Registration No. 333-________
As filed with the Securities and Exchange
Commission on December 15, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Granite State Bankshares, Inc.
(Exact Name of Registrant as Specified in its Charter)
New Hampshire 02-0399222
(State of Incorporation) (IRS Employer Identification No.)
122 West Street
Keene, New Hampshire 03431
(Address of Principal Executive Offices)
Peterborough Savings Bank 1993 Incentive Stock Option Plan
Peterborough Savings Bank 1993 Stock Option Plan for
Outside Directors
Primary Bank 1995 Incentive Stock Option Plan
Primary Bank 1995 Stock Option Plan for Outside Directors
(Full Title of the Plans)
Copies to:
Charles W. Smith John J. Gorman, Esquire
President and Chief Executive Officer Edward A. Quint, Esquire
Granite State Bankshares, Inc. Luse Lehman Gorman Pomerenk & Schick
22 West Street A Professional Corporation
Keene, New Hampshire 03431 5335 Wisconsin Ave., N.W., #400
(603) 352-1600 Washington, D.C. 20015
(202) 274-2000
(Name, Address and Telephone
Number of Agent for Service)
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933 check the following box. /X/
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
to be to be Offering Price Aggregate Registration
Registered Registered(1) Per Share Offering Price Fee
<S> <C> <C> <C> <C>
Common Stock, par 134,982 shares(2) $8.65(3) $1,167,595 $345
value $.01 per share
Common Stock, par
value $.01 per share 71,165 shares(4) $9,85(3) $ 700,976 $207
Common Stock, par
value $.01 per share 63,678 shares(5) $10.89(3) $ 693,454 $205
Common Stock, par
value $.01 per share 19,563 shares(6) $11.08(3) $ 216.759 $ 64
Total 289,388 shares $2,778,784 $821
</TABLE>
______________
(1) Together with an indeterminate number of additional shares
which may be necessary to adjust the number of shares reserved
for issuance pursuant to the Peterborough Savings Bank 1993
Incentive Stock Option Plan (the "1993 Incentive Plan"), the
Peterborough Savings Bank 1993 Stock Option Plan for Outside
Directors (the "1993 Directors Plan"), the Primary Bank 1995
Incentive Stock Option Plan (the "1995 Incentive Plan") and the
Primary Bank 1995 Stock Option Plan for Outside Directors (the
"1995 Directors Plan," and collectively, the "Plans") as the
result of a stock split, stock dividend or similar adjustment of
the outstanding Common Stock pursuant to 17 C.F.R. Section
230.416(a).
(2) Represents the number of shares currently reserved for
issuance pursuant to the 1995 Incentive Plan.
(3) Determined by the exercise price of the options pursuant to
17 C.F.R. Section 230.457(h)(1).
(4) Represents the number of shares currently reserved for
issuance pursuant to the 1993 Directors Plan.
(5) Represents the number of shares currently reserved for
issuance pursuant to the 1995 Incentive Plan.
(6) Represents the number of shares currently reserved for
issuance pursuant to the 1995 Directors Plan.
This Registration Statement shall become effective upon
filing in accordance with Section 8(a) of the Securities Act of
1933 and 17 C.F.R. Section 230.462.
<PAGE>
PART I.
Items 1 and 2. Plan Information and Registrant Information and
Employee Plan Annual Information
This Registration Statement relates to the registration of
(i) 134,982 shares of Common Stock reserved for issuance and
delivery upon the exercise of options under the 1993 Incentive
Plan; (ii) 71,165 shares of Common Stock reserved for issuance
and delivery upon the exercise of options under the 1993
Directors Plan; (iii) 63,678 shares of Common Stock reserved for
issuance and delivery upon the exercise of options under the 1995
Incentive Plan; and (iv) 19,563 shares of Common Stock reserved
for issuance and delivery upon the exercise of options under the
1995 Directors Plan. Documents containing the information
required by Part I of the Registration Statement have been or
will be sent or given to participants in the 1993 Incentive Plan,
the 1993 Directors Plan, the 1995 Incentive Plan, and the 1995
Directors Plan, as appropriate, as specified by Securities Act
Rule 428(b)(1). Such documents are not filed with the Securities
and Exchange Commission (the "Commission" or "SEC") either as
part of this Registration Statement or as prospectuses or
prospectus supplements pursuant to Rule 424 in reliance on Rule
428.
PART II.
Item 3. Incorporation of Documents by Reference
All documents filed by the Company pursuant to Sections
13(a) and (c), 14 or 15(d) of the Exchange Act after the date
hereof and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold
or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference into this registration
statement and be part hereof from the date of filing of such
documents. Any statement contained in this Registration
Statement, or in a document incorporated by reference herein,
shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained
herein, or in any other subsequently filed document which also is
incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute
a part of this Registration Statement.
The following documents filed or to be filed with the
Commission are incorporated by reference in this Registration
Statement:
(a) The Company's Annual Report on Form 10-K for the year
ended December 31, 1996, filed with the SEC on March 27, 1996.
(b)(1) The Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, filed with the SEC on May 14,
1997.
(b)(2) The Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, filed with the SEC on August 13,
1997.
(b)(3) The Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997, filed with the SEC on
November 13, 1997.
(c) The description of the Common Stock contained in the
Registration Statement on Form S-1 originally filed by the
Company under the Securities Act of 1933 with the SEC on April
18, 1996.
Item 4. Description of Securities
Not applicable.
<PAGE>
Item 5. Interests of Named Experts and Counsel
None.
Item 6. Indemnification of Directors and Officers
Article VI of the Registrant's Bylaws provides for the
following indemnification for Directors and Officers:
To the fullest extent permitted by New Hampshire law, the
Company shall indemnify each director and officer of the Company
(and his heirs, executors and administrators) against all
expenses and liabilities reasonably incurred by him or her in
connection with or arising out of any action, suit or proceeding
in which he or she may be involved by reason or his or her
being or having been a director or officer of the Company
(whether or not he or she continues to be a director or officer
at the time of incurring such expenses or liabilities), such
expenses and liabilities to include, but not be limited to,
judgments, court costs and attorneys' fees and the cost of
reasonable settlements. The Company shall not, however,
indemnify such director or officer with respect to matters as to
which he or she shall be finally adjudged in any such action,
suit or proceeding to have been liable for willful miscouduct in
the performance of his or her duties as such director or officer.
In the event that a settlement or compromise is effected,
indemnification may be had only if the board of directors shall
have determined that such settlement or compromise is in the best
interests of the Company and that such director or officer is not
liable for willful misconduct in the performance of his or her
duties with respect to such matters, and if the board of
directors shall have adopted a resolution approving such
settlement or compromise. The foregoing right of indemnification
shall not be exclusive of other rights to which any director or
officer may be entitled as a matter of law.
The Company also maintains liability insurance for its
officers and directors.
Item 7. Exemption From Registration Claimed.
Not applicable.
<PAGE>
Item 8. List of Exhibits.
The following exhibits are filed with or incorporated by
reference into this Registration Statement on Form S-8:
4.1 Peterborough Savings Bank 1993 Incentive Stock Option
Plan.
4.2 Peterborough Savings Bank 1993 Stock Option Plan for
Outside Directors.
4.3 Primary Bank 1995 Incentive Stock Option Plan.
4.4 Primary Bank 1995 Stock Option Plan for
Outside Directors.
5 Opinion of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation as to the legality of the
Common Stock registered hereby.
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation (contained in the opinion
included as Exhibit 5).
23.2 Consent of Grant Thornton LLP.
Item 9. Undertakings
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement to include any material information with respect to the
Registration Statement not previously disclosed in this
Registration Statement or any material change to such information
in this Registration Statement;
2. That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof;
3. To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the 1993 Incentive Plan, the
1993 Directors Plan, the 1995 Incentive Plan and the 1995
Directors Plan; and
4. That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference
in the Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
5. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
<PAGE>
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
4.1 Peterborough Savings Bank 1993 Incentive Stock
Option Plan.
4.2 Peterborough Savings Bank 1993 Stock Option Plan
for Outside Directors.
4.3 Primary Bank 1995 Incentive Stock Option Plan.
4.4 Primary Bank 1995 Stock Option Plan for
Outside Directors.
5 Opinion of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation as to the legality of the
Common Stock registered hereby.
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation (contained in the opinion
included as Exhibit 5).
23.2 Consent of Grant Thornton LLP.
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the
Securities Act of 1933, the registrant certifies that it has
reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Keene,
State of New Hampshire, on this 15th day of December, 1997.
Granite State Bankshares, Inc.
By: /s/ Charles W. Smith
------------------------------
Charles W. Smith, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following
persons in the capacities and on the date indicated.
By: /s/ Charles W. Smith By: /s/ William G. Pike
------------------------- -------------------------
Charles W. Smith William G. Pike
President and Chief Executive Executive Vice President
Officer (Principal Executive and Chief Financial
Officer) and Chairman of the Officer (Principal
Board Financial and
Accounting Officer)
Date: December 15, 1997 Date: December 15, 1997
By: /s/ David M. Bartley By: /s/ Christopher J. Flynn
------------------------- -------------------------
David M. Bartley, Christopher J. Flynn,
Director Director
Date: December 15, 1997 Date: December 15, 1997
By: /s/ Philip M. Hamblet By: /s/ David J. Houston
------------------------- -------------------------
Philip M. Hamblet, David J. Houston,
Director Director
Date: December 15, 1997 Date: December 15, 1997
By: /s/ James L. Koontz By: /s/ Forrest D. McKerley
------------------------- -------------------------
James L. Koontz, Forrest D. McKerley,
Director Director
Date: December 15, 1997 Date: December 15, 1997
By: By: /s/ William Smedley
------------------------- -------------------------
Jane B. Reynolds, William Smedley,
Director Director
Date: Date: December 15, 1997
By: /s/ C. Robertson Trowbridge By: /s/ James C. Wirths, III
------------------------- -------------------------
C. Robertson Trowbridge, James C. Wirths, III,
Director Director
Date: December 15, 1997 Date: December 15, 1997
<PAGE>
PETERBOROUGH SAVINGS BANK
1993 INCENTIVE STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Peterborough Savings Bank (the "Bank")
1993 Incentive Stock Option Plan (the "Plan") is to advance the
interests of the Bank and its shareholders by providing those key
employees of the Bank and its Affiliates, upon whose judgment,
initiative and efforts the successful conduct of the business of
the Bank and its affiliates largely depends, with additional
incentive to perform in a superior manner. A purpose of the Plan
is also to attract people of experience and ability to the
service of the Bank and its Affiliates.
2. DEFINITIONS.
(a) "Affiliate" means (i) a member of a controlled
group of corporations of which the Bank is a member or (ii) an
unincorporated trade or business which is under common control
with the Bank as determined in accordance with Section 414(c) of
the Internal Revenue Code of 1986, as amended, (the "Code") and
the regulations issued thereunder. For purposes hereof, a
"controlled group of corporations" shall mean a controlled group
of corporations as defined in Section 1563(a) of the Code
determined without regard to Section 1563(a)(4) and (e)(3)(C).
(b) "Award" means a grant of Non-statutory Stock
Options, Incentive Stock Options, and/or Limited Rights under the
provisions of this Plan.
(c) "Board" means the Board of Directors of the Bank.
(d) "Change in Control" for purposes of this Plan
shall mean an event of a nature that: (i) would be required to be
reported in response to Item l(a) of the current report on Form
F-3, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"); or (ii) results in a Change in Control of the Bank within
the meaning of the Change in Bank Control Act, as amended, and
the Rules and Regulations promulgated by the Federal Deposit
Insurance Corporation ("FDIC") at 12 C.F.R. Section303.4(a), as
in effect on the date hereof; or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time
as (A) any "person" (as the term is used in Sections 13(d) and
14(d) of the Exchange Act), or group of persons acting in
concert, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of any
class of equity securities of the Bank representing 20% or more
of a class of equity securities except for any securities
purchased by the Bank's employee stock ownership plan and trust;
or, (B) individuals who constitute the Board on the date hereof
(the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election
by the Bank's stockholders was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for
purposes of this clause (B), considered as though he were a
member of the Incumbent Board; or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the
assets of the Bank or similar transaction occurs in which the
Bank is not the resulting entity; or (D) a proxy statement shall
be distributed soliciting proxies from stockholders of the Bank,
by
<PAGE>
someone other than the current management of the Bank, seeking
stockholder approval of a plan or similar transaction with one or
more corporations as a result of which the outstanding shares of
the class of securities then subject to such plan or transaction
are exchanged for or converted into cash or property or
securities not issued by the Bank; or (E) a tender offer is made
for 20% or more of the voting securities of the Bank then
outstanding.
(e) "Committee" means the Committee of the Board
administering this Plan, which shall be comprised of the members
of the Compensation Committee of the Board of the Bank, which
shall consist solely of non-employee directors, all of whom are
"disinterested directors" as that term is defined under Rule 16b-
3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), promulgated by the Securities and Exchange
Commission.
(f) "Common Stock" means the common stock, $.01 par
value per share, of the Bank.
(g) "Date of Grant" means the date an Award granted by
the Committee is effective pursuant to the terms hereof.
(h) "Disability" means the permanent and total
inability by reason of mental or physical infirmity, or both, of
an employee to perform the work customarily assigned to him.
Additionally, a medical doctor selected or approved by the Board
must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears
probable that such Disability will be permanent during the
remainder of said Participant's lifetime.
(i) "Fair Market Value" means, when used in connection
with the Common Stock on a certain date, the average of the bid
and ask prices of the Common Stock as reported by the National
Association of Securities Dealers Automated Quotation System (as
published by the Wall Street Journal, if published) on such date,
or if the Common Stock was not traded on such date, on the next
preceding day on which the Common Stock was traded thereon or the
last previous date on which a sale was reported. For purposes of
the grant of options in connection with the conversion of the
Bank from mutual to stock form, Fair Market Value shall mean the
initial public offering price of the Common Stock of $8.00 per
share.
(j) "Incentive Stock Option" means an Option granted
by the Committee to a Participant, which Option is designated as
an Incentive Stock Option pursuant to Section 8 hereof.
(k) "Limited Right" means the right to receive an
amount of cash based upon the terms set forth in Section 9
hereof.
(1) "Non-statutory Stock Option" means an Option
granted by the Committee to a Participant and which is not
designated by the Committee as an Incentive Stock Option.
(m) "Normal Retirement" means retirement at the normal
or early retirement date as set forth in any tax-qualified
retirement/pension plan of the Bank.
(n) "Option" means an Award granted under Section 7 or
Section 8 hereof.
(o) "Participant" means an employee of the Bank or its
affiliates chosen by the Committee to participate in the Plan.
<PAGE>
(p) "Plan Year(s)" means a calendar year or years
commencing on or after January 1, 1993.
(q) "Termination for Cause" means the termination upon
an intentional failure to perform stated duties or breach of a
fiduciary duty involving personal dishonesty, which results in
material loss to the Bank or one of its affiliates, or willful
violation of any law, rule or regulation (other than traffic
violations or similar offenses), which results in material loss
to the Bank or one of its affiliates or final cease and desist
order.
3. ADMINISTRATION.
The Plan shall be administered and interpreted by the
Committee. The Committee shall act by vote or written consent of
a majority of its members. Subject to the express provisions and
limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the proper
administration of the Plan and make whatever determinations and
interpretations in connection with the Plan it deems to be
necessary or advisable. All determinations and interpretations
made by the Committee shall be binding and conclusive on all
Participants in the Plan and on their legal representatives and
beneficiaries.
4. TYPES OF AWARDS.
Awards under the Plan may be granted in any one or a
combination of:
(a) Non-statutory Stock Options;
(b) Incentive Stock Options; and
(c) Limited Rights
as defined below in Sections 7 through 9 of the Plan.
5. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 14, the maximum
number of shares reserved for purchase pursuant to the exercise
of options granted under the Plan shall not exceed 143,750 shares
of Common Stock. These shares of Common Stock may be either
authorized but unissued shares or shares previously issued and
reacquired by the Bank. To the extent that Options or Limited
Rights are granted under the Plan, the shares underlying such
Options will be unavailable for future grants under the Plan
except that, to the extent that Options together with any related
Limited Rights granted under the Plan terminate, expire or are
cancelled without having been exercised (in the case of Limited
Rights, exercised for cash), new awards may be made with respect
to these shares.
6. ELIGIBILITY.
Officers and other employees of the Bank or its Affiliates
shall be eligible to receive Incentive Stock Options, Non-
statutory Stock Options and/or Limited Rights under the Plan.
Directors who are not employees or officers of the Bank or its
Affiliates shall not be eligible to receive Awards under the
Plan.
<PAGE>
7. NON-STATUTORY STOCK OPTIONS.
7.1 Grant of Non-statutory Stock Options.
The Committee may, from time to time, grant Non-statutory
Stock Options to eligible employees and, upon such terms and
conditions as the Committee may determine, grant Non-statutory
Options in exchange for and upon surrender of previously granted
Awards under this Plan. Non-statutory Stock Options granted
under this Plan are subject to the following terms and
conditions:
(a) Price. The purchase price per share of Common
Stock deliverable upon the exercise of each Non-statutory Stock
Option shall be determined by the Committee on the date the
option is granted. In general, such purchase price shall not be
less than 100% of the Fair Market Value of the Common Stock on
the Date of Grant. However, the purchase price per share of
Common Stock deliverable upon the exercise of each Non-statutory
Stock Option granted in exchange for and upon surrender of
previously granted awards shall be not less than 85% of the Fair
Market Value of the Common Stock on the Date of Grant, but in no
event may the purchase price of any Non-statutory Stock Option be
less than the par value of the Common Stock. Shares may be
purchased only upon full payment of the purchase price. Payment
of the purchase price may be made, in whole or in part, through
the surrender of shares of the Common Stock of the Bank at the
Fair Market Value of such shares on the date of surrender
determined in the manner described in Section 2(i).
(b) Terms of Options. The term during which each Non-
statutory Stock Option may be exercised shall be determined by
the Committee, but in no event shall a Non-statutory Stock Option
be exercisable in whole or in part more than 10 years from the
Date of Grant. The Committee shall determine the date on which
each Non-statutory Stock Option shall become exercisable and may
provide that a Non-statutory Stock Option shall become
exercisable in installments. The shares comprising each
installment may be purchased in whole or in part at any time
after such installment becomes purchasable. The Committee may, in
its sole discretion, accelerate the time at which any Non-
statutory Stock Option may be exercised in whole or in part.
Notwithstanding the above, in the event of a Change in Control of
the Bank, all Non-statutory Stock Options shall become
immediately exercisable.
(c) Termination of Employment. Upon the termination of
a Participant's service for any reason other than Disability,
Normal Retirement, death or Termination for Cause, the
Participant's Non-statutory Stock Options shall be exercisable
only as to those shares which were immediately purchasable by the
Participant at the date of termination and only for a period of
three months following termination. In the event of Termination
for Cause, all rights under the Participant's Non-statutory Stock
Options shall expire upon termination. In the event of the death,
Disability or Normal Retirement of any Participant, all Non-
statutory Stock Options held by the Participant, whether or not
exercisable at such time, shall be exercisable by the Participant
or his legal representatives or beneficiaries for one year or
such longer period as determined by the Committee following the
date of the Participant's death, Normal Retirement or cessation
of employment due to Disability, provided that in no event shall
the period extend beyond the expiration of the Non-statutory
Stock Option term.
8. INCENTIVE STOCK OPTIONS.
8.1 Grant of Incentive Stock Options.
<PAGE>
The Committee may, from time to time, grant Incentive Stock
Options to eligible employees. Incentive Stock Options granted
pursuant to the Plan shall be subject to the following terms and
conditions:
(a) Price. The purchase price per share of Common
Stock deliverable upon the exercise of each Incentive Stock
Option shall be not less than 100% of the Fair Market Value of
the Common Stock on the Date of Grant. However, if a Participant
owns stock possessing more than 10% of the total combined voting
power of all classes of Common Stock, the purchase price per
share of Common Stock deliverable upon the exercise of each
Incentive Stock Option shall not be less than 110 % of the Fair
Market Value of the Common Stock on the Date of Grant. Shares may
be purchased only upon payment of the full purchase price.
Payment of the purchase price may be made, in whole or in part,
through the surrender of shares of the Common Stock at the Fair
Market Value of such shares on the date of surrender determined
in the manner described in Section 2(i).
(b) Amounts of Options. Incentive Stock Options may be
granted to any eligible employee in such amounts as determined by
the Committee. In the case of an Option intended to qualify as an
Incentive Stock Option, the aggregate Fair Market Value
(determined as of the time the option is granted) of the Common
Stock with respect to which Incentive Stock Options granted are
exercisable for the first time by the Participant during any
calendar year (under all plans of the Participant's employer and
its parent and subsidiary institutions) shall not exceed
$100,000. The provisions of this Section 8.1(b) shall be
construed and applied in accordance with Section 422(d) of the
Code and the regulations, if any, promulgated thereunder. To the
extent an award under this Section 8.1 exceeds this $100,000
limit, the portion of the award in excess of such limit shall be
deemed a Non-statutory Stock Option.
(c) Terms of Options. The term during which each
Incentive Stock Option may be exercised shall be determined by
the Committee, but in no event shall an Incentive Stock Option be
exercisable in whole or in part more than 10 years from the Date
of Grant. If at the time an Incentive Stock Option is granted to
an employee, the employee owns Common Stock representing more
than 10% of the total combined voting power of the Bank (or,
under Section 425(d) of the Code, is deemed to own Common Stock
representing more than 10% of the total combined voting power of
all such classes of Common Stock, by reason of the ownership of
such classes of Common Stock, directly or indirectly, by or for
any brother, sister, spouse, ancestor or lineal descendent of
such employee, or by or for any corporation, partnership, estate
or trust of which such employee is a shareholder, partner or
beneficiary), the Incentive Stock Option granted to such employee
shall not be exercisable after the expiration of 5 years from the
Date of Grant. No Incentive Stock Option granted under this Plan
is transferable except by will or the laws of descent and
distribution and is exercisable in his lifetime only by the
employee to whom it is granted.
The Committee shall determine the date on which each
Incentive Stock Option shall become exercisable and may provide
that an Incentive Stock Option shall become exercisable in
installments. The shares comprising each installment may be
purchased in whole or in part at any time after such installment
becomes purchasable, provided that the amount able to be first
exercised in a given year is consistent with the terms of Section
422 of the Code. The Committee may, in its sole discretion,
accelerate the time at which any Incentive Stock Option may be
exercised in whole or in part, provided that it is consistent
with the terms of Section 422 of the Code. Notwithstanding the
above, in the event of a Change in Control of the Bank, all
Incentive Stock Options shall become immediately exercisable.
(d) Termination of Employment. Upon the termination of
a Participant's service for any reason other than Disability,
Normal Retirement, Change in Control, death or Termination for
Cause, the
<PAGE>
Participant's Incentive Stock Options shall be exercisable only
as to those shares which were immediately purchasable by the
Participant at the date of termination and only for a period of
three months following termination. In the event of Termination
for Cause all rights under the Participant's Incentive Stock
Options shall expire.
In the event of death or Disability of any Participant, all
Incentive Stock Options held by such Participant, whether or not
exercisable at such time, shall be exercisable by the Participant
or the Participant's legal representatives or beneficiaries for
one year following the date of the Participant's death or
cessation of employment due to Disability. Upon termination of
the Participant's service due to Normal Retirement or a Change in
Control, all Incentive Stock Options held by such Participant,
whether or not exercisable at such time, shall be exercisable for
a period of one year following the date of Participant's
cessation of employment, provided however, that such option shall
not be eligible for treatment as an Incentive Stock Option in the
event such option is exercised more than three months following
the date of the Participant's Normal Retirement. In no event
shall the exercise period extend beyond the expiration of the
Incentive Stock Option term.
(e) Compliance with Code. The options granted under
this Section 8 of the Plan are intended to qualify as incentive
stock options within the meaning of Section 422 of the Code, but
the Bank makes no warranty as to the qualification of any Option
as an incentive stock option within the meaning of Section 422 of
the Code.
9. LIMITED RIGHTS.
9.1 Grant of Limited Rights.
Simultaneously with the grant of any Option, the Committee
may grant a Limited Right with respect to all or some of the
shares covered by such Option. Limited Rights granted under this
Plan are subject to the following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right
be exercisable in whole or in part before the expiration of six
months from the Date of Grant of the Limited Right. A Limited
Right may be exercised only in the event of a Change in Control
of the Bank.
The Limited Right may be exercised only when the underlying
Option is eligible to be exercised, and only when the Fair Market
Value of the underlying shares on the day of exercise is greater
than the exercise price of the related Option.
Upon exercise of a Limited Right, the related Option shall
cease to be exercisable. Upon exercise or termination of an
Option, any related Limited Rights shall terminate. The Limited
Rights may be for no more than 100% of the difference between the
exercise price and the Fair Market Value of the Common Stock
subject to the underlying Option. The Limited Right is
transferable only when the underlying Option is transferable and
under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the
holder shall promptly receive from the Bank an amount of cash
equal to the difference between the Fair Market Value on the Date
of Grant of the related Option and the Fair Market Value of the
underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such
Limited Right is being exercised.
<PAGE>
(c) Termination of Employment. Upon the termination of
a Participant's service for any reason other than Termination for
Cause, any Limited Rights held by the Participant shall then be
exercisable for a period of one year following termination. In
the event of Termination for Cause, all Limited Rights held by
the Participant shall expire immediately. Upon termination of the
Participant's employment by reason of death, Normal Retirement or
Disability, all Limited Rights held by such Participant shall be
exercisable by the Participant or the Participant's legal
representative or beneficiaries for a period of one year from the
date of such termination. In no event shall the period extend
beyond the expiration of the term of the related option.
10. SURRENDER OF OPTIONS.
In the event of a Participant's termination of employment as
a result of death, Disability or Normal Retirement, the
Participant (or the Participant's personal representative(s),
heir(s), or devisee(s)) may, in a form acceptable to the
Committee make application to surrender all or a part of Options
held by such Participant in exchange for a cash payment from the
Bank of an amount equal to the difference between the Fair Market
Value of the Common Stock on the date of termination of
employment and the exercise price per share of the Option on the
Date of Grant. Whether the Committee accepts such application or
determines to make payment, in whole or part, is within its
absolute and sole discretion, it being expressly understood that
the Committee is under no obligation to any Participant
whatsoever to make such payments. In the event that the Committee
accepts such application and the Bank determines to make payment,
such payment shall be in lieu of the exercise of the underlying
Option and such Option shall cease to be exercisable.
11. RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY.
No Participant shall have any rights as a shareholder with
respect to any shares covered by a Non-statutory and/or Incentive
Stock Option until the date of issuance of a stock certificate
for such shares. Nothing in this Plan or in any Award granted
confers on any person any right to continue in the employ of the
Bank or its Affiliates or to continue to perform services for the
Bank or its Affiliates or interferes in any way with the right of
the Bank or its Affiliates to terminate a Participant's services
as an officer or other employee at any time.
No Award under the Plan shall be transferable by the
optionee other than by will or the laws of descent and
distribution and may only be exercised during his lifetime by the
optionee, or by a guardian or legal representative.
12. AGREEMENT WITH GRANTEES.
Each Award of Stock Options and/or Limited Rights will be
evidenced by a written agreement, executed by the Participant and
the Bank or its Affiliates, which describes the conditions for
receiving the Awards including the date of Award, the purchase
price if any, applicable periods, and any other terms and
conditions as may be required by the Board or applicable
securities law.
13. DESIGNATION OF BENEFICIARY.
A Participant may, with the consent of the Committee,
designate a person or persons to receive, in the event of death,
any Option or Limited Rights Award to which the Participant would
then be entitled. Such designation will be made upon forms
supplied by and delivered to the Bank and may be revoked in
writing.
<PAGE>
If a Participant fails effectively to designate a beneficiary,
then the Participant's estate will be deemed to be the
beneficiary.
14. DILUTION AND OTHER ADJUSTMENTS.
In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares, or other
similar corporate change, or other increase or decrease in such
shares without receipt or payment of consideration by the Bank,
the Committee will make such adjustments to previously granted
Awards to prevent dilution or enlargement of the rights of the
Participant, including any or all of the following:
(a) adjustments in the aggregate number or kind of
shares of Common Stock which may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of
shares of Common Stock covered by Awards already made under the
Plan;
(c) adjustments in the purchase price of outstanding
Incentive and/or Non-statutorv Stock Options, or any Limited
Rights attached to such Options.
No such adjustments may, however, materially change the
value of benefits available to a Participant under a previously
granted Award.
15. TAX WITHHOLDING.
There shall be deducted from each distribution of cash
and/or Common Stock under the Plan the amount required by any
governmental authority to be withheld for income tax purposes. If
this Plan is qualified under 17 C.F.R. Section 240.16b-3, then
any withholding shall comply with 17 C.F.R. Section 240.16b-3(e).
16. AMENDMENT OF THE PLAN.
The Board of Directors may at any time, and from time to
time, modify or amend the Plan in any respect; provided further
that if it has been determined to continue to qualify the Plan
under the 17 C.F.R. Section 240.16b-3, shareholder approval shall
be required for any such modification or amendment which:
(a) increases the maximum number of shares for which
options may be granted under the Plan (subject, however, to the
provisions of Section 14 hereof);
(b) reduces the exercise price at which Awards may be
granted (subject, however, to the provisions of Section 14
hereof); or
(c) changes the persons eligible to participate in the
Plan.
Failure to ratify or approve amendments or modifications to
subsections (a) through (c) of this Section by shareholders shall
be effective only as to the specific amendment or modification
requiring such ratification. Other provisions, sections, and
subsections of this Plan will remain in full force and effect.
<PAGE>
No such termination, modification or amendment may affect
the rights of a Participant under an outstanding Award.
17. EFFECTIVE DATE OF PLAN.
The Plan became effective upon the consummation of the
conversion of the Bank from the mutual to capital stock form of
ownership on October 13, 1993 (the "Effective Date"). The Plan
shall be presented to shareholders of the Bank for ratification
for purposes of: (i) obtaining favorable treatment under Section
16(b) of the Exchange Act; and (ii) satisfying one of the
requirements of Section 422 of the Code governing the tax
treatment for Incentive Stock Options. The failure to obtain
shareholder ratification will not effect the validity of the Plan
and the options thereunder, provided, however, that if the Plan
is not ratified, the Plan shall remain in full force and effect,
and any Incentive Stock Options granted under the Plan shall be
deemed to be Non-statutory Stock Options.
18. TERMINATION OF THE PLAN.
The right to grant Awards under the Plan will terminate upon
the earlier of 10 years after the Effective Date of the Plan, or
the issuance of Common Stock or the exercise of Options or
related Limited Rights equivalent to the maximum number of shares
reserved under the Plan as set forth in Section 5. The Board has
the right to suspend or terminate the Plan at any time, provided
that no such action will, without the written consent of a
Participant, adversely affect his rights under a previously
granted Award.
19. APPLICABLE LAW.
The Plan will be administered in accordance with the laws of
the State of New Hampshire.
20. COMPLIANCE WITH SECTION 16.
If this Plan is qualified under 17 C.F.R. Section 240.16b-3,
transactions under this Plan are intended to comply with all
applicable conditions of such regulation or its successors. To
the extent any provisions of the Plan or action by the Committee
fail to so comply, such provision or action shall be deemed null
and void, to the extent permitted by law and deemed advisable by
the Committee.
<PAGE>
PETERBOROUGH SAVINGS BANK
1993 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
1. PURPOSE.
The purpose of the Peterborough Savings Bank (the "Bank")
1993 Stock Option Plan for Outside Directors of the Bank and its
affiliates, (the "Directors' Option Plan" or the "Plan") is to
promote the growth and profitability of the Bank by providing
outside directors of the Bank and its affiliates with an
incentive to achieve long-term objectives of the Bank and to
attract and retain non-employee directors of outstanding
competence by providing such outside directors with an
opportunity to acquire an equity interest in the Bank.
2. GRANT OF OPTIONS.
(a) Initial Grant. Each outside director (for
purposes of this Directors' Option Plan, the term "Outside
Director" shall mean a member of the Board of Directors of the
Bank ("Board") or of any of its affiliates not also serving as a
full-time employee of the Bank or any of its affiliates), who is
serving in such capacity on the date of the Bank's initial public
offering and at the effective date of this Directors' Option Plan
("Effective Date"), is hereby granted non-statutory stock options
to purchase 3,125 shares of the common stock, par value $.01 per
share, of the Bank ("Common Stock"), subject to adjustment as
provided in Section 4 hereof.
(b) Grants to Subsequent Outside Directors. To the
extent options are available for grant under the Directors'
Option Plan, each Outside Director who is first elected as a
director subsequent to the Effective Date ("Subsequent Outside
Director") is hereby granted, as of the date on which such
Subsequent Outside Director is qualified and first begins to
serve as an Outside Director, non-statutory stock options to
purchase 3,125 shares of Common Stock, subject to adjustment
pursuant to Section 4 hereof, or to purchase such lesser number
of shares of Common Stock as remain in this Directors' Option
Plan.
If options for sufficient shares are not available under the
Directors' Option Plan to fulfill the grant of options under
Section 2(b) hereof to any Subsequent Outside Director first
elected subsequent to the Effective Date, and thereafter options
become available, such Subsequent Outside Director shall then
receive options to purchase an amount of shares of Common Stock,
determined by dividing pro rata among each Subsequent Outside
Director, options for the number of shares then available under
the Outside Directors' Plan, not to exceed options for 3,125
shares, subject to adjustment under Section 4. The date of grant
shall be the date options for such shares become available. The
purchase price per share of the Common Stock deliverable upon
exercise of such options shall equal the Fair Market Value of the
Common Stock on the date the option is granted as determined
under Section 2(d) hereof.
(c) Ineligibility. An option under the Directors'
Option Plan shall not be granted to any Outside Director who at
any previous time was a full-time employee of the Bank and in
such capacity was eligible to receive any options to purchase
Common Stock.
(d) Fair Market Value. For purposes of the Directors'
Option Plan, when used in connection with Common Stock on a
certain date, Fair Market Value means the average of the bid and
ask prices of the Common Stock as reported by the National
Association of Securities Dealers Automated Quotation System (as
published by the Wall Street Journal, if published) on such date,
or if the Common
<PAGE>
Stock was not traded on such date, on the next preceding day on
which the Common Stock was traded thereon or the last previous
date on which a sale was reported. For purposes of the grant of
options in the Conversion of the Bank, as defined in Section 5
hereof, Fair Market Value shall mean the initial public offering
price of the Common Stock of $8.00 per share.
3. TERMS AND CONDITIONS.
(a) Option Agreement. Each option shall be evidenced
by a written option agreement between the Bank and the recipient
specifying the number of shares of Common Stock that may be
acquired through its exercise and containing such other terms and
conditions which are not inconsistent with the terms of this
grant.
(b) Vesting. Each option granted pursuant to Section
2(a) hereof shall become exercisable at the date of grant.
However, no shares of Common Stock acquired through the exercise
of such option granted under Section 2(a) may be sold or
otherwise disposed of for a period of one year from the date of
grant of the option.
(c) Manner of Exercise. The option when exercisable
may be exercised from time to time, in whole or in part, by
delivering a written notice of exercise to the Chief Executive
Officer of the Bank signed by the recipient. Such notice is
irrevocable and must be accompanied by full payment of the
exercise price in cash or shares of previously acquired Common
Stock of the Bank at the Fair Market Value of such shares
determined on the exercise date in the manner described in
Section 2(d).
(d) Transferability. Each option granted hereby may
be exercised only by the Outside Director to whom it is issued
or, in the event of the Outside Director's death, his or her
personal representative(s) or designee(s), heir(s) or devisee(s)
pursuant to the terms of a designation of beneficiary form
provided by such Outside Director to the Bank. In the event the
Outside Director has failed to file a designation of beneficiary
form, the estate of the Outside Director shall be deemed the
beneficiary.
(e) Termination of Option. Each option shall expire
upon the earlier of (i) 10 years following the date of grant, or
(ii) 1 year following the date on which the Outside Director
ceases to serve in such capacity for any reason other than
removal for Cause (as defined below); provided, however, that if
the recipient's service on the Board is terminated for any reason
other than being removed for cause prior to the date the Plan is
presented to the shareholders of the Bank for ratification, the
option may not be exercised prior to the date of the
shareholders' meeting regarding such ratification but shall
remain exercisable for a period of 1 year from the date of such
meeting. If the Outside Director dies before fully exercising
any portion of an option then exercisable, such option may be
exercised by such Outside Director's personal representative(s),
heir(s) or devisee(s) at any time within the 1-year period
following his or her death; provided, however, that in no event
shall the option be exercisable more than 10 years after the date
of its grant. If the Outside Director is removed for Cause, all
options awarded to him shall expire upon such removal. Removal
for Cause means the termination upon an intentional failure to
perform stated duties or breach of a fiduciary duty involving
personal dishonesty, which results in material loss to the Bank
or one of its affiliates, or willful violation of any law, rule
or regulation (other than traffic violations or similar
offenses), which results in material loss to the Bank or one of
its affiliates or final cease and desist order.
<PAGE>
4. COMMON STOCK SUBJECT TO THE DIRECTORS' OPTION PLAN.
The shares which shall be issued and delivered upon exercise
of options granted under the Directors' Option Plan may be either
authorized and unissued shares of Common Stock or authorized and
issued shares of Common Stock held by the Bank as treasury stock.
The number of shares of Common Stock reserved for issuance under
the Directors' Option Plan is 43,750 shares of the Common Stock,
subject to adjustment pursuant to this Section 4. Any shares of
Common Stock subject to an option which for any reason either
terminates unexercised or expires shall again be available for
issuance under the Directors' Option Plan.
In the event of any change or changes in the outstanding
Common Stock by reason of any stock dividend or split,
recapitalization, reorganization, merger, consolidation, spin-
off, combination or any similar corporate change, or other
increase or decrease in such shares effected without receipt or
payment of consideration by the Bank, the number of shares of
Common Stock which may be issued under this Directors' Option
Plan, the number of shares of Common Stock subject to options
granted under this Directors' Option Plan and the option price of
such options, shall be automatically adjusted to prevent dilution
or enlargement of the rights granted to the recipient under the
Directors' Option Plan.
5. EFFECTIVE DATE OF THE PLAN; SHAREHOLDER RATIFICATION
The Effective Date should be the conversion of the Bank from
the mutual to the capital stock form of ownership on October 13,
1993 (the "Conversion"). Following Conversion, the Directors'
Option Plan shall be presented to shareholders of the Bank for
ratification for the purpose of obtaining favorable treatment
under Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided, however, that the failure
to obtain shareholder ratification shall not affect the validity
of this Plan and the options granted hereunder.
6. TERMINATION OF THE PLAN.
The right to grant options under the Directors' Option Plan
will terminate upon the earlier of 10 years after the Effective
Date of the Plan, or the issuance of 43,750 shares of Common
Stock, subject to adjustment pursuant to Section 4 hereof. The
vote of a majority of the outstanding shares of the Common Stock
entitled to vote is required to terminate the Directors' Option
Plan; provided, however, no such termination shall, without the
consent of the affected recipient, affect such recipient's rights
under a previously granted option.
7. AMENDMENT OF THE PLAN.
The Directors' Option Plan may be amended from time to time
by the Board provided that Section 2 and 3 hereof shall not be
amended more than once every six months other than to comport
with the Internal Revenue Code of 1986, as amended, or the
Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder. Except as provided in Section 9 hereof,
rights and obligations under any option granted before an
amendment shall not be altered or impaired by such amendment
without the written consent of the optionee. If the Directors'
Option Plan becomes qualified under 17 C.F.R. Section 240.16b-3
and an amendment would require shareholder approval under such
regulation to retain the Plan's qualification, then subject to
the discretion of the Board, such amendment shall be presented to
shareholders for ratification; provided, however, that the
failure to obtain shareholder ratification shall not affect the
validity of this Plan as so amended and the options granted
thereunder.
<PAGE>
8. APPLICABLE LAW.
The Plan will be administered in accordance with the laws of
the State of New Hampshire.
9. COMPLIANCE WITH SECTION 16.
If this Plan is qualified under 17 C.F.R. Section 240.16b-3,
transactions under this Plan are intended to comply with all
applicable conditions of such regulation or its successors. To
the extent any provisions of the Plan fail to so comply, such
provisions shall be deemed null and void, to the extent permitted
by law.
<PAGE>
PRIMARY BANK
1995 INCENTIVE STOCK OPTION PLAN
1. Purpose.
The purpose of the Primary Bank (the "Bank") 1995 Incentive
Stock Option Plan (the "Plan") is to advance the interests of the
Bank and its shareholders by providing those key employees of the
Bank and its Affiliates, upon whose judgment, initiative and
efforts the successful conduct of the business of the Bank and
its affiliates largely depends, with additional incentive to
perform in a superior manner, and also to attract people of
experience and ability to the service of the Bank and its
Affiliates.
2. Definitions.
(a) "Affiliate" means (i) a member of a controlled group of
corporations of which the Bank is a member or (ii) an
unincorporated trade or business which is under common control
with the Bank as determined in accordance with Section 414(c) of
the Internal Revenue Code of 1986, as amended, (the "Code") and
the regulations issued thereunder. For purposes hereof, a
"controlled group of corporations" shall mean a controlled group
of corporations as defined in Section 1563 (a) of the Code
determined without regard to Section 1563 (a) (4) and (e) (3)
(C).
(b) "Award" means a grant of Non-statutory Stock Options,
Incentive Stock Options, and/or Limited Rights under the
provisions of this Plan.
(c) "Board" means the Board of Directors of the Bank.
(d) "Change in Control" for purposes of this Plan shall
mean an event of a nature that: (i) would be required to be
reported in response to Item l(a) of the current report on Form
F-3, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"); or (ii) results in a Change in Control of the Bank within
the meaning of the Change in Bank Control Act, as amended, and
the Rules and Regulations promulgated by the Federal Deposit
Insurance Corporation ("FDIC") at 12 C.F.R. Section303.4(a), as
in effect on the date hereof; or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time
as (A) any "person" (as the term is used in Sections 13(d) and
14(d) of the Exchange Act), or group of persons acting in
concert, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of any
class of equity securities of the Bank representing 20% or more
of a class of equity securities except for any securities
purchased by the Bank's employee stock ownership plan and trust;
or, (B) individuals who constitute the Board on the date hereof
(the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election
by the Bank's stockholders was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for
purposes of this clause (B), considered as though he were a
member of the Incumbent Board; or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the
assets of the Bank or similar transaction occurs in which the
Bank is not the resulting entity; or (D) a proxy statement shall
be distributed soliciting proxies from stockholders of the Bank,
by someone other than the current management of the Bank, seeking
stockholder approval of a plan or similar transaction with one or
more corporations as a result of which the outstanding shares of
the class of securities then subject to such plan or transaction
are exchanged for or converted into cash or property or
securities not issued by the Bank: or (E) a tender offer is made
for 20% or more of the voting securities of the Bank then
outstanding.
<PAGE>
(e) "Committee" means the Committee of the Board
administering this Plan, which shall be comprised of the members
of the Compensation Committee of the Board of the Bank, which
shall consist solely of non-employee directors, all of whom are
"disinterested directors" as that term is defined under Rule i6b-
3 under the Exchange Act, promulgated by the Securities and
Exchange Commission, and "outside directors" as that term is
defined under Section 162(m) of the Code and the regulations
promulgated thereunder.
(f) "Common Stock" means the common stock, par value $.01
per share, of the Bank.
(g) "Date of Grant" means the date an Award granted by the
Committee is effective pursuant to the terms hereof.
(h) "Disability" means the permanent and total inability by
reason of mental or physical infirmity, or both, of a Participant
to perform the work customarily assigned to him. Additionally, a
medical doctor selected or approved by the Board must advise the
Committee that it is either not possible to determine when such
Disability will terminate or that it appears probable that such
Disability will be permanent during the remainder of said
Participant's lifetime.
(i) "Fair Market Value" means, when used in connection with
the Common Stock on a certain date, the average of the bid and
ask prices of the Common Stock as reported by the National
Association of Securities Dealers Automated Quotation System (as
published by the Wall Street Journal, if published) on such date,
or if the Common Stock was not traded on such date, on the next
preceding day on which the Common Stock was traded thereon or the
last previous date on which a sale was reported.
(j) "Incentive Stock Option" means an Option granted by the
Committee to a Participant, which Option is designated as an
Incentive Stock Option pursuant to Section 8 hereof.
(k) "Limited Right" means the right to receive an amount of
cash based upon the terms set forth in Section 9 hereof.
(1) "Non-statutory Stock Option" means an Option granted by
the Committee to a Participant, which Option is not designated by
the Committee as an Incentive Stock Option.
(m) "Normal Retirement" means retirement at the normal or
early retirement date as set forth in any tax-qualified
retirement/pension plan of the Bank. If no such plan is in place,
it shall mean termination of employment at or after age 65.
(n) "Option" means an Award granted under Section 7 or
Section 8 hereof.
(o) "Participant" means an employee of the Bank or its
Affiliates chosen by the Committee to participate in the Plan.
(p) "Plan Year(s)" means a calendar year or years
commencing on or after January 1, 1995.
(q) "Termination for Cause" means the termination upon an
intentional failure to perform stated duties or breach of a
fiduciary duty involving personal dishonesty, which results in
material loss to the Bank or one of its Affiliates, or willful
violation of any law, rule or regulation (other than traffic
violations or similar offenses), which results in material loss
to the Bank or its Affiliates or the issuance of a final cease
and desist order.
<PAGE>
3. Administration.
The Plan shall be administered and interpreted by the
Committee. The Committee shall act by vote or written consent of
a majority of its members. Subject to the express provisions and
limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the proper
administration of the Plan and make whatever determinations and
interpretations in connection with the Plan it deems to be
necessary or advisable. All determinations and interpretations
made by the Committee shall be binding and conclusive on all
Participants and on their legal representatives and
beneficiaries.
4. Types of Awards.
Awards under the Plan may be granted in any one or a
combination of:
(a) Non-statutory Stock Options;
(b) Incentive Stock Options; and
(c) Limited Rights
as defined below in Sections 7 through 9 of the Plan.
5. Stock Subject to the Plan.
Subject to adjustment as provided in Section 14, the maximum
number of shares reserved for purchase pursuant to the exercise
of Options shall not exceed 125,000 shares of Common Stock. These
shares of Common Stock may be either authorized but unissued
shares or shares previously issued and reacquired by the Bank. To
the extent that Options or Limited Rights are granted under the
Plan, the shares underlying such Options will be unavailable for
future grants under the Plan except that, to the extent that
Options together with any related Limited Rights granted under
the Plan terminate, expire or are cancelled without having been
exercised (in the case of Limited Rights, exercised for cash),
new awards may be made with respect to these shares.
6. Eligibility.
Officers and other employees of the Bank or its Affiliates
shall be eligible to receive Non-statutory Stock Options,
Incentive Stock Options and/or Limited Rights under the Plan.
Directors who are not employees or officers of the Bank or its
Affiliates shall not be eligible to receive Awards under the
Plan.
7. Non-Statutory Stock Options.
7.1 Grant of Non-statutory Stock Options.
The Committee may, from time to time, grant Non-statutory
Stock Options to eligible employees and, upon such terms and
conditions as the Committee may determine, grant Non-statutory
Options in exchange for and upon surrender of previously granted
Awards under this Plan. Non-statutory Stock Options granted under
this Plan are subject to the following terms and conditions:
(a) Price. The purchase price per share of Common
Stock deliverable upon the exercise of each Non-statutory Stock
Option shall be determined by the Committee on the date the
option is
<PAGE>
granted. In general, such purchase price shall not be less than
100% of the Fair Market Value of the Common Stock on the Date of
Grant. Shares may be purchased only upon full payment of the
purchase price. Payment of the purchase price may be made, in
whole or in part, through the surrender of shares of Common Stock
at the Fair Market Value of such shares on the date of surrender
determined in the manner described in Section 2(i).
(b) Terms of Options. The term during which each
Nonstatutory Stock Option may be exercised shall be determined by
the Committee, but in no event shall a Non-statutory Stock Option
be exercisable in whole or in part less than 1 year or more than
10 years from the Date of Grant. The Committee may, in its sole
discretion, accelerate the time at which any Non-statutory Stock
Option may be exercised in whole or in part.
Non-Statutory Stock Options shall vest on the following
schedule:
1. When the Fair Market Value of the Common Stock
exceeds 150% of the Fair Market Value at the Date of Grant for a
period of 30 consecutive business days, 50% of an Option shall
vest and become exercisable.
2. When the Fair Market Value of the Common Stock
exceeds 175% of the Fair Market Value at the Date of Grant for a
period of 30 consecutive business days, an additional 25% of an
Option shall vest and become exercisable
3. When the Fair Market Value of the Common Stock
exceeds 200% of the Fair Market Value at the Date of Grant for a
period of 30 consecutive business days, the remaining 25% of an
Option shall vest and become exercisable.
4. Regardless of the Fair Market Value of the Common
Stock, all Options shall vest and become exercisable nine years
and six months following grant.
Notwithstanding the above, in the event of a Change in
Control, all Non-statutory Stock Options shall become immediately
vested and exercisable.
(c) Termination of Employment. Upon the termination of
a Participant's service for any reason other than death,
Disability, Normal Retirement, or Termination for Cause, the
Participant's Nonstatutory Stock Options shall be exercisable
only as to those shares which were immediately purchasable by the
Participant at the date of termination and only for a period of
three months following termination. In the event of Termination
for Cause, all rights under the Participant's Non-statutory Stock
Options shall expire immediately upon termination. In the event
of the death, Disability or Normal Retirement of any Participant,
all Non-statutory Stock Options held by the Participant, whether
or not exercisable at such time, shall be exercisable by the
Participant or his legal representatives or beneficiaries for one
year or such longer period as determined by the Committee
following the date of the Participant's death, Normal Retirement
or cessation of employment due to Disability, provided that in no
event shall the period extend beyond the expiration of the
Nonstatutory Stock Option term.
8. Incentive Stock Options.
8.1 Grant of Incentive Stock Options.
<PAGE>
The Committee may, from time to time, grant Incentive Stock
Options to eligible employees. Incentive Stock Options granted
pursuant to the Plan shall be subject to the following terms and
conditions:
(a) Price. The purchase price per share of Common
Stock deliverable upon the exercise of each Incentive Stock
Option shall be not less than 100% of the Fair Market Value of
the Common Stock on the Date of Grant. However, if a Participant
owns Common Stock possessing more than 10% of the total combined
voting power of all classes of Common Stock, the purchase price
per share of Common Stock deliverable upon the exercise of each
Incentive Stock Option shall not be less than 110% of the Fair
Market Value of the Common Stock on the Date of Grant. Shares may
be purchased only upon payment of the full purchase price.
Payment of the purchase price may be made, in whole or in part,
through the surrender of shares of the Common Stock at the Fair
Market Value of such shares on the date of surrender determined
in the manner described in Section 2(i).
(b) Amounts of Options. Incentive Stock Options may be
granted to any eligible employee in such amounts as determined by
the Committee. In the case of an Option intended to qualify as an
Incentive Stock Option, the aggregate Fair Market Value
(determined as of the time the option is granted) of the Common
Stock with respect to which Incentive Stock Options granted are
exercisable for the first time by the Participant during any
calendar year (under all plans of the Bank and its Affiliates)
shall not exceed $100,000. The provisions of this Section 8.1(b)
shall be construed and applied in accordance with Section 422(d)
of the Code and the regulations, if any, promulgated thereunder.
To the extent an award under this Section 8.1 exceeds this
$100,000 limit, the portion of the award in excess of such limit
shall be deemed a Non-statutory Stock Option.
(c) Terms of Options. The term during which each
Incentive Stock Option may be exercised shall be determined by
the Committee, but in no event shall an Incentive Stock Option be
exercisable in whole or in part less than 1 year or more than 10
years from the Date of Grant. If at the time an Incentive Stock
Option is granted to a Participant, that Participant owns Common
Stock representing more than 10% of the total combined voting
power of the Bank (or, under Section 425(d) of the Code, is
deemed to own Common Stock representing more than 10% of the
total combined voting power of all such classes of Common Stock,
by reason of the ownership of such classes of Common Stock,
directly or indirectly, by or for any brother, sister, spouse,
ancestor or lineal descendent of such Participant, or by or for
any corporation, partnership, estate or trust of which such
Participant is a shareholder, partner or beneficiary), the
Incentive Stock Option granted to such Participant shall not be
exercisable after the expiration of 5 years from the Date of
Grant. No Incentive Stock Option granted under this Plan is
transferable except by will or the laws of descent and
distribution and is exercisable in his lifetime only by the
Participant to whom it is granted.
Incentive Stock Options shall vest on the following
schedule:
1. When the Fair Market Value of the Common Stock
exceeds 150% of the Fair Market Value at the Date of Grant for a
period of 30 consecutive business days, 50% of an Option shall
vest and become exercisable.
2. When the Fair Market Value of the Common Stock
exceeds 175% of the Fair Market Value at the Date of Grant for a
period of 30 consecutive business days, an additional 25% of an
Option shall vest and become exercisable.
<PAGE>
3. When the Fair Market Value of the Common Stock
exceeds 200% of the Fair Market Value at the Date of Grant for a
period of 30 consecutive business days, the remaining 25% of an
Option shall vest and become exercisable.
4. Regardless of the Fair Market Value of the Stock,
all Options shall vest and become exercisable nine years and six
months following grant.
Notwithstanding the above, in the event of a Change in
Control, all Incentive Stock Options shall become immediately
vested and exercisable.
(d) Termination of Employment. Upon the termination of
a Participant's service for any reason other than death,
Disability, Normal Retirement, Change in Control, or Termination
for Cause, the Participant's Incentive Stock Options shall be
exercisable only as to those shares which were immediately
purchasable by the Participant at the date of termination and
only for a period of three months following termination.
In the event of death or Disability of any Participant, all
Incentive Stock Options held by such Participant, whether or not
exercisable at such time, shall be exercisable by the Participant
or the Participant's legal representatives or beneficiaries for
one year following the date of the Participant's death or
cessation of employment due to Disability. Upon termination of
the Participant's service due to Normal Retirement or a Change in
Control, all Incentive Stock Options held by such Participant,
whether or not exercisable at such time, shall be exercisable for
a period of one year following the date of Participant's
cessation of employment, provided however, that such Option shall
not bile for treatment as an Incentive Stock Option in the event
such option is exercised more than three months following the
date of the Participant's cessation of employment. In no event
shall the exercise period extend beyond the expiration of the
Incentive Stock Option term. In the event of Termination for
Cause all rights under the Participant's Incentive Stock Options
shall expire immediately upon termination.
(e) Compliance with Code. The Incentive Stock Options
granted under this Section 8 of the Plan are intended to qualify
as incentive stock options within the meaning of Section 422 of
the Code, but the Bank makes no warranty as to the qualification
of any Option as an incentive stock option within the meaning of
Section 422 of the Code.
9. Limited Rights.
9.1 Grant of Limited Rights.
Simultaneously with the grant of any Option, the Committee
may grant a Limited Right with respect to all or some of the
shares covered by such Option. Limited Rights granted under this
Plan are subject to the following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right
be exercisable in whole or in part before the expiration of six
months from the Date of Grant of the Limited Right. A Limited
Right may be exercised only in the event of a Change in Control.
The Limited Right may be exercised only when the related
Option is eligible to be exercised, and only when the Fair Market
Value of the underlying shares on the day of exercise is greater
than the exercise price of the related Option.
<PAGE>
Upon exercise of a Limited Right, the related Option shall
cease to be exercisable. Upon exercise or termination of an
Option, any related Limited Rights shall terminate. The Limited
Right is transferable only when the underlying Option is
transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the
holder shall promptly receive from the Bank an amount of cash
equal to the difference between the Fair Market Value on the Date
of Grant of the related Option and the Fair Market Value of the
underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such
Limited Right is being exercised.
(c) Termination of Employment. Upon the termination of
a Participant's service for any reason other than Termination for
Cause, any Limited Rights held by the Participant shall then be
exercisable for a period of one year following termination. In
the event of Termination for Cause, all Limited Rights held by
the Participant shall expire immediately upon termination. In no
event shall the period extend beyond the expiration of the term
of the related Option.
10. Surrender of Options.
In the event of a Participant's termination of employment as
a result of death, Disability or Normal Retirement, the
Participant (or the Participant's personal representative(s),
heir(s), or devisee(s) ) may, in a form acceptable to the
Committee make application to surrender all or a part of Options
held by such Participant in exchange for a cash payment from the
Bank of an amount equal to the difference between the Fair Market
Value of the Common Stock on the date of termination of
employment and the exercise price per share of the Option on the
Date of Grant. Whether the Committee accepts such application or
determines to make payment, in whole or part, is within its
absolute and sole discretion, it being expressly understood that
the Committee is under no obligation to any Participant
whatsoever to make such payments. In the event that the Committee
accepts such application and the Bank determines to make payment,
such payment shall be in lieu of the exercise of the underlying
Option and such Option shall cease to be exercisable.
11. Rights of a Shareholder; Nontransferability.
No Participant shall have any rights as a shareholder with
respect to any shares covered by a Nonstatutory Option and/or
Incentive Stock Option until the date of issuance of a stock
certificate for such shares. Nothing in this Plan or in any Award
confers on any person any right to continue in the employ of the
Bank or its Affiliates or to continue to perform services for the
Bank or its Affiliates or interferes in any way with the right of
the Bank or its Affiliates to terminate a Participant's services
as an officer or other employee at any time.
No Award under the Plan shall be transferable by the
Participant other than by will or the laws of descent and
distribution and may only be exercised during his lifetime by the
Participant, or by a guardian or legal representative.
12. Agreement with Grantees.
Each Award of Stock Options and/or Limited Rights will be
evidenced by a written agreement, executed by the Participant and
the Bank or its Affiliates, which describes the conditions for
receiving the Awards including the Date of Grant, the purchase
price if any, applicable periods, and any other terms and
conditions as may be required by the Board or applicable
securities law.
<PAGE>
13. Designation of Beneficiary.
A Participant may, with the consent of the Committee,
designate a person or persons to receive, in the event of death,
any Award to which the Participant would then be entitled. Such
designation will be made upon forms supplied by and delivered to
the Bank and may be revoked in writing. If a Participant fails to
effectively designate a beneficiary, then the Participant's
estate will be deemed to be the beneficiary.
14. Maximum Award.
No Participant may receive an Award with respect to more
than 20,000 shares of Common Stock in any Plan Year.
15. Dilution and Other Adjustments.
In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares, or other
similar corporate change, or other increase or decrease in such
shares without receipt or payment of consideration by the Bank,
the Committee will make such adjustments to previously granted
Awards to prevent dilution or enlargement of the rights of the
Participant, including any or all of the following:
(a) adjustments in the aggregate number or kind of
shares of Common Stock which may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of
shares of Common Stock covered by Awards already made under the
Plan;
(c) adjustments in the purchase price of outstanding
Non-statutory Stock Options and/or Incentive Stock Options, or
any Limited Rights attached to such Options.
No such adjustments may, however, materially change the
value of benefits available to a Participant under a previously
granted Award.
16. Tax Withholding.
There shall be deducted from each distribution of cash
and/or Common Stock under the Plan the amount required by any
governmental authority to be withheld for income tax purposes. If
this Plan is qualified under 17 C.F.R. Section 240.16b-3, then
any withholding shall comply with 17 C.F.R. Section 240.16b-3(e).
17. Amendment of the Plan.
The Board of Directors may at any time, and from time to
time, modify or amend the Plan in any respect; provided further
that if it has been determined to continue to qualify the Plan
under the 17 C.F.R. Section 240.16b-3, shareholder approval shall
be required for any such modification or amendment which:
(a) increases the maximum number of shares for which
Options may be granted under the Plan (subject, however, to the
provisions of Section 14 hereof);
<PAGE>
(b) reduces the exercise price at which Awards may be
granted (subject, however, to the provisions of Section 14
hereof); or
(c) changes the persons eligible to participate in the
Plan.
Failure to ratify or approve amendments or modifications to
subsections (a) through (c) of this Section 16 by shareholders
shall be effective only as to the specific amendment or
modification requiring such ratification. Other provisions,
sections, and subsections of this Plan will remain in full force
and effect.
No such termination, modification or amendment may affect
the rights of a Participant under an outstanding Award.
18. Effective Date of Plan.
The Plan became effective upon the date on which it is
approved by a majority vote of the shareholders of record of the
Bank at the 1995 Annual Meeting of Shareholders (the "Effective
Date"). The Plan shall terminate on the tenth anniversary of the
Effective Date, or such earlier date as determined by the Board.
19. Termination of The Plan.
The right to grant Awards under the Plan will terminate upon
the earlier of 10 years after the Effective Date of the Plan, or
the issuance of Common Stock or the exercise of Options or
related Limited Rights equivalent to the maximum number of shares
reserved under the Plan as set forth in Section 5. The Board has
the right to suspend or terminate the Plan at any time, provided
that no such action will, without the written consent of a
Participant, adversely affect his rights under a previously
granted Award.
20. Applicable Law.
The Plan will be administered in accordance with the laws of
the State of New Hampshire.
21. Compliance with Section 16.
If this Plan is qualified under 17 C.F.R. Section 240.16b-3,
transactions under this Plan are intended to comply with all
applicable conditions of such regulation or its successors. To
the extent any provisions of the Plan or action by the Committee
fail to so comply, such provision or action shall be deemed null
and void, to the extent permitted by law and deemed advisable by
the Committee.
<PAGE>
PRIMARY BANK
1995 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
1. Purpose.
The Purpose of the Primary Bank (the "Bank") 1995 Stock
Option Plan for Outside Directors of the Bank and its affiliates,
(the "1995 Directors' Option Plan" or the "Plan") is to promote
the growth and profitability of the Bank by providing outside
directors of the Bank and its affiliates with an additional
incentive to achieve long-term objectives of the Bank and to
attract and retain non-employee directors of outstanding
competence by providing such outside directors with an
opportunity to acquire an equity interest in the Bank.
2. Grant Options
(a) "Automatic Grants. Each individual member of the Board
of Directors of the Bank (the "Board") or any of its affiliates
not also serving as a full-time employee of the Bank or any of
its affiliates (an "Outside Director") who is serving as a
director on the fifth business day after the annual meeting of
the shareholders of the Bank or a special meeting in lieu
thereof, beginning with the 1995 Special Meeting in Lieu of an
Annual Meeting of Shareholders, shall automatically be granted,
on such day (the "Date of Grant"), a non-statutory stock option
to purchase 500 shares of the common stock, par value $.01 per
share, of the Bank ("Common Stock"), subject to adjustment as
provided in Section 4 hereof. The purchase price per share of
the Common Stock deliverable upon exercise of such options shall
equal the Fair Market Value of the Common Stock on the Date of
Grant as determined under Section 2 (c) hereof.
If options for sufficient shares are not available under the
1995 Directors' Option Plan to fulfill the grant of options under
Section 2 (a) hereof to any Outside Director, and thereafter
options become available, such Outside Director shall then
receive options to purchase an amount of shares of Common Stock,
determined by dividing pro rata among each Outside Director,
options for the number of shares then available under the Plan,
not to exceed options for 500 shares for each year in which a
grant of options could not be made, subject to adjustment under
Section 4. In such case, the Date of Grant shall be the date on
which options for such shares become available.
(b) "Ineligibility. An option under the 1995 Directors'
Option Plan shall not be granted to any Outside Director who at
any previous time was a full-time employee of the Bank and in
such capacity was eligible to receive any options to purchase
Common Stock.
(c) "Fair Market Value. For purposes of the 1995
Directors' Option Plan, when used in connection with Common Stock
on a certain date, Fair Market Value means the average of the bid
and ask prices of the Common Stock as reported by the National
Association of Securities Dealers Automated Quotation System (as
published by the Wall Street Journal, if published) on such date,
or if the Common Stock was not traded on such date, on the next
preceding day on which the Common Stock was traded thereon or the
last previous date on which a sale was reported.
3. Terms and Conditions.
(a) "Optional Agreement. Each option shall be evidenced by
a written option agreement between the Bank and the recipient
specifying the number of shares of Common Stock that may be
acquired through
<PAGE>
its exercise and containing such other terms and conditions which
are not inconsistent with the terms of this Plan.
(b) "Vesting. Each option granted pursuant to Section 2
(a) hereof shall vest on the following schedule:
1. When the Fair Market Value of the Common Stock
exceeds 150% of the Fair Market Value at the Date of Grant for a
period of 30 consecutive business days, 50% of an option shall
vest and become exercisable.
2. When the Fair Market Value of the Common Stock
exceeds 175% of the Fair Market Value at the Date of Grant for a
period of 30 consecutive business days, an additional 25% of an
option shall vest and become exercisable.
3. When the Fair Market Value of the Common Stock
exceeds 200% of the Fair Market Value at the Date of Grant for a
period of 30 consecutive business days, the remaining 25% of an
option shall vest and become exercisable.
4. Regardless of the Fair Market Value of the Stock ,
all options shall vest an become exercisable nine years and six
months following Date of Grant.
Notwithstanding the above, in the event of a Change in
Control, all options granted under the Plan shall become
immediately vested and exercisable. For the purposes of this
Plan, a "Change in Control" shall mean an event of a nature that:
(i) would be required to be reported in response to Item 1 (a) of
the current report on Form F-3, as in effect on the date hereof,
pursuant to Section 13 or 15 (d) of the Securities Exchange Act
of 1934 (the "Exchange Act"); or (ii) results in a Change in
Control of the Bank within the meaning of the Change in Bank
Control Act, as amended, and the Rules and Regulations
promulgated by the Federal Deposit Insurance Corporation ("FDIC")
at 12 C.F.R. Section 303.4 (a), as in effect on the date hereof;
or (iii) without limitation such a Change in Control shall be
deemed to have occurred at such time as (A) any "person" (as the
term is used in Sections 13 (d) and 14 (d) of the Exchange Act),
or group of persons acting in concert, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, or any class of equity securities
of the Bank representing 20% or more of a class of equity
securities except for any securities purchased by the Bank's
employee stock ownership plan and trust; or, (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of al least
three-quarters of the directors comprising the Incumbent Board,
or whose nomination for election by the Bank's stockholders was
approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (B),
considered as though he were a member of the Incumbent Board; or
(C) a plan of reorganization, merger, consolidation, sale of all
or substantially all the assets of the Bank or similar
transaction occurs in which the Bank is not the resulting entity;
or (D) a proxy statement shall be distributed soliciting proxies
from stockholders of the Bank, by someone other than the current
management of the Bank, seeking stockholder approval of a plan or
similar transaction with one or more corporations as a result of
which the outstanding shares of the class of securities then
subject to such plan or transactions are exchanged or converted
into cash or property or securities not issued by the Bank; or
(E) a tender offer is made for 20% or more of the voting
securities of the Bank then outstanding.
<PAGE>
(c) "Manner of Exercise. The option when exercisable may
be exercised from time to time, in whole or in part, by
delivering a written notice of exercise to the Chief Executive
Officer of the Bank signed by the recipient. Such notice is
irrevocable and must be accompanied by full payment of the
exercise price in cash or shares of previously acquired Common
Stock of the Bank at the Fair Market Value of such shares
determined on the exercise date in the manner described in
Section 2 (c).
(d) "Transferability. Each option granted hereby may be
exercised only by the Outside Director to whom it is issued or,
in the event of the Outside Director's death, his or her personal
representative(s) or designee(s), heir(s) or devisee(s) pursuant
to the terms of a designation of beneficiary form provided by
such Outside Director to the Bank. In the event the Outside
Director has failed to file a designation of beneficiary form,
the estate of the Outside Director shall be deemed the
beneficiary.
(e) "Termination of Option. Each option shall expire under
the earlier of (i) 10 years following the Date of Grant, or (ii)
one year following the date on which the Outside Director ceases
to serve in such capacity for any reason other than removal for
Cause (as defined below). If the Outside Director dies before
fully exercising any portion of an option then exercisable, such
option may be exercised by such Outside Director's personal
representative(s), heir(s) or devisee(s) at any time within the
one-year period following his or her death; provided, however,
that in no event shall the option be exercisable more than 10
years after its Date of Grant. If the Outside Director is
removed for Cause, all options awarded to him or her shall expire
upon such removal. Removal for Cause means the termination upon
an intentional failure to perform stated duties or breach of a
fiduciary duty involving personal dishonesty, which results in
material loss to the Bank or one of its affiliates, or willful
violation of any law, rule or regulation (other than traffic
violations or similar offenses), which results in material loss
to the Bank or one of its affiliates or final cease and desist
order.
4. Common Stock Subject to the 1995 Directors' Option Plan.
The shares which shall be issued and delivered upon exercise
of options granted under the 1995 Directors' Option Plan may be
either authorized and unissued shares of Common Stock or
authorized and issued shares of Common Stock held by the Bank as
treasury stock. The number of shares of Common Stock reserved
for issuance under the 1995 Directors' Option Plan is 35,000
shares of Common Stock, subject to adjustment pursuant to this
Section 4. Any shares of Common Stock subject to an option which
for any reason either terminates unexercised or expires shall
again be available for issuance under the 1995 Directors' Option
Plan.
In the event of any change or changes in the outstanding
Common Stock by reason of any stock dividend or split,
recapitalization, reorganization, merger, consolidation, spin-
off, combination or any similar corporate change, or other
increase or decrease in such shares effected without receipt or
payment of consideration by the Bank, the number of shares of
Common Stock which may be issued under this 1995 Directors'
Option Plan, the number of shares of Common Stock subject to
options granted under this 1995 Directors' Option Plan and the
exercise price of such options, shall be automatically adjusted
to prevent dilution or enlargement of the rights granted to the
recipient under the Plan.
5. Effective Date of the Plan; Shareholder Ratification.
The Effective Date of the Plan shall be the date upon which
the 1995 Directors' Option Plan is approved by the Board;
provided, however, that the Plan shall be subject to the approval
of the
<PAGE>
shareholders of the Bank with applicable laws and regulations at
an annual meeting of the Bank's shareholders or a special meeting
in lieu thereof held within 12 months of the Effective Date.
6. Termination of the Plan.
The right to grant options under the 1995 Directors' Option
Plan will terminate under the earlier of 10 years after the
Effective Date of the Plan, or the issuance of 35,000 shares of
Common Stock, subject to adjustment pursuant to Section 4 hereof.
A vote of the Board is required to terminate the 1995 Directors'
Option Plan; "provided, however, no such termination shall,
without the consent of the affected recipient, affect such
recipient's rights under a previously granted option.
7. Amendment of the Plan.
The 1995 Directors' Option Plan may be amended from time to
time by the Board provided that Sections 2 and 3 hereof shall not
be amended more than once every six months other than to comport
with the Internal Review Code of 1986, as amended, or the
Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder. Except as provided in Section 9 hereof,
rights and obligations under any option granted before an
amendment shall not be altered or impaired by such amendment
without the written consent of the optionee. If the 1995
Directors' Option Plan becomes qualified under 17 C.F.R. Section
240.16b-3 and an amendment would require shareholder approval
under such regulation to retain the 1995 Directors' Option Plan's
qualification, then subject to the discretion of the Board, such
amendment shall be presented to shareholders for ratification.
8. Applicable Law.
The 1995 Directors' Option Plan will be administered in
accordance with the laws of the State of New Hampshire.
9. Compliance with Section 16.
If this 1995 Directors' Option Plan is qualified under 17
C.F.R. Section 240.16b-3, transactions under this Plan are
intended to comply with all applicable conditions of such
regulation or its successors. To the extent any provisions of
the 1995 Directors' Option Plan fail to so comply, such
provisions shall be deemed null and void, to the extent permitted
by law.
<PAGE>
December 15, 1997 (202) 274-2000
Board of Directors
Granite State Bankshares, Inc.
122 West Street
Keene, New Hampshire
Re: Granite State Bankshares, Inc.
Registration Statement on Form S-8
Ladies and Gentlemen:
You have requested the opinion of this firm as to certain
matters in connection with the offer and sale of Granite State
Bankshares, Inc. (the "Company") common stock, par value $.01 per
share (the "Common Stock"), pursuant to the Peterborough Savings
Bank 1993 Stock Option Plan for Outside Directors, the
Peterborough Savings Bank 1993 Incentive Stock Option Plan, the
Primary Bank 1995 Stock Option Plan for Outside Directors, the
Primary Bank 1995 Incentive Stock Option Plan (together, the
"Plans"). We have reviewed the Company's Articles of
Incorporation, Registration Statement on Form S-8 (the "Form S-
8"), as well as applicable statutes and regulations governing the
Company and the offer and sale of the Common Stock.
Based on the foregoing, we are of the following opinion:
Upon the effectiveness of the Form S-8, the Common Stock,
when sold in connection with the exercise of options granted
pursuant to the Plans, will be legally issued, fully paid
and non-assessable.
This opinion has been prepared solely for the use of the
Company in connection with the preparation and filing of the Form
S-8, and should not be used for any other purpose or relied upon
by any other person without the prior written consent of this
firm. We hereby consent to the use of this opinion in the Form
S-8.
Very truly yours,
/s/ Luse Lehman Gorman Pomerenk & Schick
----------------------------------------
Luse Lehman Gorman Pomerenk & Schick
A Professional Corporation
<PAGE>
Consent of Independent Certified Public Accountants
---------------------------------------------------
We have issued our report dated January 9, 1997, accompanying the
consolidated financial statements incorporated by reference in
the Annual Report of Granite State Bankshares, Inc. and
subsidiary on Form 10-K for the year ended December 31, 1996
which is incorporated by reference in this Registration
Statement. We consent to the incorporation by reference in the
Registration Statement of the aforementioned report.
/s/ GRANT THORNTON LLP
Boston, Massachusetts
December 15, 1997
