities. It is antici-
pated that the transaction will close by mid-1996.
As part of the agreement, BNHC gave Peoples Heritage an
option to purchase 19.9% of its outstanding common stock under
certain circumstances and Peoples Heritage gave BNHC an option
to purchase 9.9% of its outstanding common stock under certain
circumstances.
Peoples Heritage Financial Group Inc. is a $3.0 billion
multi-bank and financial services holding company with head-
quarters in Portland, Maine. Peoples Heritage's Maine bank,
Peoples Heritage Bank, operates 61 banking centers throughout
the state. Peoples Heritage also operates a mortgage services
company, Peoples Heritage Mortgage Corporation, Inc., a leasing
subsidiary, Peoples Heritage Leasing Inc., and several real
estate subsidiaries.
The Company's New Hampshire-based bank, The First National
Bank of Portsmouth, operates 10 branches in the seacoast area
of New Hampshire and five branches in the Mount Washington Val-
ley area of the state. Peoples Heritage recently entered into
an agreement to purchase five New Hampshire offices of Shawmut
Bank NH being divested as part of the proposed merger of Fleet
Financial Group and Shawmut National Corporation that will
increase the Company's assets by approximately $172 million.
-2-<PAGE>
Bank of New Hampshire Corporation is a $1.0 billion bank
holding company which conducts its business through 29 offices
of the Bank of New Hampshire located throughout the southern,
central, seacoast and lakes regions of New Hampshire.
(end)
-3-
