<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ X / Definitive Proxy Statement
/ X / Definitive Additional Materials
/ / Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12
Peoples Heritage Financial Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Gerard L. Hawkins
Elias, Matz, Tiernan & Herrick LLP
734 15th Street
Washington, D.C. 20005
(202) 347-0300
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ X / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
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/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of Securities to which transaction applies:
N/A
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2) Aggregate number of securities to which the transaction applies:
N/A
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
N/A
------------------------------------------------------------------------
/ X / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0- 11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
$125
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2) Form, Schedule or Registration Statement No.:
Preliminary Proxy Materials
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3) Filing Party:
Peoples Heritage Financial Group, Inc.
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4) Date Filed:
February 23, 1996
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1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
2
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[COMPANY LOGO]
March 22, 1996
Dear Stockholder:
On behalf of the Board of Directors I cordially invite you to attend the
Annual Meeting of Stockholders of Peoples Heritage Financial Group, Inc., which
will be held at the Portland Marriott Hotel, 200 Sable Oaks Drive, South
Portland, Maine 04106, on Tuesday, April 23, 1996 at 10:30 a.m., local time. The
matters to be considered by stockholders at the Annual Meeting are described in
detail in the accompanying materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. Let me urge you to mark, sign and date your proxy card today
and return it in the envelope provided, even if you plan to attend the Annual
Meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are unable to attend.
Your continued support of and interest in Peoples Heritage Financial Group,
Inc. are sincerely appreciated.
Sincerely,
/s/ William J. Ryan
William J. Ryan
Chairperson, President and
Chief Executive Officer
<PAGE> 4
PEOPLES HERITAGE FINANCIAL GROUP, INC.
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207)761-8500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 23, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Peoples
Heritage Financial Group, Inc. (the "Company") will be held at the Portland
Marriott Hotel, 200 Sable Oaks Drive, South Portland, Maine 04106, on Tuesday,
April 23, 1996 at 10:30 a.m., local time, for the following purposes, all of
which are more completely set forth in the accompanying Proxy Statement:
1. To elect three Directors for a three-year term and in each case
until their successors are elected and qualified;
2. To amend the Articles of Incorporation of the Company to increase
the number of authorized shares of Common Stock from 30,000,000 to
100,000,000;
3. To adopt a 1996 Equity Incentive Plan for key employees of the
Company;
4. To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for 1996; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof. Management is not aware of any other
such business.
The Board of Directors has fixed March 15, 1996 as the voting record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and at any adjournment thereof. Only those stockholders of record
as of the close of business on that date will be entitled to vote at the Annual
Meeting or at any such adjournment.
By Order of the Board of Directors
/s/ Carol L. Mitchell
Carol L. Mitchell, Esq.
Senior Vice President, General Counsel,
Secretary and Clerk
Portland, Maine
March 22, 1996
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YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
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<PAGE> 5
PEOPLES HERITAGE FINANCIAL GROUP, INC.
-------------------------------
PROXY STATEMENT
-------------------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to stockholders of Peoples Heritage
Financial Group, Inc. (the "Company") in connection with the solicitation of
proxies on behalf of the Board of Directors to be used at the Annual Meeting of
Stockholders of the Company to be held at the Portland Marriott Hotel, 200 Sable
Oaks Drive, South Portland, Maine 04106, on Tuesday, April 23, 1996 at 10:30
a.m., local time, and at any adjournment thereof for the purposes set forth in
the Notice of Annual Meeting of Stockholders (the "Annual Meeting"). This Proxy
Statement is first being mailed to stockholders on or about March 22, 1996.
The proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for the nominees for Director described herein and
the other matters described below and, upon the transaction of such other
business as may properly come before the Annual Meeting, in accordance with the
best judgment of the persons appointed as proxies. Any stockholder giving a
proxy has the power to revoke it at any time before it is exercised by (i)
filing with the Clerk of the Company written notice thereof (Carol L. Mitchell,
Esq., Senior Vice President, General Counsel, Secretary and Clerk; Peoples
Heritage Financial Group, Inc., P.O. Box 9540, One Portland Square, Portland,
Maine 04112-9540); (ii) submitting a duly executed proxy bearing a later date;
or (iii) appearing at the Annual Meeting and giving the Clerk notice of his or
her intention to vote in person. Proxies solicited hereby may be exercised only
at the Annual Meeting and any adjournment thereof and will not be used for any
other meeting.
VOTING
Only stockholders of record at the close of business on March 15, 1996 (the
"Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 17,009,949 shares of common stock of the Company,
par value $.01 per share (the "Common Stock"), issued and outstanding, and the
Company had no other class of equity securities outstanding. Each share of
Common Stock is entitled to one vote at the Annual Meeting on all matters
properly presented thereat.
The persons receiving the greatest number of votes of the Common Stock, up
to the number of Directors to be elected, shall be elected as Directors of the
Company. The affirmative vote of the holders of a majority of all outstanding
shares of Common Stock is required for approval of (i) the proposal to amend the
Articles of Incorporation of the Company (the "Articles of Incorporation") to
increase the number of authorized shares of Common Stock and (ii) the proposal
to adopt the Peoples Heritage Financial Group, Inc. 1996 Equity Incentive Plan
("1996 Equity Plan"). The affirmative vote of a majority of the votes cast on
the matter at the Annual Meeting is required to ratify the appointment of KPMG
Peat Marwick LLP as the Company's independent auditors for 1996 and to approve
any other matter submitted to the stockholders for their consideration at the
Annual Meeting.
With regard to the election of Directors, stockholders may vote in favor of
or withhold authority to vote for one or more nominees for Director. Votes that
are withheld in connection with the election of one or more nominees for
Director will not be counted as votes cast for such individuals and accordingly
will have no effect. Abstentions may be specified on all other proposals.
Because the proposals to amend the Articles of Incorporation to increase the
number of authorized shares of Common Stock and to adopt the 1996 Equity Plan
require the approval of the holders of a majority of all outstanding shares of
Common Stock, an abstention on either proposal will have the same effect as a
vote against such proposal. Abstentions will not be
<PAGE> 6
counted in determining the votes cast in connection with the proposal to ratify
the Company's auditors and thus will have no effect on such proposal.
With the exception of the proposal to amend the Articles of Incorporation
to increase the number of authorized shares of Common Stock, under the rules of
the New York Stock Exchange, all of the proposals of the Company described
herein are considered "discretionary" items upon which brokerage firms may vote
in their discretion on behalf of their clients if such clients have not
furnished voting instructions within ten days of the Annual Meeting.
Accordingly, the only proposal subject to "broker non-votes" is the proposal to
amend the Articles of Incorporation to increase the number of authorized shares
of Common Stock. "Broker non-votes" will have the same effect as a vote against
such proposal.
ELECTION OF DIRECTORS
(PROPOSAL ONE)
The Articles of Incorporation of the Company provide that the Board of
Directors shall be divided into three classes as nearly equal in number as
possible and that the members of each class are to be elected for a term of
three years and until their successors are elected and qualified. One class of
Directors is to be elected annually. A resolution of the Board of Directors
adopted pursuant to the Company's Articles of Incorporation has established the
number of Directors at ten.
Each of the three Directors up for election at the Annual Meeting currently
is a Director of the Company. There are no arrangements or understandings
between the persons named and any other person pursuant to which such person was
selected as a nominee for election as a Director at the Annual Meeting of
Stockholders, and no Director is related to any other Director or executive
officer of the Company or of any of its subsidiaries by blood, marriage or
adoption.
If any person named as nominee should be unable or unwilling to stand for
election at the time of the Annual Meeting, the proxies will nominate and vote
for a replacement nominee or nominees recommended by the Board of Directors. At
this time, the Board of Directors knows of no reason why any of the nominees
listed below may not be able to serve as Director if elected.
<TABLE>
The following table presents information concerning the nominees for
Director and the Directors whose terms continue, including each such person's
tenure as a Director of the Company or its subsidiaries. Where applicable,
service as a Director includes service as a Director of Peoples Heritage Bank
(the "Bank"), the Company's principal banking subsidiary, and its predecessors.
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERM EXPIRING IN 1999
<CAPTION>
POSITION WITH THE COMPANY
AND PRINCIPAL OCCUPATION DIRECTOR
NAME AGE DURING THE PAST FIVE YEARS SINCE
---- --- -------------------------- --------
<S> <C> <C> <C>
Everett W. Gray 69 Director of the Company; Director of the Bank; 1971
retired attorney; former senior partner of the law
firm of Gray, Gray & Palmer of Bangor, Maine; member
of the Maine State Bar Association and past President
of the Penobscot County Bar Association; Chair of the
Title Standards subcommittee of the Maine State Bar
Association; former chair of the Real Estate Section
of the Maine State Bar Association; Trustee, Brewer
Water District; Chair, Brewer Voter Registration
Appeals Board.
</TABLE>
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<TABLE>
<S> <C> <C> <C>
William J. Ryan 52 Chairperson, President and Chief Executive Officer of 1989
the Company and former Vice Chairperson of the Board
of Directors of the Company; Director, President and
Chief Executive Officer of the Bank; prior to joining
the Company and the Bank in July 1989, held various
positions with banking subsidiaries of Bank of New
England Corporation, including President and Chief
Executive Officer of Bank of New England North,
Lowell, Massachusetts from January 1989 to July 1989
and Executive Vice President of Bank of New England,
Boston, Massachusetts from July 1986 to January 1989
and President and Chief Executive Officer of Bank of
New England Bay State, Lawrence, Massachusetts from
January 1985 to June 1986. Trustee of the Portland
Museum of Art; Director of New England Student Loan
Association; Director, Blue Cross/Blue Shield of
Maine and member of its Finance Committee; Director
of Nissan Baking Co.; member, Partners for Progress;
Trustee, New England Banking Institute; 1992
Chairperson, Portland Region, United Way of Greater
Portland campaign; President of Pine Tree Council of
Boy Scouts of America.
Curtis M. Scribner 58 Director of the Company; Director of the Bank; 1977
Principal of C.M. Scribner & Co., a real estate
holding company; past president of J.B. Brown & Son,
a real estate management and development company;
Trustee of Hurricane Island Outward Bound; Director
of the Rufus Deering Co. and of Forest City
Chevrolet; member of the Maine Alliance and Maine
Committee of Newcomen Society; Corporator, Maine
Medical Center and Chairperson of its Real Estate
Committee; Honorary Trustee of the North Yarmouth
Academy.
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
OF THE COMPANY VOTE "FOR" APPROVAL OF THE NOMINEES FOR DIRECTOR.
<TABLE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
DIRECTORS WITH TERMS EXPIRING IN 1997
<S> <C> <C> <C>
Andrew W. Greene 52 Director of the Company; President, Chief Executive 1992
Officer and Director of Blue Cross/Blue Shield of
Maine; President, Chief Executive Officer and
Director of Blue Alliance Mutual Insurance Company;
Chairperson of the Board and Chief Executive Officer
of Machigonne Agency, Inc.; Director, National Blue
Cross and Blue Shield Association; member of the
President's Council of Visitors, University of
Southern Maine; member of Senator Cohen's Health Care
Advisory Group; member of the Board of Corporators,
Maine Medical Center Foundation; member of Partners
for Progress; member of the Board of Trustees, New
Hampshire College; member of the Board of Directors
of the Gulf of Maine Aquarium Development
Corporation; member of the Board of Directors of the
Maine Coalition for Excellence in Education.
</TABLE>
3
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<TABLE>
<S> <C> <C> <C>
Robert A. Marden 69 Vice Chairperson of the Board of Directors of the 1976
Company since October 1990 and former Chairperson of
the Board; Chairperson of the Board of Directors of
the Bank since October 1990; attorney and member of
the law firm of Marden, Dubord, Bernier & Stevens,
Waterville, Maine; Trustee Emeritus of Colby College.
Malcolm W. Philbrook, Jr. 62 Director of the Company; Director of the Bank since 1976
1976 and Vice Chairperson of the Board of Directors
of the Bank; attorney and President of the law firm
of Crockett, Philbrook & Crouch, P.A., Auburn, Maine;
Director of the Lewiston/ Auburn YMCA; Director,
Patrons Mutual Insurance Co.; President and Trustee,
Winter Foundation.
DIRECTORS WITH TERMS EXPIRING IN 1998
Robert B. Bahre 68 Director of the Company; Chairperson, President and 1988
Chief Executive Officer of Oxford Bank & Trust from
1988 to its merger into the Bank in March 1993 and
Director of Oxford Bank & Trust from 1972 until the
same; Chief Executive Officer of New Hampshire
International Speedway.
Katherine M. Greenleaf 47 Director of the Company; former Director of the Bank 1981
from 1981 to 1991; Principal of Katherine M.
Greenleaf Consulting, a human resources consulting
concern, from 1995 to present; Vice President of The
Limited Stores from 1993 to 1995; Vice President of
Hannaford Bros., Inc. 1985 to 1993; former Vice
President of UNUM, from 1973 to 1985; admitted to
practice law before the Maine and Massachusetts Bars;
member of Hurricane Island Outward Bound.
Pamela P. Plumb 52 Director of the Company; Vice Chairperson of the 1979
Company since 1990; former Vice Chairperson of the
Bank and Director of the Bank; President, Pamela
Plumb & Associates; member of the Board of the
Children's Museum, Advisory Board of Greater Portland
Landmarks, Inc. and the Gulf of Maine Aquarium;
Co-Chair, Campaign for Greater Portland Cares; former
Mayor and member of the City Council of the City of
Portland, Maine; former Board member and
past-President of the National League of Cities.
Dana Levenson 42 Director of the Company; Director of The First 1995
National Bank of Portsmouth since 1993; Director of
First Coastal Banks, Inc.; President of Ann Ellen
Enterprises, Inc., a 35-store specialty retail
operation; member of Portsmouth Rotary Club since
1977; Treasurer of Dartmouth Club of the Seacoast;
former Director of Portsmouth Rotary, Portsmouth
Chamber of Commerce and Pro-Portsmouth, Inc.
</TABLE>
STOCKHOLDER NOMINATIONS
Article III, Section 4 of the Company's Bylaws governs nominations for
election to the Board of Directors and requires all nominations for election to
the Board of Directors, other than those made by the Board, to be made at a
meeting of stockholders called for the election of Directors, and only by a
stockholder who has complied with the notice provisions in that section. Written
notice of a stockholder nomination must be given either by personal delivery or
by United States mail, postage prepaid, to the Clerk of the Company not later
than (i) 90 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders and (ii) with respect to an election to be held
at a special meeting of stockholders for the election of Directors, the close of
business on the tenth day following the date on which notice of such meeting is
first given to stockholders. Each written notice of a stockholder nomination
shall set forth: (a) the name and
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address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the Company entitled to vote at the meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission (the "Commission"); and (e) the consent of
each nominee to serve as a Director of the Company if so elected. The presiding
officer of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedures. The Company did not
receive any stockholder nominations for Director in connection with the Annual
Meeting.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
Regular meetings of the Board of Directors of the Company are held six
times per year. The Board of Directors of the Company held a total of 11 regular
and special meetings during 1995. In addition, there were meetings during 1995
of the Executive, Governance and Nominating, and Audit Committees of the Board
of Directors. With the exception of Director Marden, no Director of the Company
attended fewer than 80% of the aggregate total number of meetings of the Board
of Directors held while he or she was a member of the Board during 1995 and the
total number of meetings held by all committees thereof during the period which
he or she served on such committees during 1995. Director Marden suffered an
illness which precluded him from attending meetings of the Board and its
Committees for a significant portion of the year.
The Board of Directors of the Company has established various committees,
including Executive/ALCO, Asset Review, Audit, Human Resources and Governance
and Nominating Committees. The Asset Review Committee has been established to
provide direct involvement of the Board of Directors in asset quality issues of
the Company. A brief description of the Audit, Human Resources and Governance
and Nominating Committees is set forth below.
The Audit Committee receives and reviews internal and independent auditors'
reports and monitors the Company's adherence in accounting and financial
reporting to generally accepted accounting principles. Currently, the members of
this committee are Directors Philbrook (Chairperson), Gray and Scribner. The
Audit Committee met five times in 1995.
The Human Resources Committee has been delegated authority to handle all
personnel and compensation matters for the Company. Currently, the members of
this committee are Directors Greenleaf (Chairperson), Gray, Greene and Plumb.
The Human Resources Committee met six times in 1995.
The Governance and Nominating Committee evaluates and makes recommendations
to the Board of Directors for the election of Directors. Currently, the members
of this committee are Directors Ryan (Chairperson), Marden and Plumb. The
Governance and Nominating Committee met one time during 1995.
COMPENSATION OF DIRECTORS
Fees. Directors of the Company, other than those Directors who are
employed by the Company or its subsidiaries, are paid an annual retainer of
$9,000, $4,000 of which is in the form of restricted stock under the Company's
Restricted Stock Plan for Non-Employee Directors, described below. In addition,
Directors, other than those who are employed by the Company or its subsidiaries,
annually receive an option to purchase 1,000 shares of Common Stock (the
"Option") under the 1995 Stock Option Plan for Non-Employee Directors (the
"Option Plan"), described below. Mr. Marden receives a total of $16,000, $4,000
of which is in the form of restricted stock, in recognition of his additional
duties as Chairperson of the Board of Directors of the Bank. All non-employee
Directors also receive $500 for attendance at each meeting of the Board or any
of its committees and reimbursement for travel time in excess of one hour at a
rate of $25 per hour per meeting, up to a maximum of six hours.
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Restricted Stock Plan for Non-Employee Directors. In 1990, the Board of
Directors and stockholders of the Company adopted a Restricted Stock Plan for
Non-Employee Directors (the "Plan"), pursuant to which a portion of the
compensation of the non-employee Directors of the Company and the Bank is paid
in shares of Common Stock. Each member of the Board of Directors of the Company
and/or the Board of Directors of the Bank who is not a full-time employee of the
Company or any of its subsidiaries shall be eligible participants in the Plan
(the "Participants"). Directors who are employees of the Company or any of its
subsidiaries are not eligible to participate in the Plan.
Commencing with the calendar year 1994, $4,000 of the amount of the annual
fee payable to each Participant for service on the Board of Directors of the
Company and $2,500 of the amount of the annual fee payable to each Participant
for service on the Board of Directors of the Bank who also is not a member of
the Board of Directors of the Company shall be payable solely in shares of
Common Stock. Such fees shall be payable in one annual installment on the first
day of July in each calendar year for service on the Boards of Directors of the
Company and/or the Bank and any committee thereof in the first six months of
such calendar year. The number of shares of Common Stock to be issued to each
Participant on each payment date shall be determined by dividing such annual
installment by the fair market value of such shares, which is defined in the
Plan to mean the closing price of the Common Stock on the last trading day
preceding the relevant payment date, as reported in The Wall Street Journal.
During the month of December of any calendar year, the Board of Directors
of the Company may elect to decrease the amount of the annual fee payable in the
form of shares of Common Stock to each Participant for service on the Boards of
Directors of the Company and/or the Bank and any committee thereof during the
succeeding calendar year or to increase the amount of such annual fee payable in
the form of shares of Common Stock to a dollar amount which does not exceed
$10,000 in the case of Participants on the Board of Directors of the Company and
$2,500 in the case of Participants on the Board of Directors of the Bank who
also are not Directors of the Company. Any such election shall remain in effect
from year to year until changed by the Board of Directors of the Company in the
month of December of any calendar year for the next succeeding calendar year,
and no such election shall be effective until the next calendar year.
The holders of shares of Common Stock acquired pursuant to the Plan are
entitled to all distributions made with respect thereto and all voting rights
associated therewith. The shares of Common Stock issued under the Plan may not
be sold, hypothecated or transferred (including, without limitation, transfer by
gift, or donation), however, except that such restrictions shall lapse upon (a)
death of the Participant; (b) disability of the Participant preventing continued
service on the Board; (c) retirement of the Participant from service as a
Director of the Company and the Bank in accordance with the policy on retirement
of non-employee Directors of the same then in effect; (d) termination of service
as a Director with the consent of a majority of the members of the Board of
Directors of the Company or the Board of Directors of the Bank, as applicable,
other than the Participant; or (e) a Change in Control, as defined in the Plan.
If a Participant ceases to be a Director of the Company or the Bank for any
other reason, the shares of Common Stock issued to such Director pursuant to the
Plan shall be forfeited and revert to the Company. Certificates evidencing the
shares of Common Stock issued to Participants pursuant to the Plan contain a
restrictive legend which notes the foregoing restrictions on transfer.
In 1995, an aggregate of 3,825 shares of Common Stock were issued pursuant
to the Plan, including 262 shares of Common Stock to each non-employee Director
of the Company.
1995 Stock Option Plan for Non-Employee Directors. In 1995, the Board of
Directors and the stockholders of the Company adopted the Option Plan, pursuant
to which each person who is elected or appointed a Director at each annual
meeting shall automatically receive an option to purchase 1,000 shares of Common
Stock. Each director of the Company or the Bank who is not an employee of the
Company or the Bank or any parent or subsidiary thereof shall be eligible to
participate in the Option Plan. Directors who are employees of the Company or
any of its subsidiaries are not eligible to participate in the Option Plan.
Commencing at the annual meeting in 1995, 1,000 Options were granted to
each non-employee director of the Company and the Bank. The exercise price per
share for each Option granted shall be the fair market value per share of the
Common Stock of the Company on the day the Option is granted. For purposes of
the
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Option Plan, fair market value shall be the per share closing price of the
Common Stock on the date of the grant of the Option on the Nasdaq Stock Market's
National Market.
Each Option shall have a term of ten years from the date of grant, except
that in the event that an optionee ceases to be a Director for any reason, (i)
any Option held by such Optionee which has not yet become exercisable shall
expire immediately, and (ii) the unexercised portion of any exercisable Option
held by such optionee shall expire as of the earlier of the termination date of
the Option or the first anniversary of the day the optionee ceases to be a
Director.
An Option shall first become exercisable on the first business day
following the date six months after the date of grant, and thereafter shall
remain exercisable through the term of the Option, subject to earlier
termination as discussed above, provided that all Options granted under the
Option Plan shall be fully exercisable from and after the date the Company
enters into any agreement which will result in a liquidation, a sale of all or
substantially all of the assets of the Company or a merger or other
reorganization in which the Company is not the survivor or in which all of the
Common Stock is not sold or exchanged. During the period that it is exercisable,
an Option may be exercised in whole or in part by the Optionee.
An Option may not be sold, transferred, assigned, pledged, hypothecated,
attached, executed upon or otherwise disposed of in whole or in part in any way
other than by will or the laws of descent and distribution. A beneficiary may be
designated with respect to an Option in the event of the death of the Optionee.
In 1995, an aggregate of 9,000 Options were granted pursuant to the Option
Plan to each non-employee Director of the Company.
Directors' Deferred Compensation Plan. The Company and the Bank maintain a
Directors' Deferred Compensation Plan which allows Directors of the Company and
the Bank to defer all or any portion of the fees received from the Company or
the Bank. Benefits are payable upon the date elected by the Directors for the
distribution in a lump sum or in equal annual installments over a period not to
exceed ten years, and a Director may elect annually to have the amounts deferred
treated as if they were invested in a money market account, a mutual fund
selected by the administering committee or in Common Stock. During 1995,
Directors Greene and Levenson elected to defer certain of their compensation
pursuant to the Directors' Deferred Compensation Plan.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided with respect to each person who
currently serves as an executive officer of the Company but does not serve on
the Company's Board of Directors. There are no arrangements or understandings
between the Company and any such person pursuant to which such person has been
elected an officer, and no such officer is related to any Director or other
officer of the Company by blood, marriage or adoption.
Peter J. Verrill, 47, was elected Chief Operating Officer and Chief
Financial Officer of the Company and the Bank, effective January 1, 1996. From
1988 through December 1995, Mr. Verrill served as Executive Vice President and
Treasurer of the Company and as its Chief Financial Officer. Previously, Mr.
Verrill served as Senior Vice President and Treasurer of the Bank from February
1985 through January 1988, and as Executive Vice President, Chief Financial
Officer and Treasurer of the Bank from February 1988 through December 1995. Mr.
Verrill, who is a certified public accountant, was Senior Vice President,
Finance of a predecessor of the Bank from 1982 to 1985. Mr. Verrill serves as a
Director of Catholic Charities of Maine, a non-profit organization which
provides human services under various state, federal and private contracts, and
as Chairperson of its Financial Management Committee. Mr. Verrill also is a
Director of United Way of Greater Portland, as well as a member of its Finance
Committee. Mr. Verrill is a member of the American Institute of Certified Public
Accountants and the Maine Society of Public Accountants.
John W. Fridlington, 51, was elected Executive Vice President of the
Company and Executive Vice President of Commercial Lending of the Bank in
January 1992. Mr. Fridlington was formerly Executive Vice President, Commercial
Lending, at Heritage Bank for Savings in Holyoke, Massachusetts from 1988 to
1992.
7
<PAGE> 12
Prior to his tenure at Heritage Bank for Savings, Mr. Fridlington's banking
career included over 20 years of service in various capacities at Community
Savings Bank, BayBank Valley Trust Co., Mechanics Bank and New England Merchants
Bank, all of which are located in Massachusetts. Mr. Fridlington serves as a
Director of the Institute for Civic Leadership in Portland; the Park Danforth
Corporation, a private non-profit housing corporation; and the Maine Children's
Cancer Program. Mr. Fridlington also serves on the campaign cabinet of the
United Way of Greater Portland.
Henry G. (Bill) Beyer, 51, was elected Executive Vice President of the
Company in 1994 and Executive Vice President of the Bank in 1991. He currently
oversees retail delivery functions, small business banking and training
functions. Mr. Beyer has been with the Bank and a predecessor of the Bank since
1982. Prior to joining the Bank, Mr. Beyer was employed by Maine National Bank
as Director of Correspondent Banking and Marketing. Mr. Beyer is Chairperson of
the Board of Directors of the Salvation Army of Northern New England; an
Advisory Board member of Pine Tree Legal Assistance; a Board member of Williams
School of Banking; a member of the Maine Association of Community Banks,
Legislative Committee; a Board member of Maine Educational Loan Marketing Corp.;
and a member of the Advisory Committee to the Maine Bureau of Banking.
Carol L. Mitchell, 40, joined the Company in August 1990 and was elected
Senior Vice President, General Counsel and Clerk in 1992. Ms. Mitchell currently
oversees the Legal Affairs, Human Resources and Facilities Departments of the
Company and/or the Bank. Prior to joining the Company, Ms. Mitchell's banking
career included service in various capacities at Maine Savings Bank and the Bank
of Boston. She is an attorney, admitted to practice law in Maine, and is a
member of the American Bar Association, the Maine Bar Association and the
Cumberland County Bar Association. Ms. Mitchell is a Board member of the Maine
Bar Foundation and serves on its Bankers Advisory Committee; a past member of
the General Committee of the Cumberland Bar Association; a mentor for the Judge
Baker Child Advocacy Program; and Program Chairperson for the Maine In-house
Counsel Association.
8
<PAGE> 13
<TABLE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the Common Stock
beneficially owned as of the indicated date by (i) each person or entity,
including any "group" as that term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), who or which were known
by the Company to be the beneficial owner of 5% or more of the outstanding
Common Stock, (ii) each Director and executive officer of the Company named in
the summary compensation table below and (iii) all Directors and executive
officers of the Company as a group.
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF FEBRUARY 15, 1996(1)
--------------------------
NAME OF BENEFICIAL OWNER AMOUNT PERCENT
------------------------ ------- -------
<S> <C> <C>
Legg Mason, Inc.................................................... 894,925(2) 5.3%
7 East Redwood Street
P.O. Box 17023
Baltimore, Maryland 21203-7023
FMR Corp., et. al.................................................. 891,900(3) 5.2
82 Devonshire Street
Boston, Massachusetts 02109-3614
Directors:
Robert P. Bahre............................................... 38,660(4) --
Everett W. Gray............................................... 5,583(4) --
Andrew W. Greene.............................................. 3,179(4) --
Katherine M. Greenleaf........................................ 7,123(4) --
Dana S. Levenson.............................................. 5,262(4) --
Robert A. Marden.............................................. 8,864(4)(5) --
Malcolm W. Philbrook, Jr...................................... 47,282(4)(6) --
Pamela P. Plumb............................................... 9,281(4) --
William J. Ryan............................................... 146,841(7) --
Curtis M. Scribner............................................ 8,303(4) --
Executive officers who are not Directors:
Henry G. Beyer................................................ 29,543(7) --
John W. Fridlington........................................... 43,711(7) --
John E. Menario............................................... 85,728(7)(8) --
Peter J. Verrill.............................................. 64,881(7)(9) --
All Directors and executive officers of the Company as a group
(15 persons)..................................................... 520,680(10) 3.0
<FN>
---------------
(1) The number of shares beneficially owned by the persons set forth above is
determined under rules under Section 13 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, an individual is considered to
beneficially own any shares of Common Stock if he or she directly or
indirectly has or shares: (i) voting power, which includes the power to
vote or to direct the voting of the shares, or (ii) investment power, which
includes the power to dispose or direct the disposition of the shares.
Unless otherwise indicated, an individual has sole voting power and sole
investment power with respect to the indicated shares and all individual
holdings amount to less than 1% of the issued and outstanding Common Stock.
(2) Based on a Schedule 13G filed under the Exchange Act on February 14, 1996,
Legg Mason, Inc. has sole voting power and sole dispositive power over the
indicated shares.
(3) Based on a Schedule 13G filed under the Exchange Act on February 14, 1996,
FMR Corp. has sole voting power over 434,100 shares and sole dispositive
power over 891,900 shares.
(4) In the case of all indicated directors other than Mr. Marden, includes
outstanding options to purchase 1,000 shares of Common Stock granted
pursuant to the Company's 1995 Stock Option Plan for Non-
</TABLE>
9
<PAGE> 14
Employee Directors, and in the case of Mr. Marden includes outstanding
options to purchase 523 shares of Common Stock granted pursuant to such
plan (net of exercises during the year).
(5) Includes 1,564 shares held by Mr. Marden's spouse, with whom beneficial
ownership of such shares is shared.
(6) Includes 1,670 shares held by one entity for which Mr. Philbrook serves as
Director; beneficial ownership of such shares is shared with the other
members of the investment committee. Also includes 14,416 shares held in
various trusts for which Mr. Philbrook serves as sole trustee or in one
case as co-trustee; beneficial ownership of 2,505 of such shares is shared
with a co-trustee.
<TABLE>
(7) Includes shares over which an officer has voting power pursuant to the
Company's Thrift Incentive Plan and Profit Sharing Employee Stock Ownership
Plan, and options to purchase shares of Common Stock granted pursuant to
the Company's 1986 Stock Option and Stock Appreciation Rights Plan, as
amended (the "1986 Option Plan"), which are exercisable within 60 days of
February 15, 1996 as follows:
<CAPTION>
PROFIT SHARING CURRENTLY
EMPLOYEE STOCK EXERCISABLE
THRIFT INCENTIVE PLAN OWNERSHIP PLAN OPTIONS
--------------------- -------------- -----------
<S> <C> <C> <C>
William J. Ryan............ 21,826 2,062 110,727
Henry G. Beyer............. 10,698 1,482 17,323
John W. Fridlington........ 2,944 1,176 34,823
John E. Menario............ 5,448 2,283 34,554
Peter J. Verrill........... 17,451 2,062 40,569
</TABLE>
(8) Includes 28,920 shares held jointly with Mr. Menario's wife and 1,247
shares held solely by Mr. Menario's wife, with whom beneficial ownership of
such shares is shared.
(9) Includes 3,824 shares held jointly with Mr. Verrill's wife, as well as 250
shares and 25 shares held by Mr. Verrill's wife and son, respectively, in
each case with whom beneficial ownership of such shares is shared.
(10) Includes an aggregate of 69,498 shares of Common Stock which are held by
the trusts established pursuant to the Thrift Incentive Plan (59,779
shares) and the Company's Profit Sharing Employee Stock Ownership Plan
(9,719 shares) on behalf of executive officers of the Company as a group.
Also includes 258,103 shares which may be acquired by directors and
executive officers as a group upon the exercise of outstanding stock
options which are exercisable within 60 days of February 15, 1996. Shares
subject to such stock options are deemed to be outstanding for the purpose
of computing the percentage of Common Stock beneficially owned by Directors
and executive officers of the Company as a group.
Under Section 16(a) of the Exchange Act, the Company's Directors, officers
and any persons holding more than 10% of the Common Stock are required to report
their ownership of the Common Stock and any changes in that ownership to the
Commission and the National Association of Securities Dealers, Inc. ("NASD") by
specific dates. Based on representations of its Directors and officers and
copies of the reports that they have filed with the Commission and the NASD, the
Company believes that all of these filing requirements were satisfied by the
Company's Directors and officers in 1995, with the exception of a late filing by
Director Plumb to report the purchase of 75 shares pursuant to a dividend
reinvestment plan during 1994.
10
<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS AND
TRANSACTIONS WITH MANAGEMENT
<TABLE>
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's chief
executive officer and the four other most highly-compensated executive officers
of the Company for the three years ended
December 31, 1995.
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
AWARDS
ANNUAL COMPENSATION ------------------- PAYOUTS
-------------------------------------- RESTRICTED ----------
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
EXECUTIVE OFFICER YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) SARS(#) PAYOUTS($) COMPENSATION($)
----------------- ---- --------- -------- --------------- --------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(1) (2) (3) (4) (5) (6)
William J. Ryan............... 1995 $363,136 $229,950 $5,723 $0 59,705 $ 0 $ 9,000
Chairperson, President and 1994 333,941 245,000 4,845 0 67,972 3,479 12,000
Chief Executive Officer 1993 267,396 156,000 7,585 0 24,035 3,160 25,498
John E. Menario Sr. .......... 1995 186,750 122,354 2,138 0 29,504 0 9,000
Executive Vice President and 1994 176,599 131,021 0 0 33,541 5,777 12,000
Chief Operating Officer(7) 1993 167,345 88,200 0 0 12,784 5,252 21,190
Peter J. Verrill.............. 1995 170,729 122,354 2,944 0 26,393 0 9,000
Executive Vice President and 1994 161,120 102,914 3,256 0 29,563 4,880 12,000
Chief Financial Officer(8) 1993 149,877 69,300 2,263 0 10,042 4,428 19,433
John W. Fridlington........... 1995 163,437 96,106 581 0 26,393 0 9,000
Executive Vice President -- 1994 153,927 102,914 581 0 29,563 0 12,000
Commercial Lending 1993 142,584 69,300 581 0 10,042 0 15,823
Henry G. Beyer................ 1995 135,879 96,106 0 0 26,393 0 9,000
Executive Vice President -- 1994 127,195 102,914 0 0 29,563 2,380 12,000
Retail Banking(9)
<FN>
- ---------------
(1) In addition to base salaries, amounts disclosed in this column include (i)
amounts deferred pursuant to the Company's Senior Officers' Deferred
Compensation Plan, which generally allows eligible officers to defer up to
35% of their salaries, and (ii) amounts deferred pursuant to the Company's
Thrift Incentive Plan, which generally allows employees of the Company and
participating subsidiaries to defer up to 15% of their compensation,
subject to applicable limitations in Section 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"). Executive officers are considered
for base salary adjustments each April 1.
(2) Bonuses in 1995 were earned under the Company's Annual Incentive
Compensation Program and paid in 1996.
(3) Includes the value of a Company-owned automobile for Mr. Ryan and club
memberships for Messrs. Ryan, Menario, Verrill and Fridlington, which in
each case amounts to substantially less than the lesser of either $50,000
or 10% of the total of annual salary and bonus for the respective named
executive officers.
(4) Consists of awards granted pursuant to the Company's 1986 Option Plan.
(5) Long-term incentive payments were earned in 1989 under the Company's
Long-Term Incentive Bonus Plan based on the Company's earnings per share
performance in 1989, but vested and were distributed over a five-year
period ending in 1994. Long-term incentive payments under this plan have
not been earned since 1989.
(6) Includes matching contributions by the Company pursuant to the Company's
Thrift Incentive Plan and contributions to the Company's Profit Sharing and
Employee Stock Ownership Plan.
(7) Effective February 1, 1996, Mr. Menario retired as an executive officer and
became Special Assistant to the President.
(8) Effective January 1, 1996, Mr. Verrill was elected Chief Operating Officer
of the Company and the Bank.
(9) Mr. Beyer became an executive officer of the Company in 1994.
</TABLE>
11
<PAGE> 16
<TABLE>
OPTIONS/SAR GRANTS IN 1995
The following table provides information relating to option grants pursuant
to the 1986 Option Plan during 1995 to the named executive officers.
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- RATES OF STOCK PRICE
PERCENT OF TOTAL APPRECIATION FOR
OPTIONS GRANTED OPTION TERM(6)
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION --------------------
EXECUTIVE OFFICER GRANTED(#) 1995(3) PRICE DATE 5% 10%
----------------- ---------- --------------- --------- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
William J. Ryan............ 29,705(1) 7.4% $21.00(4) October 2005 $392,403 $994,226
30,000(2) 7.5 21.00(5) December 2005 386,700 980,100
John E. Menario............ 14,504(1) 3.6 21.00(4) October 2005 191,598 485,449
15,000(2) 3.8 21.00(5) December 2005 193,350 490,050
Peter J. Verrill........... 11,393(1) 2.8 21.00(4) October 2005 150,502 381,324
15,000(2) 3.8 21.00(5) December 2005 193,350 490,050
John W. Fridlington....... 11,393(1) 2.8 21.00(4) October 2005 150,502 381,324
15,000(2) 3.8 21.00(5) December 2005 193,350 490,050
Henry G. Beyer............. 11,393(1) 2.8 21.00(4) October 2005 150,502 381,324
15,000(2) 3.8 21.00(5) December 2005 193,350 490,050
<FN>
- ---------------
(1) Options vest and become exercisable 50% per year commencing on the first
anniversary of the date of grant (October 24, 1996). None of the indicated
awards were accompanied by stock appreciation rights.
(2) Options fully vest and become exercisable on the fifth anniversary of the
date of grant (December 19, 2000). None of the indicated awards were
accompanied by stock appreciation rights.
(3) Percentage of options to purchase an aggregate of 399,139 shares of Common
Stock granted to all employees during 1995.
(4) The exercise price was based on the market price of the Common Stock on the
date of grant.
(5) The exercise price was based on the higher of the market price on the date
of the grant ($20.50) or the market price on October 24, 1995 ($21.00).
(6) Assumes future stock prices of $34.21 and $54.47 for options granted on
October 24, 1995 and $33.39 and $53.17 for options granted on December 19,
1995, at compounded rates of return of 5% and 10%, respectively. No
discount has been applied to determine a net present value of each award;
however, a 7.0% discount would yield real values of 51% of the values shown
under the 5% and 10% columns, respectively.
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN 1995 AND YEAR-END OPTION/SAR VALUES
The following table provides information relating to option/SAR exercises
in 1995 by the named executive officers and the value of such officers'
unexercised options/SARs at December 31, 1995.
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT YEAR END(#) YEAR END($)(1)
SHARES ACQUIRED VALUE -------------------------- --------------------------
EXECUTIVE OFFICER ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William J. Ryan............. 0 0 110,727 133,691 $1,687,052 $919,747
John E. Menario............. 0 0 34,554 66,275 424,373 459,405
Peter J. Verrill............ 0 0 40,569 61,175 592,154 437,313
John W. Fridlington........ 0 0 34,823 61,175 470,334 437,313
Henry G. Beyer.............. 0 0 29,823 61,175 377,234 437,313
<FN>
- ---------------
(1) Based on a per share market price of $22.75
</TABLE>
12
<PAGE> 17
<TABLE>
PENSION PLAN
The following table sets forth the estimated benefits payable under the
Company's qualified defined benefit plan for all eligible employees. This
benefit and a supplemental benefit (for those executive officers covered under a
supplemental retirement plan, as described below) provide a competitive total
pension benefit plan. Covered compensation in the following table is limited to
the $150,000 ceiling as provided under the Omnibus Budget Reconciliation Act of
1993.
<CAPTION>
CAREER AVERAGE 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
COMPENSATION OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ---------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$125,000 $25,082 $37,623 $50,165 $62,706 $75,247 $ 87,788
150,000 or more 30,457 45,686 60,915 76,143 91,372 106,601
<FN>
Notes:
(1) Benefit formula is 1.5% of career average earnings plus 0.65% of career
average earnings above covered compensation. For 1996 year of retirement
covered compensation equalled $27,580.
(2) Career average salary limited to $150,000.
(3) Maximum allowable annual benefit for 1996 is $120,000.
</TABLE>
The amounts indicated for each of the named executive officers assume level
salaries until retirement and that participants elect a straight life annuity
form of benefit. The maximum annual compensation which may be taken into account
under qualified plans will be indexed for inflation after 1994. Benefits in
excess of the maximum would be paid pursuant to the supplemental retirement
agreements which the Company has entered with its named executive officers.
Messrs. Ryan, Menario, Verrill, Fridlington and Beyer each have
supplemental retirement agreements which provide for a cumulative retirement
benefit (together with qualified plan benefits and other integrated benefits, as
set forth below) equal to 65% of their respective compensation for the highest
five consecutive of the last ten years of the executive's employment.
Compensation includes annual salary and bonuses, but excludes amounts paid
pursuant to any stock option, stock appreciation right or other long-term
compensation plans of the Company. The Company does not believe that the covered
compensation for this purpose differs substantially (by more than 10%) from that
set forth in the Summary Compensation Table set forth above. The benefits under
the supplemental retirement agreements for covered executives generally are
integrated with, and thus reduced by, (i) 50% of the officer's primary Social
Security benefit estimated at the normal retirement age of 65; (ii) the annual
amount of benefits payable to the officer at age 65 on a life annuity basis from
the qualified pension retirement plan maintained by the Company; (iii) the
annual amount of benefits payable on the same basis of that portion of the
account balances attributable to contributions by the Company to any and all
qualified defined contribution plans maintained by the Company; and (iv) the
annual amounts of benefits payable on the same basis attributable to
contributions by the Company to any other qualified or non-qualified retirement
plans or agreements maintained or entered into by the Company. Each of the
supplemental retirement agreements provides for a reduction in the benefit to be
provided if the executive does not complete 25 years of service with the Company
or its subsidiaries.
At December 31, 1995, the expected annual benefits under the supplemental
retirement agreements with Messrs. Ryan, Menario, Verrill, Fridlington and Beyer
were $181,204, $41,914, $0, $18,059 and $42,681, respectively, assuming level
future salaries and an 8% return on defined contribution investment accounts.
These figures are based on 13, 5, 19, 14 and 13 years until retirement for
Messrs. Ryan, Menario, Verrill, Fridlington and Beyer, respectively.
At December 31, 1995, Messrs. Ryan, Menario, Verrill, Fridlington and Beyer
had 6, 9, 18, 4 and 14 years of credited service under the Company's defined
benefit pension plan, respectively.
13
<PAGE> 18
SEVERANCE AND EMPLOYMENT AGREEMENTS
The Company and the Bank have entered into severance agreements with
Messrs. Ryan, Verrill, Fridlington and Beyer, pursuant to which these officers
would receive specified benefits in the event that their employment was
terminated by the Company and the Bank other than for cause, disability,
retirement or death following a change in control of the Company, as defined, or
the officers terminated their employment under such circumstances for "good
reason," as defined. The benefits payable under such circumstances generally
would amount to three times the compensation paid to Messrs. Ryan and Verrill
and two times the compensation paid to each other officer by the Company and the
Bank in effect on the date of termination of employment, including base salary
and bonuses under any employee benefit plans of the Company and the Bank, as
well as continued participation in most employee benefit plans of the Company
for the applicable three- or two-year severance period following termination of
employment. The agreements also provide that in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "excess parachute payments" within the meaning of Section
280G of the Code, and payments will cause the executive officer to incur an
excise tax under the Code, the Company shall pay the executive officer an amount
such that after payment of all federal, state and local income tax and any
additional excise tax, the executive will be fully reimbursed for the amount of
such excise tax ("gross-up provision"). Excess parachute payments generally are
payments in excess of three times the recipient's average annual compensation
from the employer includable in the recipient's gross income during the most
recent five taxable years ending before the date of a change in control of the
employer ("base amount"). Recipients of excess parachute payments are subject to
a 20% excise tax on the amount by which such payments exceed the base amount, in
addition to regular income taxes, and payments in excess of the base amount are
not deductible by the employer as compensation expense for federal income tax
purposes.
Pursuant to an Employment Agreement, dated as of June 30, 1995 (the
"Agreement"), between the Company and John E. Menario, Mr. Menario retired as an
executive officer of the Company and became Special Assistant to the President
effective February 1, 1996. The Agreement provides that Mr. Menario shall be
employed by the Company as such for 1,000 hours during any calendar year from
February 1, 1996 to January 31, 2001. During this period, Mr. Menario shall be
paid a salary at an annual rate of $90,000, which shall be reviewed annually for
increase in the sole judgment of the Chief Executive Officer of the Company and
shall be increased in all events by a percentage which is not less than the
average percentage increase in salary applicable to Executive Vice Presidents of
the Company. The Agreement also provides that Mr. Menario shall receive a
percentage of his annual salary as an annual bonus, with such percentage to be
determined by reference to the percentage of "mid-point" salaries set as the
target bonus opportunity for Executive Vice Presidents of the Company for that
year, as well as stock options at such times and pursuant to such terms as are
applicable to Executive Vice Presidents of the Company in an amount equal to one
half the average number of shares applicable to simultaneous grants to such
Executive Vice Presidents. The Agreement may be terminated by the Company with
or without cause, as defined, subject to the payment of specified benefits,
which in the case of a termination for cause consist solely of salary and
benefits earned to the date of termination of employment and any unpaid annual
bonus earned for the performance year prior to the performance year in which
employment terminates. Pursuant to the Agreement, which also contains certain
non-competition provisions, the Company and Mr. Menario also entered into a
Severance Agreement which generally provides that in the event a "change in
control of the Company," as defined, occurs on or before December 31, 2000, the
period of Mr. Menario's employment by the Company shall be deemed to commence on
the date of such change in control and end on the earlier of the last day of the
24th month following the month in which the change in control occurred or the
termination date under the Agreement (the "Employment Period"). The Severance
Agreement provides Mr. Menario with specified benefits in the event that his
employment was terminated by the Company during the Employment Period other than
for cause, disability or death (in which case benefits generally would be
determined pursuant to the Agreement) or Mr. Menario terminated his employment
during such period for "good reason," as defined. Under such circumstances, Mr.
Menario generally would be entitled to receive from the Company, in addition to
specified accrued benefits to the date of termination, a lump sum payment equal
to his "annual compensation," as defined, multiplied by the lesser of (i) 2 or
(ii) a fraction, the numerator of which is the number of months remaining
through December 31, 2000 and the denominator of which is 12. In addition, under
such
14
<PAGE> 19
circumstances, Mr. Menario's rights under any equity or long-term incentive plan
shall be fully vested to the extent such rights would have become vested had Mr.
Menario remained in the employ of the Company until December 31, 2000, Mr.
Menario's rights, if any, to supplemental pension payments shall be fully
vested, and Mr. Menario shall continue to be covered at the expense of the
Company by the same or equivalent specified employee benefit plans until the
earlier of 24 months following termination of employment, the date Mr. Menario
obtains comparable benefits through new employment and December 31, 2000. The
Severance Agreement also contains a gross-up provision which protects the
executive in the event that any excise taxes may be payable under the Code
because the specified benefits constitute "excess parachute payments."
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1993, AS AMENDED, OR THE EXCHANGE
ACT, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN
WHOLE OR IN PART, THE FOLLOWING REPORT OF THE HUMAN RESOURCES COMMITTEE AND
PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
REPORT OF THE HUMAN RESOURCES COMMITTEE
The Human Resources Committee of the Board of Directors of the Company
makes this report on executive compensation for the year ended December 31,
1995.
During 1995, the members of the Human Resources Committee were Katherine M.
Greenleaf, Chairperson, Everett W. Gray, Andrew W. Greene and Pamela P. Plumb.
One of the responsibilities of the Human Resources Committee is to
determine the compensation of the executive officers of the Company. The
components of compensation include salary, bonuses under an Annual Incentive
Compensation Program, stock options and stock appreciation rights under the
Company's 1986 Option Plan and contributions by the Company under its defined
benefit Pension Plan, Thrift Incentive Plan and Profit Sharing and Employee
Stock Ownership Plan. The bases for determining contributions to the Company's
Pension Plan, Thrift Incentive Plan and Profit Sharing and Employee Stock
Ownership Plan are the same for all participants in those plans, including
executive officers.
It is the policy of the Human Resources Committee to determine the
components of executive compensation to accomplish the following objectives:
A. To reward executives for enhancement of shareholder value as
reflected in the Company's annual earnings performance and the market price
of the Common Stock;
B. To balance awards for accomplishments of short and long-term
performance criteria;
C. To sponsor a pay-for-performance structure which awards executives
with above-market levels of compensation when the Company outperforms its
peer group, and below-market compensation when financial performance trails
its peer group;
D. To encourage ownership in the Company through annual grants of
stock options, not only to highly compensated executives of the Company,
but also to management personnel throughout the Company; and
E. To attract and retain highly-qualified executives critical to the
Company's long-term success.
The Company's compensation philosophy is to provide its executives,
including the President and Chief Executive Officer, competitive, conservative
base salaries along with performance-based annual bonus and long-term
incentives. Annual bonus and long-term incentive components provide an
appropriate balance and focus between near-term and long-term objectives of the
Company. The compensation model for executives of the Company targets total
compensation to be competitive (at least the 50th percentile) when measured
against a range of selected comparable companies, including bank holding
companies and banks in the Company's size range. Comparability is established
based on several criteria, including size, scope of business and geographical
proximity. This comparative analysis was carried out in 1995 with the assistance
of Towers Perrin, a nationally-recognized independent consulting firm. The
comparison group is broader than the regional bank holding company and bank
group described in the performance graph below, and contains some,
15
<PAGE> 20
but not all of the bank holding companies and banks in that group. Based on the
advice of its independent consultants, the Committee believes that the broader
group provides a sounder basis for comparison in setting compensation levels.
The Committee also seeks to ensure that compensation reflects annual evaluation
of corporate and individual performance. Except as otherwise described below,
the Committee adjusted salaries in 1995 based on this methodology, and with the
assistance of Towers Perrin.
Mr. Ryan's salary was increased from $350,000 to $367,500, which was
slightly above the mid-range of the selected comparison group. Mr. Ryan's
salary, after adjustment in 1994, was at the mid-point for that year, consistent
with the policy described above. The mid-point for comparable companies did not
increase in 1995. However, due to the continued excellent results achieved by
the Company in 1994, particularly as regards return on assets, the Committee
determined that a five percent increase in salary was appropriate.
The annual bonus plan provided for payouts at a specific target (40% and
35% of base salary range mid-point for the President and Chief Executive Officer
and Executive Vice President levels, respectively) upon achieving net earnings
of $29.4 million for the year, with a maximum payout of 70% and 65%,
respectively, for net earnings of at least $34.8 million, or 18.4% over
forecasted earnings. Under the plan, a threshold level of earnings of $25.4
million was required before any bonus compensation was paid. As a result of the
Company's earnings for 1995, bonuses for Messrs. Ryan, Menario, Verrill,
Fridlington and Beyer were $229,950, $122,354, $122,354, $96,106, and $96,106,
respectively.
The Committee has awarded stock option grants under the Company's 1986
Option Plan annually at market rate exercise prices since 1991. Annual awards
are made under this program under a formula which attempts to provide executives
long-term compensation equal to the target for long-term compensation in the
model. Those targets were 46% and 39% of salary range mid-points for the
President and Chief Executive Officer and the Executive Vice Presidents,
respectively. Sufficient shares are granted so that if share prices improve at a
rate of 10% annually for five years, the spread between the market price at that
time and the exercise price will be sufficient such that the present value of
the spread multiplied times the number of shares issued equals the target annual
long-term compensation amount.
During 1994, the Committee retained Frederic W. Cook & Co., Inc. ("Cook"),
a nationally-recognized consulting firm, to evaluate stock ownership by
management. Based on Cook's analysis, the Committee concluded that beneficial
ownership by the Company's management was comparable to the holdings of
managements of comparable banking institutions, but that some increase in
ownership opportunity was warranted in order to further encourage a long-term
commitment by senior management. As a result, and based on Cook's proposal, the
Committee determined in 1994 to grant to the President and Chief Executive
Officer options to acquire 30,000 shares and each of the Executive Vice
Presidents options to acquire 15,000 shares, at an exercise price equal to the
higher of the fair market value of such shares on December 20, 1994 or on
October 25, 1994. These options are generally exercisable only after five years
of continued employment following the grant. The Committee also determined to
consider further option grants to these executives, similar in amount, price and
timing, in each of the next two years, if warranted by the Company's
performance. In 1995, based on overall Company performance, the Committee
determined that an additional grant, as contemplated in the Cook proposal, was
appropriate. As a result, the Committee determined to grant to the President and
Chief Executive Officer options to acquire an additional 30,000 shares and each
of the Executive Vice Presidents options to acquire 15,000 shares, at an
exercise price equal to the higher of the fair market value of such shares on
December 19, 1995 or on October 24, 1995. In reviewing the President and Chief
Executive Officer's compensation, the Committee became concerned that his
current supplemental pension accrual was not in proportion to his pay or
seniority. This was the result of his relatively short period of service with
the Company, as well as his salary and bonus history prior to 1994. The
Committee is satisfied that the supplemental pension formula will provide an
adequate pension at the Chief Executive Officer's projected retirement date.
However, the Committee deemed it appropriate to provide a minimum pension, based
upon his current pay, with credit for additional deemed years of service. In
this way, the Chief Executive Officer has a reasonable guarantee of a
competitive pension if his employment is terminated involuntarily other than for
cause (but not if such employment is terminated voluntarily or for cause).
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<PAGE> 21
The Committee has considered changes in the Code pursuant to which
publicly-held companies will be subject to a maximum income tax deduction of $1
million with respect to annual compensation paid to any one of the Chief
Executive Officer or the other officers appearing in the Summary Compensation
Table above (with certain exceptions for "performance based" compensation). The
Committee believes that the likelihood of any impact on the Company from this
change in the tax law is remote at this time. Notwithstanding the foregoing,
however, the proposed 1986 Equity Plan has been structured in order to ensure
that compensation which is attributable to stock options and stock appreciation
rights granted pursuant thereto will be deductible, performance-based
compensation pursuant to the applicable provisions of the Code and the
regulations thereunder.
Respectfully submitted,
Katherine M. Greenleaf, Chairman
Everett W. Gray
Andrew W. Greene
Pamela P. Plumb
<TABLE>
PERFORMANCE GRAPH
The following graph compares the yearly cumulative total return on the
Common Stock over a five-year measurement period with (i) the yearly cumulative
total return on the stocks included in the Standard & Poor's 500 Stock Index and
(ii) the yearly cumulative total return on the stocks included in the Keefe
Bruyette & Woods, Inc. ("KBW") New England Bank Index. All of these cumulative
returns are computed assuming the reinvestment of dividends at the frequency
with which dividends were paid during the applicable years.
Peoples Heritage Financial (PHBK) v. The Five Year Total Return For
KBW New England Bank Index and S&P 500 Index
<CAPTION>
Measurement Period KBW New
(Fiscal Year Covered) England S&P 500 PHBK
<S> <C> <C> <C>
12/31/90 100.00 100.00 100.00
145.37 114.47 175.00
125.96 114.22 100.00
147.99 120.33 83.33
12/31/91 175.57 130.34 87.50
229.78 127.06 183.33
238.01 129.48 258.33
235.98 133.56 212.50
12/31/92 308.34 140.25 325.00
342.04 146.36 362.50
322.44 147.05 325.00
417.52 150.84 387.50
12/31/93 411.65 154.33 400.00
433.03 148.52 345.83
510.16 149.16 443.67
487.09 156.45 496.57
12/31/94 414.42 156.42 407.36
465.28 171.60 432.31
528.58 187.93 518.08
604.84 202.82 634.83
12/31/95 646.81 214.61 796.58
</TABLE>
17
<PAGE> 22
INDEBTEDNESS OF MANAGEMENT
Directors, officers and employees of the Company and its subsidiaries are
permitted to borrow from the Company's banking subsidiaries in accordance with
the requirements of federal and state law. All loans made by the Company's
banking subsidiaries to Directors and executive officers or their associates
have been made in the ordinary course of business, on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons. It is the belief of management
that at the time of origination these loans neither involved more than the
normal risk of collectibility nor presented any other unfavorable features. At
December 31, 1995, the Company's banking subsidiaries had $12.6 million of loans
outstanding to Directors and officers of the Company and its subsidiaries and
related parties of such persons.
CERTAIN TRANSACTIONS
The law firm of Marden, Dubord, Bernier & Stevens, of which Robert A.
Marden is a partner, provides legal services to the Bank from time to time in
the ordinary course of business. The law firm of Crocker, Philbrook and Crouch,
PA, of which Malcolm Philbrook is a partner, provides legal services to the Bank
from time to time in the ordinary course of business. Blue Cross/Blue Shield of
Maine, of which Andrew Greene is President, Chief Executive Officer and
Director, is one of two companies which provide health insurance to employees of
the Company and its banking subsidiaries. In addition to the foregoing, the
Bank, as successor to Oxford Bank and Trust, leases the main office of its
Oxford Division from Robert P. Bahre under a lease which provides for a current
annual base rental of $177,469.
The Company believes that the foregoing transactions are fair to and in the
best interests of the Company and its stockholders.
PROPOSAL TO AMEND THE ARTICLES
OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
(PROPOSAL TWO)
At the Annual Meeting, stockholders will be asked to consider and approve a
proposal to amend the Company's Articles of Incorporation to increase the number
of shares of authorized Common Stock from 30,000,000 to 100,000,000. Such
amendment was unanimously approved by the Board of Directors of the Company in
February 1996.
The Company's Articles of Incorporation currently authorize 35,000,000
shares of capital stock, consisting of 30,000,000 shares of Common Stock and
5,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"). The proposed amendment to the Articles of Incorporation would increase
the number of shares of authorized capital stock by 70,000,000 shares, from
35,000,000 shares to 105,000,000 shares. If the amendment is authorized, the
first two sentences of Article 4 of the Company's Articles of Incorporation
would be amended to read as follows:
"The total number of shares of capital stock which the Corporation has
authority to issue is 105,000,000, of which 5,000,000 shall be serial
preferred stock, $.01 par value per share (hereinafter the "Preferred
Stock") and 100,000,000 shall be common stock, par value $.01 per share
(hereinafter the "Common Stock"). The aggregate par value of all authorized
shares of capital stock having a par value is $1,050,000.
As of December 31, 1995, there were 16,944,158 shares of Common Stock
outstanding. As of the same date, there were an aggregate of 11,733,868 shares
of Common Stock reserved for issuance, consisting of (i) 1,930,644 shares
reserved for issuance pursuant to the Company's 1986 Option Plan, Employee Stock
Purchase Plan and 1995 Stock Option Plan for Non-Employee Directors, (ii)
8,128,330 shares of Common Stock reserved for issuance pursuant to the Agreement
and Plan of Merger, dated as of October 25, 1995 (the "Agreement"), among the
Company, First Coastal Banks, Inc. and Bank of New Hampshire Corporation
18
<PAGE> 23
("BNHC"), and (iii) 1,674,894 shares of Common Stock reserved for issuance
pursuant to the Stock Option Agreement, dated as of October 25, 1995 (the "Stock
Option Agreement"), between the Company and BNHC. It is anticipated that no
shares of Common Stock will be issued pursuant to the Stock Option Agreement,
which terminates upon the earliest to occur of several specified times,
including the effective time of the Company's acquisition of BNHC. In addition,
as described below, the Board of Directors has proposed to reserve up to an
additional 1,250,000 shares of Common Stock for issuance pursuant to the
proposed 1996 Equity Plan. Assuming that the 1996 Equity Plan is adopted, the
acquisition of BNHC is completed and no shares of Common Stock are issued
pursuant to the Stock Option Agreement, the Company will have approximately
3,180,644 shares of authorized Common Stock reserved for issuance.
The Board of Directors of the Company has determined that the number of
shares of authorized Common Stock should be increased to provide the Company
with the flexibility to conduct the Company's future operations, including the
issuance, distribution, exchange or reservation of shares of Common Stock for
stock dividends, acquisitions, financings and employee equity compensation
plans. The Board of Directors currently has no specific plans to issue
additional Common Stock, except pursuant to the Company's director and employee
equity compensation plans and in connection with the acquisition of BNHC
pursuant to the Agreement.
Under certain circumstances, authorized but unissued shares of Common Stock
and Preferred Stock can provide the Board of Directors of the Company with a
means of discouraging an unsolicited change in control of the Company. Although
the proposed amendment may allow the Board of Directors to issue additional
shares of Common Stock in the event of an unsolicited attempt to acquire control
of the Company as a means of discouraging a hostile acquiror, the Board of
Directors has no present intention of using the existing or proposed authorized
but unissued Common Stock or the existing authorized but unissued Preferred
Stock for such purpose, except to the extent that such an issuance could occur
pursuant to the Company's existing Stockholder Rights Plan. The Board of
Directors is not presently aware of any plans to acquire control of the Company.
Holders of Common Stock do not have preemptive rights to subscribe to
additional securities that may be issued by the Company, which means that
current stockholders do not have a prior right to purchase any new issue of
capital stock of the Company in order to maintain their proportionate ownership.
Stockholders who desire to maintain their interests may be able to do so through
normal market purchases, however.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVAL OF ADOPTION OF THE PROPOSAL TO
AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK.
APPROVAL OF THE 1996 EQUITY INCENTIVE PLAN
(PROPOSAL THREE)
Since 1991, the Company has emphasized the grant of stock options at market
rate exercise prices as a means of providing long-term incentive compensation
to, and encouraging a long-term commitment by, key employees. These grants have
been made pursuant to the 1986 Option Plan, which authorizes the issuance of a
total of 1,670,000 shares of Common Stock. As of December 31, 1995, the Company
had issued an aggregate of 190,038 shares of Common Stock pursuant to the 1986
Option Plan and options to purchase an additional 1,436,823 shares of Common
Stock were outstanding.
The Company believes that stock options and other stock compensation can,
in appropriate circumstances, enhance the Company's ability to meet its
long-term goals and intends to continue to utilize this means of compensation
for its and its affiliates' employees, including persons who become such
employees as a result of the Company's pending acquisition of BNHC, which does
not have a stock compensation plan. As a result, in February 1996, the Board of
Directors unanimously adopted, subject to stockholder approval at the Annual
Meeting, the Peoples Heritage Financial Group, Inc. 1996 Equity Incentive Plan.
If approved by stockholders, the 1996 Equity Plan will provide for the grant of
stock options and other stock and cash awards
19
<PAGE> 24
in order to facilitate the attraction, retention and motivation of key
employees, as well as enable such employees to participate in the long-term
growth and financial success of the Company.
MATERIAL FEATURES OF THE 1996 EQUITY PLAN
The following brief description of the material features of the 1996 Equity
Plan is qualified in its entirety by reference to the full text of the 1996
Equity Plan, which is attached to this Proxy Statement as Annex A.
The 1996 Equity Plan shall be administered by a committee designated by the
Board of Directors and composed of at least the minimum number of persons
required by Rule 16b-3, each of whom, as may be required by Rule 16b-3, is a
"disinterested person" within the meaning of this rule (the "Committee").
Currently, the Human Resources Committee of the Board of Directors serves in
this capacity. The Committee shall have, among other powers, the power to
interpret, waive, amend, establish or suspend rules and regulations of the 1996
Equity Plan in its administration of the 1996 Equity Plan.
The 1996 Equity Plan also may be administered by the Board of Directors of
the Company to the extent permitted by Rule 16b-3, as amended from time to time.
In the event of such administration by the Board of Directors, all references to
the Committee in the 1996 Equity Plan shall be deemed to refer to the Board of
Directors.
The Committee shall have sole and complete authority to grant to eligible
participants one or more equity awards, including incentive stock options and/or
nonqualified stock options, stock appreciation rights, restricted stock and
restricted stock units, performance awards and other stock-based awards, or any
combination thereof. The Committee shall have the sole discretion to determine
the number or amount of shares, units, cash or other rights or awards to be
awarded to any participant; however, subject to adjustment as provided in the
1996 Equity Plan, no participant may receive awards under the 1996 Equity Plan
in any calendar year that relate to more than 150,000 shares.
Subject to the restrictions described below, the Committee in its sole
discretion shall establish the exercise price, grant price or value of awards.
All stock options which are granted under the 1996 Equity Plan shall have a per
share exercise price which is not less than 100% of the fair market value of a
share of Common Stock on the date of grant, and all restricted stock units shall
have a value equal to the fair market value of a share of Common Stock.
Currently, the fair market value of a share of Common Stock for purposes of the
1996 Equity Plan generally shall be the closing price of a share of Common Stock
on the Nasdaq Stock Market's National Market.
Each award will be evidenced by an award agreement that will be delivered
to the participant specifying the terms and conditions of the award and any
rules applicable to such award. Upon a change in control of the Company, as
defined in, and subject to certain limitations under, the 1996 Equity Plan, all
outstanding awards will vest, become immediately exercisable or payable or have
all restrictions lifted as may apply to the type of award granted. Awards are
nontransferable; however, an award may be transferable under the 1996 Equity
Plan to the extent determined by the Committee and set forth in the applicable
award agreement if such award agreement provisions do not disqualify such award
for exemption under Rule 16b-3, if such award is not intended to qualify for
exemption under Rule 16b-3 or, with respect to awards which are incentive stock
options, if such provisions do not prevent the incentive stock options from
qualifying as such under applicable laws and regulations.
Unless sooner terminated, the 1996 Equity Plan shall remain in effect for a
period of ten years ending on the tenth anniversary of its adoption by the Board
of Directors of the Company on February 13, 1996. Termination of the 1996 Equity
Plan shall not affect any awards previously granted thereunder and such awards
shall remain valid and in effect until they have been fully exercised or earned,
are surrendered or by their terms expire or are forfeited.
ELIGIBLE PARTICIPANTS
Under the 1996 Equity Plan, any employee of the Company or the Company's
affiliates who is not a member of the Committee may be designated by the
Committee as a participant and receive awards
20
<PAGE> 25
thereunder. This currently includes the chief executive officer, who is a
director, four other executive officers and, as of the date hereof,
approximately 1,500 other employees. Non-employee directors of the Company are
not eligible to receive awards under the 1996 Equity Plan.
SHARES RESERVED UNDER THE 1996 EQUITY PLAN
The initial number of shares of Common Stock that may be issued pursuant to
the 1996 Equity Plan shall be equal to the sum of (i) 845,000 and (ii) 4.9% of
the total number of shares of Common Stock actually issued by the Company in
connection with the acquisition of BNHC pursuant to the Agreement. Assuming that
the maximum 8,128,330 shares of Common Stock are issued by the Company pursuant
to the Agreement, a total of 1,250,000 shares of Common Stock would be issuable
pursuant to the 1996 Equity Plan (845,000 plus 4.9% of 8,128,330, or 405,000).
The total number of shares of Common Stock that may be issued pursuant to
the 1996 Equity Plan is subject to adjustment by the Committee in the event of
stock dividends, stock splits, combination of shares, recapitalizations or other
changes in the outstanding Common Stock. The shares issuable under the 1996
Equity Plan may be from either authorized but previously unissued shares of
Common Stock or from reacquired shares of Common Stock, including shares
purchased by the Company on the open market and held as treasury shares.
NATURE OF AMENDMENTS ALLOWED TO THE 1996 EQUITY PLAN WITHOUT STOCKHOLDER ACTION
The Board of Directors may amend, suspend, discontinue or terminate the
1996 Equity Plan or any portion thereof at any time, provided that no such
action will be made without stockholder approval if such approval is (i)
necessary to comply with any tax or regulatory requirement with which the Board
of Directors of the Company deems it necessary or desirable to comply or (ii)
otherwise required by applicable law.
NEW PLAN BENEFITS
No benefits or amounts have been allocated under the 1996 Equity Plan; nor
are any such benefits or amounts now determinable. For comparison purposes,
reference is made to the grant of options under the 1986 Option Plan in 1995, as
set forth above under the caption "Option/SAR Grants in 1995." In addition to
the data shown in that table, in 1995, options to purchase 168,388 shares of
Common Stock were granted to all executive officers as a group and options to
purchase 230,751 shares of Common Stock were granted to all other employees as a
group. All options granted by the Company in 1995 had a per share exercise price
equal to the market value of a share of Common Stock on the date of grant.
DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a summary of the federal income tax consequences under
the Code relating to awards which may be granted under the 1996 Equity Plan.
Incentive Stock Options. No taxable income is recognized by the optionee
upon the grant or exercise of an incentive stock option that meets the
requirements of Section 422 of the Code. However, the exercise of an incentive
stock option may result in alternative minimum tax liability for the optionee.
If no disposition of shares issued to an optionee pursuant to the exercise of an
incentive stock option is made by the optionee within two years from the date of
grant or within one year after the date of exercise, then upon sale of such
shares, any amount realized in excess of the exercise price (the amount paid for
the shares) will be taxed to the optionee as a long-term capital gain and any
loss sustained will be a long-term capital loss, and no deduction will be
allowed to the Company for federal income tax purposes.
If shares of Common Stock acquired upon the exercise of an incentive stock
option are disposed of prior to the expiration of the two-year and one-year
holding periods described above (a "disqualifying disposition"), the optionee
generally will recognize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares on the date
of exercise (or, if less, the amount realized on an arm's length sale of such
shares) over the exercise price of the underlying options, and the Company will
be
21
<PAGE> 26
entitled to deduct such amount. Any gain realized from the shares in excess of
the amount taxed as ordinary income will be taxed as capital gain and will not
be deductible by the Company.
An incentive stock option will not be eligible for the tax treatment
described above if it is exercised more than three months following termination
of employment, except in certain cases where the incentive stock option is
exercised after the death or permanent and total disability of the optionee. If
an incentive stock option is exercised at a time when it no longer qualifies for
the tax treatment described above, the option is treated as a nonqualified stock
option.
Nonqualified Stock Options. No taxable income is recognized by the
optionee at the time a nonqualified stock option is granted under the 1996
Equity Plan. Generally, on the date of exercise of a nonqualified stock option,
ordinary income is recognized by the optionee in an amount equal to the
difference between the exercise price and the fair market value of the shares on
the date of exercise, and the Company receives a tax deduction for the same
amount. Upon disposition of the shares acquired, an optionee generally
recognizes the appreciation or depreciation on the shares after the date of
exercise as either short-term or long-term capital gain or loss depending on how
long the shares have been held.
If the stock received upon exercise of an option or stock appreciation
right is subject to a substantial risk of forfeiture pursuant to Section 16(b)
under the Exchange Act or otherwise, the income and the deduction, if any,
associated with such award may be deferred in accordance with the rules
described below for restricted stock.
Stock Appreciation Rights. No income will be recognized by an optionee in
connection with the grant of a stock appreciation right. When the stock
appreciation right is exercised, the optionee generally will be required to
include as taxable ordinary income in the year of such exercise an amount equal
to the amount of cash received and the fair market value of any stock received.
The Company generally will be entitled to a deduction equal to the amount
includable as ordinary income by such optionee.
Restricted Stock. A recipient of restricted stock generally will be
subject to tax at ordinary income rates on the excess of the fair market value
of the stock (measured at the time the stock is either transferable or is no
longer subject to forfeiture) over the amount, if any, paid for such stock.
However, a recipient who elects under Section 83(b) of the Code within 30 days
of the date of issuance of the restricted stock to be taxed at the time of
issuance of the restricted stock will recognize ordinary income on the date of
issuance equal to the fair market value of the shares of restricted stock at
that time (measured as if the shares were unrestricted and could be sold
immediately), minus any amount paid for such stock. If the shares subject to
such election are forfeited, the recipient will be entitled to a capital loss
for tax purposes only for the amount paid for the forfeited shares, not the
amount recognized as ordinary income as a result of the Section 83(b) election.
The holding period to determine whether the recipient has long-term or
short-term capital gain or loss upon sale of shares begins when the forfeiture
period expires (or upon issuance of the shares, if the recipient elected
immediate recognition of income under Section 83(b) of the Code).
Other Awards. The federal income tax treatment of other awards which may
be granted under the 1996 Equity Plan which are not described above will depend
on the specific terms of such awards. Generally, the Company will be required to
withhold applicable taxes with respect to any ordinary income recognized by a
participant in connection with awards made under the 1996 Equity Plan.
Parachute Payments. The acceleration of the vesting or payment of an award
under the 1996 Equity Plan in connection with a change in control of the Company
may, depending upon the individual circumstances of the participant, cause
certain amounts attributable thereto to be treated as "excess parachute
payments" as defined in the Code. "Excess parachute payments" are non-deductible
by the Company for purposes of the Code and subject the employee to a 20%
federal excise tax thereon in addition to regular income taxes.
Deduction Limit for Certain Executive Compensation. For fiscal years
commencing on or after January 1, 1994, Section 162(m) of the Code generally
limits the deduction for certain compensation in excess of $1 million per year
paid by a publicly-traded corporation to its chief executive officer and the
four other most highly compensated executive officers ("covered executives").
Certain types of compensation,
22
<PAGE> 27
including compensation based on performance goals, are excluded from the $1
million deduction limitation. In order for compensation to qualify for this
exception: (i) it must be paid solely on account of the attainment of one or
more preestablished, objective performance goals; (ii) the performance goal must
be established by a compensation committee consisting solely of two or more
outside directors, as defined; (iii) the material terms under which the
compensation is to be paid, including performance goals, must be disclosed to
and approved by stockholders in a separate vote prior to payment; and (iv) prior
to payment, the compensation committee must certify that the performance goals
and any other material terms were in fact satisfied (the "Certification
Requirement").
Final Treasury regulations issued in December 1995 provide that
compensation attributable to a stock option or stock appreciation right is
deemed to satisfy the requirement that compensation be paid solely on account of
the attainment of one or more performance goals if: (i) the grant is made by a
compensation committee consisting solely of two or more outside directors, as
defined; (ii) the plan under which the option or stock appreciation right is
granted states the maximum number of shares with respect to which options or
stock appreciation rights may be granted during a specified period to any
employee; and (iii) under the terms of the option or stock appreciation right,
the amount of compensation the employee could receive is based solely on an
increase in the value of the stock after the date of grant or award. The
Certification Requirement is not necessary if these other requirements are
satisfied.
The 1996 Equity Plan has been designed to meet the requirements of Section
162(m) of the Code and, as a result, the Company believes that compensation
attributable to stock options and stock appreciation rights granted under the
1996 Equity Plan in accordance with the foregoing requirements will be fully
deductible under Section 162(m) of the Code. If the non-excluded compensation of
a covered executive exceeded $1 million, however, compensation attributable to
other awards, such as restricted stock, may not be fully deductible unless the
grant or vesting of the award is contingent on the attainment of a performance
goal determined by a compensation committee meeting specified requirements and
disclosed to and approved by the stockholders of the Company. The Board of
Directors believes that the likelihood of any impact on the Company from the
deduction limitation contained in Section 162(m) of the Code is remote at this
time.
THE ABOVE DESCRIPTION OF TAX CONSEQUENCES IS NECESSARILY GENERAL IN NATURE
AND DOES NOT PURPORT TO BE COMPLETE. MOREOVER, STATUTORY PROVISIONS ARE SUBJECT
TO CHANGE (IN SOME CASES RETROACTIVELY), AS ARE THEIR INTERPRETATIONS, AND THEIR
APPLICATION MAY VARY IN INDIVIDUAL CIRCUMSTANCES (INCLUDING WITHOUT LIMITATION
IN THE CASE OF PERSONS WHO ARE SUBJECT TO SECTION 16 OF THE EXCHANGE ACT AND
REGULATIONS THEREUNDER.) FINALLY, THE CONSEQUENCES UNDER APPLICABLE STATE AND
LOCAL INCOME TAX LAWS MAY NOT BE THE SAME AS UNDER FEDERAL INCOME TAX LAWS.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVAL OF THE 1996 EQUITY PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL FOUR)
The Board of Directors of the Company has appointed KPMG Peat Marwick LLP,
independent certified public accountants, to perform the audit of the Company's
financial statements for the year ending December 31, 1996, and has further
directed that selection of auditors be submitted for ratification by the
stockholders at the Annual Meeting.
Representatives from KPMG Peat Marwick LLP will be present at the Annual
Meeting and will be given the opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions from
stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE
COMPANY VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS FOR 1996.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders,
which is scheduled to be held in April 1997, must be received at the principal
executive offices of the Company, One Portland Square, P.O. Box 9540, Portland,
Maine
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<PAGE> 28
04112-9540, Attention: Carol L. Mitchell, Esq., Senior Vice President, General
Counsel, Secretary and Clerk, no later than November 22, 1996. If such proposal
is in compliance with all of the requirements of Rule 14a-8 under the Exchange
Act, it will be included in the Proxy Statement and set forth on the form of
proxy issued for the next annual meeting of stockholders. It is urged that any
stockholder proposals be sent certified mail, return-receipt requested.
Stockholder proposals which are not presented to the Company for inclusion
in its proxy solicitation materials in compliance with Rule 14a-8 under the
Exchange Act must comply with the Company's Bylaws with respect to any proposal
to be presented at the Company's next annual meeting of stockholders. To be
properly brought before an annual meeting of stockholders pursuant to the
Company's Bylaws, business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors,
(b) otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder of the Company, the stockholder must have given timely notice
thereof in writing to the Clerk of the Company. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not less than 90 days prior to the anniversary date of
the immediately preceding annual meeting. Stockholder proposals for the annual
meeting of stockholders of the Company in 1997 must be received at the executive
offices of the Company by January 22, 1996. A stockholder's notice should be
sent to Carol L. Mitchell, Esq., Senior Vice President, General Counsel,
Secretary and Clerk, Peoples Heritage Financial Group, Inc., One Portland
Square, P.O. Box 9540, Portland, Maine 04112-9540, and must set forth as to each
matter the stockholder proposes to bring before an annual meeting (a) a brief
description of the business desired to be brought before the annual meeting, (b)
the name and address, as they appear on the books of the Company of the
stockholder proposing such business, (c) the class and number of shares of the
Company which are beneficially owned by the stockholder and (d) any material
interest of the stockholder in such business.
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1995 accompanies this Proxy Statement. Such report is not part of
the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
REQUIRED TO BE FILED WITH THE COMMISSION UNDER THE EXCHANGE ACT. UPON WRITTEN
REQUEST AND A PAYMENT OF A COPYING CHARGE OF TEN CENTS PER PAGE, THE COMPANY
ALSO WILL FURNISH TO ANY STOCKHOLDER A COPY OF THE EXHIBITS TO THE ANNUAL REPORT
ON FORM 10-K. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO CAROL L. MITCHELL,
ESQ., SENIOR VICE PRESIDENT, GENERAL COUNSEL, SECRETARY AND CLERK, PEOPLES
HERITAGE FINANCIAL GROUP, INC., ONE PORTLAND SQUARE, P.O. BOX 9540, PORTLAND,
MAINE 04112-9540. SUCH REPORT IS NOT PART OF THE PROXY SOLICITATION MATERIALS.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described above in this Proxy Statement. However, if
any other matters should properly come before the Annual Meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by the Company. The
Company has retained Morrow & Co., a professional proxy solicitation firm, to
assist in the solicitation of proxies. The fee arrangement with such firm is
$5,000 plus reimbursement for out-of-pocket expenses. The Company will reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending the proxy materials to the beneficial
owners of the Common Stock. In addition to solicitations by mail, Directors,
officers and employees of the Company may solicit proxies personally or by
telephone without additional compensation.
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ANNEX A
PEOPLES HERITAGE FINANCIAL GROUP, INC.
1996 EQUITY INCENTIVE PLAN
SECTION 1. Purpose. The purposes of the Peoples Heritage Financial Group,
Inc. 1996 Equity Incentive Plan are to promote the interests of Peoples Heritage
Financial Group, Inc. and its stockholders by (i) attracting and retaining
exceptional executive personnel and other key employees of the Company and its
Affiliates; (ii) motivating such employees by means of performance-related
incentives to achieve long-range performance goals; and (iii) enabling such
employees to participate in the long-term growth and financial success of the
Company.
SECTION 2. Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted Stock
Award, Performance Award or Other Stock-Based Award.
"Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall be deemed to have occurred if: (i) any "person,"
as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than
the Company and any trustee or other fiduciary holding securities under any
employee benefit plan of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities; (ii) during any period of two
consecutive years (not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the Board of
Directors, and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the stockholders
of the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company outstanding immediately
after such merger or consolidation; or (iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets. If any of the events enumerated in clauses (i) through (iv) occur, the
Board shall determine the effective date of the Change in Control resulting
therefrom for purposes of the Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean a committee of the Board designated by the Board to
administer the Plan and composed of not less than the minimum number of persons
from time to time required by Rule 16b-3, each of whom, to the extent necessary
to comply with Rule 16b-3 only, is a "disinterested person" within the meaning
of Rule 16b-3, as from time to time amended. Until otherwise determined by the
Board, the Human Resources Committee designated by the Board shall be the
Committee under the Plan.
"Company" shall mean Peoples Heritage Financial Group, Inc.
"Employee" shall mean an employee of the Company or of any Affiliate.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the fair market value of the property or
other item being valued, as determined by the Committee in its sole discretion,
provided that, unless otherwise determined by the Committee in order to satisfy
the requirements relating to Incentive Stock Options under applicable laws and
regulations, the "Fair Market Value" of a Share shall be (i) if the Shares are
listed or admitted to trading on any securities exchange or national market
system in the United States, the closing price, regular way, on such day on the
principal securities exchange or national market system in the United States on
which Shares are traded, (ii) if the Shares are not then listed or admitted to
trading on any such day, or if no sale takes place on such day, the average of
the closing bid and asked prices in the United States on such day, as reported
by a reputable quotation source designated by the Committee, and (iii) if the
Shares are not then listed or admitted to trading on any such securities
exchange or national market system and no such reported sale price or bid and
asked prices are available, the average of the reported high bid and low asked
prices in the United States on such day, as reported in The Wall Street Journal
(Eastern edition) or other newspaper designated by the Committee.
"Incentive Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to meet
the requirements of Section 422 of the Code or any successor provisions thereto.
"Net After-Tax Amount" shall mean the net amount of compensation, assuming
for this purpose only that all vested Awards and other forms of compensation
subject to vesting upon a Change of Control are exercised upon such Change in
Control, to be received (or deemed to have been received) by such Participant in
connection with such Change in Control under any option agreement and under any
other plan, arrangement or contract of the Company to which such Participant is
a party, after giving effect to all income and excise taxes applicable to such
payments.
"Nonqualified Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is not intended to
be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.
"Other Stock-Based Award" shall mean any right granted under Section 10 of
the Plan.
"Participant" shall mean any Employee selected by the Committee to receive
an Award under the Plan.
"Performance Award" shall mean any right granted under Section 9 of the
Plan.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.
"Plan" shall mean this Peoples Heritage Financial Group, Inc. 1996 Equity
Incentive Plan.
"QDRO" shall mean a domestic relations order meeting such requirements as
the Committee shall determine, in its sole discretion.
"Restricted Stock Award" shall mean any Award granted under Section 8 of
the Plan.
"Restricted Stock" shall mean any Share granted under Section 8 of the
Plan.
"Restricted Stock Unit" shall mean any unit granted under Section 8 of the
Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the staff thereof.
"Shares" shall mean shares of the common stock, $.01 par value, of the
Company, or such other securities of the Company as may be designated by the
Committee from time to time.
"Stock Appreciation Right" shall mean any right granted under Section 7 of
the Plan.
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SECTION 3. Administration.
(a) Authority of Committee. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to an
eligible Employee; (iii) determine the number of Shares to be covered by, or
with respect to which payments, rights or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent and under what circumstances Awards may be
settled or exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited or suspended; (vi) determine whether, to what
extent and under what circumstances cash, Shares, other securities, other
Awards, other property and other amounts payable with respect to an Award shall
be deferred either automatically or at the election of the holder thereof or of
the Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (ix) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan.
(b) Committee Discretion Binding. Unless otherwise expressly provided in
the Plan, all designations, determinations, interpretations and other decisions
under or with respect to the Plan or any Award shall be within the sole
discretion of the Committee, may be made at any time and shall be final,
conclusive and binding upon all Persons, including the Company, any Affiliate,
any Participant, any holder or beneficiary of any Award, any stockholder and any
Employee.
(c) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers of the Company or any Affiliate,
or to a committee of such officers, the authority, subject to such terms and
limitations as the Committee shall determine, to grant Awards to, or to cancel,
modify or waive rights with respect to, or to alter, discontinue, suspend or
terminate Awards held by, Employees who are not officers or directors of the
Company for purposes of Section 16 of the Exchange Act, or any successor section
thereto, or who are otherwise not subject to such Section.
(d) Authority of Board. Notwithstanding anything to the contrary contained
in the Plan, the Plan also may be administered by the Board to the extent
permitted by Rule 16b-3, as amended from time to time. In the event of such
administration by the Board, all references to the Committee in the Plan shall
be deemed to refer to the Board and any officer or employee-director of the
Company or any Affiliate shall be eligible to be designated a Participant.
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section 4(b),
the number of Shares with respect to which Awards may be granted under the Plan
shall be equal to the sum of (i) 845,000 and (ii) 4.9% of the total number of
Shares actually issued by the Company pursuant to an Agreement and Plan of
Merger, dated as of October 25, 1995, among the Company, First Coastal Banks,
Inc. and Bank of New Hampshire Corporation. If, after the effective date of the
Plan, any Shares covered by an Award granted under the Plan, or to which such an
Award relates, are forfeited, or if such an Award is settled for cash or
otherwise terminates or is canceled without the delivery of Shares, then the
Shares covered by such Award, or to which such Award relates, or the number of
Shares otherwise counted against the aggregate number of Shares with respect to
which Awards may be granted, to the extent of any such settlement, forfeiture,
termination or cancellation, shall again become Shares with respect to which
Awards may be granted. In the event that any Option or other Award granted
hereunder is exercised through the delivery of Shares or in the event that
withholding tax liabilities arising from such Award are satisfied by the
withholding of Shares by the Company, the number of Shares available for Awards
under the Plan shall be increased by the number of Shares so surrendered or
withheld. Notwithstanding the foregoing and subject to adjustment as provided in
Section 4(b), no Participant may receive Awards under the Plan in any calendar
year that relate to more than 150,000 Shares.
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(b) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
with respect to which Awards may be granted, (ii) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding Awards and (iii) the grant or exercise price with respect
to any Award, or, if deemed appropriate, make provision for a cash payment to
the holder of an outstanding Award; provided, in each case, that (A) with
respect to Awards of Incentive Stock Options no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code, as from time to time amended, and (B) with
respect to any Award no such adjustment shall be authorized to the extent that
such authority would be inconsistent with the Plan's meeting the requirements of
Section 162(m) of the Code, as from time to time amended, or Rule 16b-3, as from
time to time amended.
(c) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
SECTION 5. Eligibility. Any Employee, including any officer or
employee-director of the Company or any Affiliate, who is not a member of the
Committee, shall be eligible to be designated a Participant.
SECTION 6. Stock Options.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Employees to whom Options shall be
granted, the number of Shares to be covered by each Option, the option price
therefor and the conditions and limitations applicable to the exercise of the
Option. The Committee shall have the authority to grant Incentive Stock Options,
or to grant Nonqualified Stock Options, or to grant both types of options. In
the case of Incentive Stock Options, the terms and conditions of such grants
shall be subject to and comply with such rules as may be prescribed by Section
422 of the Code, as from time to time amended, and any regulations implementing
such statute.
(b) Exercise Price. The Committee in its sole discretion shall establish
the exercise price at the time each Option is granted, provided that the per
share price at which Shares may be purchased upon exercise of an Option shall be
no less than one hundred percent (100%) of the Fair Market Value of a Share at
the time such Option is granted.
(c) Exercise. Each Option shall be exercisable at such times and subject
to such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award Agreement or thereafter. The Committee may
impose such conditions with respect to the exercise of Options, including
without limitation any conditions relating to the application of federal or
state securities laws, as it may deem necessary or advisable.
(d) Payment. No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the option price therefor is received by the
Company. Such payment may be made in cash, or its equivalent, or, if and to the
extent permitted by the Committee, by exchanging Shares owned by the optionee
(which are not the subject of any pledge or other security interest), or by a
combination of the foregoing, provided that the combined value of all cash and
cash equivalents and the Fair Market Value of any such Shares so tendered to the
Company as of the date of such tender is at least equal to such option price.
SECTION 7. Stock Appreciation Rights.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Employees to whom Stock
Appreciation Rights shall be granted, the number of Shares to be covered by each
Stock Appreciation Right, the grant price thereof and the conditions and
limitations
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applicable to the exercise thereof. Stock Appreciation Rights may be granted in
tandem with another Award, in addition to another Award, or freestanding and
unrelated to another Award. Stock Appreciation Rights granted in tandem with or
in addition to an Award may be granted either at the same time as the Award or
at a later time. Stock Appreciation Rights shall have a grant price as
determined by the Committee on the date of grant.
(b) Exercise and Payment. A Stock Appreciation Right shall entitle the
Participant to receive an amount equal to the excess of the Fair Market Value of
a Share on the date of exercise of the Stock Appreciation Right over the grant
price thereof, provided that the Committee may for administrative convenience
determine that, with respect to any Stock Appreciation Right that is not related
to an Incentive Stock Option and that can only be exercised for cash during
limited periods of time in order to satisfy the conditions of Rule 16b-3, the
exercise of such Stock Appreciation Right for cash during such limited period
shall be deemed to occur for all purposes hereunder on the day during such
limited period on which the Fair Market Value of the Shares is the highest. Any
such determination by the Committee may be changed by the Committee from time to
time and may govern the exercise of Stock Appreciation Rights granted prior to
such determination as well as Stock Appreciation Rights granted thereafter. The
Committee shall determine whether a Stock Appreciation Right shall be settled in
cash, Shares or a combination of cash and Shares.
(c) Other Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine, at or after the grant
of a Stock Appreciation Right, the term, methods of exercise, methods and form
of settlement and any other terms and conditions of any Stock Appreciation
Right. Any such determination by the Committee may be changed by the Committee
from time to time and may govern the exercise of Stock Appreciation Rights
granted prior to such determination as well as Stock Appreciation Rights granted
thereafter. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it shall deem appropriate.
SECTION 8. Restricted Stock and Restricted Stock Units.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Employees to whom Shares of
Restricted Stock and Restricted Stock Units shall be granted, the number of
Shares of Restricted Stock and/or the number of Restricted Stock Units to be
granted to each Participant, the duration of the period during which, and the
conditions under which, the Restricted Stock and Restricted Stock Units may be
forfeited to the Company and the other terms and conditions of such Awards.
(b) Transfer Restrictions. Shares of Restricted Stock and Restricted Stock
Units may not be sold, assigned, transferred, pledged or otherwise encumbered,
except, in the case of Restricted Stock, as provided in the Plan or the
applicable Award Agreements. Certificates issued in respect of Shares of
Restricted Stock shall be registered in the name of the Participant and
deposited by such Participant, together with a stock power endorsed in blank,
with the Company. Upon the lapse of the restrictions applicable to such Shares
of Restricted Stock, the Company shall deliver such certificates to the
Participant or the Participant's legal representative.
(c) Payment. Each Restricted Stock Unit shall have a value equal to the
Fair Market Value of a Share. Restricted Stock Units shall be paid in cash,
Shares, other securities or other property, as determined in the sole discretion
of the Committee, upon the lapse of the restrictions applicable thereto, or
otherwise in accordance with the applicable Award Agreement.
(d) Dividends and Distributions. Dividends and other distributions paid on
or in respect of any Shares of Restricted Stock may be paid directly to the
Participant, or may be reinvested in additional Shares of Restricted Stock or in
additional Restricted Stock Units, as determined by the Committee in its sole
discretion.
(e) Voting of Restricted Stock. Unless otherwise determined by the
Committee at the time of grant, an Employee to whom Shares of Restricted Stock
shall be granted shall be entitled to vote such Shares.
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SECTION 9. Performance Awards.
(a) Grant. The Committee shall have sole and complete authority to
determine the Employees who shall receive a Performance Award, which shall
consist of a right that is (i) denominated in cash or Shares, (ii) valued, as
determined by the Committee, in accordance with the achievement of such
performance goals during such performance periods as the Committee shall
establish and (iii) payable at such time and in such form as the Committee shall
determine.
(b) Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the performance goals
to be achieved during any performance period, the length of any performance
period, the amount of any Performance Award and the amount and kind of any
payment or transfer to be made pursuant to any Performance Award.
(c) Payment of Performance Awards. Performance Awards may be paid in a
lump sum or in installments following the close of the performance period or, in
accordance with procedures established by the Committee, on a deferred basis.
SECTION 10. Other Stock-Based Awards. The Committee shall have authority
to grant to eligible Employees an Other Stock-Based Award, which shall consist
of any right that is (i) not an Award described in Sections 6 through 9 above
and (ii) an Award of Shares or an Award denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as deemed
by the Committee to be consistent with the purposes of the Plan; provided that
any such rights must comply, to the extent deemed desirable by the Committee,
with Rule 16b-3 and applicable law. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the terms and
conditions of any such Other Stock-Based Award.
SECTION 11. Termination or Suspension of Employment. The following
provisions shall apply in the event of the Participant's termination of
employment unless the Committee shall have provided otherwise, either at the
time of the grant of the Award or thereafter.
(a) Nonqualified Stock Options and Stock Appreciation Rights.
(i) Termination of Employment. If the Participant's employment with
the Company or its Affiliates is terminated for any reason other than
death, permanent and total disability or retirement, the Participant's
right to exercise any Nonqualified Stock Option or Stock Appreciation Right
shall terminate, and such Option or Stock Appreciation Right shall expire,
on the earlier of (A) the first anniversary of such termination of
employment or (B) the date such Option or Stock Appreciation Right would
have expired had it not been for the termination of employment. The
Participant shall have the right to exercise such Option or Stock
Appreciation Right prior to such expiration to the extent it was
exercisable at the date of such termination of employment and shall not
have been exercised.
(ii) Death, Disability or Retirement. If the Participant's employment
with the Company or its Affiliates is terminated by death, permanent and
total disability or retirement, the Participant or his successor (if
employment is terminated by death) shall have the right to exercise any
Nonqualified Stock Option or Stock Appreciation Right to the extent it was
exercisable at the date of such termination of employment and shall not
have been exercised, but in no event shall such Option or Stock
Appreciation Right be exercisable later than the date the Option or Stock
Appreciation Right would have expired had it not been for the termination
of such employment. The meaning of the terms "permanent and total
disability" and "retirement" shall be determined by the Committee.
(iii) Acceleration and Extension of Exercisability. Notwithstanding
the foregoing, the Committee may, in its discretion, provide (A) that an
Option granted to a Participant may terminate at a date earlier than that
set forth above, including without limitation the date of termination of
employment, (B) that an Option granted to a Participant may terminate at a
date later than that set forth above, provided such date shall not be
beyond the date the Option would have expired had it not been for the
termination of the Participant's employment, and (C) that an Option or
Stock Appreciation Right may become immediately exercisable when it finds
that such acceleration would be in the best interests of the Company.
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(b) Incentive Stock Options. Except as otherwise determined by the
Committee at the time of grant, if the Participant's employment with the Company
is terminated for any reason, the Participant shall have the right to exercise
any Incentive Stock Option and any related Stock Appreciation Right during the
90 days after such termination of employment to the extent it was exercisable at
the date of such termination, but in no event later than the date the option
would have expired had it not been for the termination of such employment. If
the Participant does not exercise such Option or related Stock Appreciation
right to the full extent permitted by the preceding sentence, the remaining
exercisable portion of such Option automatically will be deemed a Nonqualified
Stock Option, and such Option and any related Stock Appreciation Right will be
exercisable during the period set forth in Section 11(a) of the Plan, provided
that in the event that employment is terminated because of death or the
Participant dies during such 90-day period, the option will continue to be an
Incentive Stock Option to the extent provided by Section 421 or Section 422 of
the Code, or any successor provisions, and any regulations promulgated
thereunder.
(c) Restricted Stock. Except as otherwise determined by the Committee at
the time of grant, upon termination of employment for any reason during the
restriction period, all shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant and reacquired by the Company at the price
(if any) paid by the Participant for such Restricted Stock, provided that in the
event of a Participant's retirement, permanent and total disability or death, or
in cases of special circumstances, the Committee may, in its sole discretion,
when it finds that a waiver would be in the best interests of the Company, waive
in whole or in part any or all remaining restrictions with respect to such
participant's shares of Restricted Stock.
SECTION 12. Change in Control. Notwithstanding any other provision of the
Plan to the contrary, upon a Change in Control all outstanding Awards shall
vest, become immediately exercisable or payable or have all restrictions lifted
as may apply to the type of Award; provided, however, that unless otherwise
determined by the Committee at the time of grant or thereafter, if it is
determined that the Net After-Tax Amount to be realized by any Participant,
taking into account the accelerated vesting provided for by this Section as well
as all other payments to be received by such Participant in connection with such
Change in Control, would be higher if Awards did not vest in accordance with
this Section, then and to such extent the Awards of such Participant shall not
vest. The determination of whether any such Award should not vest shall be made
by a nationally-recognized accounting firm selected by the Company, which shall
be instructed to consider that (i) Awards and other forms of compensation
subject to vesting upon a Change of Control shall be vested in the order in
which they were granted and within each grant in the order in which they would
otherwise have vested and (ii) unless and to the extent any other plan,
arrangement or contract of the Company pursuant to which any such payment is to
be received provides to the contrary, such other payment shall be deemed to have
occurred after any acceleration of Awards or other forms of compensation subject
to vesting upon a Change in Control.
SECTION 13. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without stockholder approval if such approval is (i) necessary to
comply with any tax or regulatory requirement, including for these purposes any
approval requirement that is a prerequisite for exemptive relief from Section
16(b) of the Exchange Act, for which or with which the Board deems it necessary
or desirable to qualify or comply or (ii) otherwise required by applicable law.
(b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate,
any Award theretofore granted, prospectively or retroactively; provided that any
such waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would adversely affect the rights of any Participant or any
holder or beneficiary of any Award theretofore granted shall not to that extent
be effective without the consent of the affected Participant, holder or
beneficiary.
(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual or nonrecurring events (including, without limitation, the events
A-7
<PAGE> 36
described in Section 4(b) hereof) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan; provided that no such adjustment shall be authorized to the
extent that such authority would be inconsistent with the Plan's meeting the
requirements of Section 162(m) of the Code, as from time to time amended, or
Rule 16b-3, as from time to time amended.
SECTION 14. General Provisions.
(a) Dividend Equivalents. In the sole and complete discretion of the
Committee, an Award, whether made as an Other Stock-Based Award under Section 10
or as an Award granted pursuant to Sections 6 through 9 hereof, may provide the
Participant with dividends or dividend equivalents, payable in cash, Shares,
other securities or other property on a current or deferred basis.
(b) Nontransferability. No Award shall be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant, except
by will or the laws of descent and distribution or pursuant to a QDRO, provided,
however, that an Award may be transferable, to the extent determined by the
Committee and set forth in the applicable Award Agreement, (i) if such Award
Agreement provisions do not disqualify such Award for exemption under Rule
16b-3, as from time to time amended, (ii) if such Award is not intended to
qualify for exemption under such rule or (iii) with respect to Awards which are
Incentive Stock Options, if such Award Agreement provisions do not prevent the
Incentive Stock Options from qualifying as such under Section 422 of the Code,
as from time to time amended.
(c) No Rights to Awards. No Employee, Participant or other Person shall
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with respect
to each recipient.
(d) Share Certificates. All certificates for Shares or other securities of
the Company of any Affiliate delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations and other requirements of the SEC, any stock exchange or national
market quotation system upon which such Shares or other securities are then
listed or quoted, respectively, and any applicable Federal or state laws, and
the Committee may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
(e) Withholding. A participant may be required to pay to the Company or
any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Award, from any payment due or transfer
made under any Award or under the Plan or from any compensation or other amount
owing to a Participant the amount (in cash, Shares, other securities, other
Awards or other property) of any applicable withholding taxes in respect of any
Award, its exercise or any payment or transfer under an Award or under the Plan
and to take such other action as may be necessary in the opinion of the Company
to satisfy all obligations for the payment of such taxes. The Committee may
provide for additional cash payments to holders of Awards to defray or offset
any tax arising from the grant, vesting, exercise or payments of any Award.
(f) Award Agreements. Each Award hereunder shall be evidenced by an Award
Agreement that shall be delivered to the Participant and shall specify the terms
and conditions of the Award and any rules applicable thereto.
(g) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other compensation arrangements, which may, but need not, provide for the
grant of options, restricted stock, Shares and other types of Awards provided
for hereunder (subject to stockholder approval if such approval is required),
and such arrangements may be either generally applicable or applicable only in
specific cases.
A-8
<PAGE> 37
(h) No Right to Employment. Neither the Plan nor the grant of any Awards
hereunder nor any action taken by the Committee or the Board in connection with
the Plan shall create any right on the part of any Employee to continue in the
employ of the Company or any Affiliate.
(i) No Rights as Stockholder. Subject to the provisions of the applicable
Award and the Plan, no Participant or holder or beneficiary of any Award shall
have any rights as a stockholder with respect to any Shares to be distributed
under the Plan until he or she has become the holder of such Shares.
(j) Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Maine.
(k) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
(l) Other Laws. The Committee may refuse to issue or transfer any Shares
or other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws and any other laws to which such offer, if made, would
be subject.
(m) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(n) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities or other property shall be paid or transferred in
lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated or otherwise eliminated.
(o) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
(p) Successors and Assigns. The Plan and any Award Agreement shall be
binding upon the successors and assigns of the Company and upon each Participant
and such Participant's heirs, executors, administrators, personal
representatives, permitted assignees and successors in interest.
A-9
<PAGE> 38
SECTION 15. Effective Date; Term of the Plan.
(a) Effective Date. The Plan shall be effective as of February 13, 1996,
subject to approval by the stockholders of the Company within one year
thereafter.
(b) Term of the Plan. Unless sooner terminated, the Plan shall remain in
effect for a period of ten years ending on the tenth anniversary of the
Effective Date. Termination of the Plan shall not affect any Awards previously
granted and such Awards shall remain valid and in effect until they have been
fully exercised or earned, are surrendered or by their terms expire or are
forfeited.
A-10
<PAGE> 39
PEOPLES HERITAGE FINANCIAL GROUP, INC.
REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of Common Stock of Peoples Heritage
Financial Group, Inc. (the "Company"), hereby appoints each of Roger B. Percival
and O. William Robertson as Proxies, with the full power of substitution, to
represent and to vote as designated on the reverse of this card all of the
shares of Common Stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Stockholders to be held at the Portland Marriott Hotel,
200 Sable Oaks Drive, South Portland, Maine 04106, on Tuesday, April 23, 1996,
at 10:30 a.m., local time, or any adjournment thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
SHARES OF COMMON STOCK OF THE COMPANY WILL BE VOTED AS SPECIFIED.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
BOARD OF DIRECTORS' NOMINEES TO THE BOARD OF DIRECTORS, FOR THE PROPOSAL TO
AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK, FOR THE PROPOSAL TO ADOPT A 1996 EQUITY INCENTIVE PLAN FOR KEY
EMPLOYEES OF THE COMPANY AND FOR THE RATIFICATION OF KPMG PEAT MARWICK LLP AS
THE COMPANY'S INDEPENDENT AUDITORS FOR 1996. IF ANY OTHER MATTER IS PROPERLY
PRESENTED AT THE ANNUAL MEETING OF STOCKHOLDERS, THE PROXY WILL BE VOTED IN
ACCORDANCE WITH THE JUDGMENT OF THE PERSONS APPOINTED AS PROXIES.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE.
<PAGE> 40
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
----------------
I plan to attend
the meeting
/ /
----------------
1. Election of Directors for Three-Year Terms:
Nominees for Three-Year Term Expiring in 1999:
Everett W. Gray
William J. Ryan
Curtis M. Scribner
FOR all listed nominees (except WITHHOLD
as marked to the contrary herein) AUTHORITY
to vote for
all listed nominees
/ / / /
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominees's name in the line provided below.
- --------------------------------------------------------------------------------
2. To amend the Articles of Incorporation to increase the number of authorized
shares of Common Stock from 30,000,000 to 100,000,000.
FOR AGAINST ABSTAIN
/ / / / / /
3. To adopt a 1996 Equity Incentive Plan for key employees of the Company.
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE> 41
4. Ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the year ending December 31, 1996.
FOR AGAINST ABSTAIN
/ / / / / /
5. In their discretion, upon any other matter that may properly come before
the Annual Meeting of Stockholders or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES FOR DIRECTOR AND FOR THE OTHER PROPOSALS. SUCH VOTES ARE HEREBY
SOLICITED BY THE BOARD OF DIRECTORS.
Dated: , 1996
---------------------------------------------
Signature
------------------------------------------
Signature
------------------------------------------
(print name)
IMPORTANT: Please sign your name exactly as it appears
hereon. When shares are held as joint tenants, either may
sign. When signing as an attorney, executor, administrator,
trustee or guardian, add such title to your signature.
NOTE: If you receive more than one proxy card, please date
and sign each card and return all proxy cards in the
enclosed envelope.
<PAGE> 42
March 22, 1996
To: Participants in the Thrift Incentive Plan and
Profit Sharing Employee Stock Ownership Plan
of Peoples Heritage Financial Group, Inc.
As described in the enclosed materials, your proxy as a stockholder of
the Company is being solicited in connection with the proposals to be considered
at the Company's Annual Meeting of Stockholders. I hope you will take advantage
of the opportunity to direct, on a confidential basis, the manner in which
shares of Common Stock of the Company allocated to your accounts under the
Company's Thrift Incentive Plan and Profit Sharing Employee Stock Ownership Plan
(together the "Plans") will be voted.
Enclosed with this letter is the Proxy Statement, which describes the
matters to be voted upon, a voting instruction ballot for each of the Plans,
which will permit you to vote the shares allocated to your accounts under the
Plans, and a stamped, pre-addressed return envelope. After you have reviewed the
Proxy Statement, I urge you to vote your shares in the Plans by marking, dating,
signing and returning the enclosed voting instruction ballots to the internal
audit department of Peoples Heritage Bank. Your voting instructions will remain
completely confidential. Only the Company's internal auditor, who will tabulate
the voting instructions, will have access to your ballots. The Company's
internal auditor will certify the totals for the Plans to Peoples Heritage Bank,
which acts as Trustee for the Plans, for the purpose of having those shares
voted as directed. No other person associated with the Company or Peoples
Heritage Bank will see the individual voting instructions.
I urge each of you to vote, as a means of participating in the
governance of the affairs of the Company. If your voting instructions are not
received, the shares allocated to your accounts will be voted in the same
proportion as the shares under the respective Plans have voted. While I hope
that you will vote in the manner recommended by the Board of Directors, the most
important thing is that you vote in whatever manner you deem appropriate. Please
take a moment to do so.
Sincerely yours,
William J. Ryan
Chairman, President and
Chief Executive Officer
<PAGE> 43
PEOPLES HERITAGE FINANCIAL GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1996
THIS BALLOT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, as a holder of Common Stock of Peoples Heritage
Financial Group, Inc. (the "Company"), pursuant to the Company's Profit Sharing
Employee Stock Ownership Plan (the "ESOP") hereby instructs Peoples Heritage
Bank, as Trustee for the ESOP, to vote as designated on the reverse of this card
all of the shares of Common Stock of the Company which the undersigned holds
pursuant to the ESOP at the Annual Meeting of Stockholders to be held at the
Portland Marriott Hotel, 200 Sable Oaks Drive, South Portland, Maine 04106, on
Tuesday, April 23, 1996, at 10:30 a.m., local time, or any adjournment thereof.
SHARES OF COMMON STOCK OF THE COMPANY WILL BE VOTED AS SPECIFIED. IF
YOU RETURN THIS BALLOT PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, SHARES WILL
BE VOTED FOR EACH OF THE NOMINEES FOR DIRECTOR AND FOR THE OTHER PROPOSALS SET
FORTH ON THE REVERSE SIDE. IF YOU DO NOT RETURN THIS BALLOT, SHARES WILL BE
VOTED IN THE SAME PROPORTION AS THE SHARES UNDER THE ESOP HAVE VOTED.
IMPORTANT: PLEASE DATE AND SIGN THE BALLOT ON REVERSE SIDE.
<PAGE> 44
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
----------------
I plan to attend
the meeting
/ /
----------------
1. Election of Directors for Three-Year Terms:
Nominees for Three-Year Term Expiring in 1999:
Everett W. Gray
William J. Ryan
Curtis M. Scribner
FOR all listed nominees (except WITHHOLD
as marked to the contrary herein) AUTHORITY
to vote for
all listed nominees
/ / / /
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominees's name in the line provided below.
- --------------------------------------------------------------------------------
2. To amend the Articles of Incorporation to increase the number of authorized
shares of Common Stock from 30,000,000 to 100,000,000.
FOR AGAINST ABSTAIN
/ / / / / /
3. To adopt a 1996 Equity Incentive Plan for key employees of the Company.
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE> 45
4. Ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the year ending December 31, 1996.
FOR AGAINST ABSTAIN
/ / / / / /
5. In their discretion, upon any other matter that may properly come before
the Annual Meeting of Stockholders or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES FOR DIRECTOR AND FOR THE OTHER PROPOSALS. SUCH VOTES ARE HEREBY
SOLICITED BY THE BOARD OF DIRECTORS.
Dated: , 1996
---------------------------------------------
Signature
------------------------------------------
Signature
------------------------------------------
(print name)
IMPORTANT: Please sign your name exactly as it appears
hereon. When shares are held as joint tenants, either may
sign. When signing as an attorney, executor, administrator,
trustee or guardian, add such title to your signature.
NOTE: If you receive more than one proxy card, please date
and sign each card and return all proxy cards in the
enclosed envelope.
<PAGE> 46
PEOPLES HERITAGE FINANCIAL GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1996
THIS BALLOT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, as a holder of Common Stock of Peoples Heritage
Financial Group, Inc. (the "Company"), pursuant to the Company's Thrift
Incentive Plan (the "Plan") hereby instructs Peoples Heritage Bank, as Trustee
for the Plan, to vote as designated on the reverse of this card all of the
shares of Common Stock of the Company which the undersigned holds pursuant to
the Plan at the Annual Meeting of Stockholders to be held at the Portland
Marriott Hotel, 200 Sable Oaks Drive, South Portland, Maine 04106, on Tuesday,
April 23, 1996, at 10:30 a.m., local time, or any adjournment thereof.
SHARES OF COMMON STOCK OF THE COMPANY WILL BE VOTED AS SPECIFIED. IF
YOU RETURN THIS BALLOT PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, SHARES WILL
BE VOTED FOR EACH OF THE NOMINEES FOR DIRECTOR AND FOR THE OTHER PROPOSALS SET
FORTH ON THE REVERSE SIDE. IF YOU DO NOT RETURN THIS BALLOT, SHARES WILL BE
VOTED IN THE SAME PROPORTION AS THE SHARES UNDER THE PLAN HAVE VOTED.
IMPORTANT: PLEASE DATE AND SIGN THE BALLOT ON REVERSE SIDE.
<PAGE> 47
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
----------------
I plan to attend
the meeting
/ /
----------------
1. Election of Directors for Three-Year Terms:
Nominees for Three-Year Term Expiring in 1999:
Everett W. Gray
William J. Ryan
Curtis M. Scribner
FOR all listed nominees (except WITHHOLD
as marked to the contrary herein) AUTHORITY
to vote for
all listed nominees
/ / / /
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominees's name in the line provided below.
- --------------------------------------------------------------------------------
2. To amend the Articles of Incorporation to increase the number of authorized
shares of Common Stock from 30,000,000 to 100,000,000.
FOR AGAINST ABSTAIN
/ / / / / /
3. To adopt a 1996 Equity Incentive Plan for key employees of the Company.
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE> 48
4. Ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the year ending December 31, 1996.
FOR AGAINST ABSTAIN
/ / / / / /
5. In their discretion, upon any other matter that may properly come before
the Annual Meeting of Stockholders or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES FOR DIRECTOR AND FOR THE OTHER PROPOSALS. SUCH VOTES ARE HEREBY
SOLICITED BY THE BOARD OF DIRECTORS.
Dated: , 1996
---------------------------------------------
Signature
------------------------------------------
Signature
------------------------------------------
(print name)
IMPORTANT: Please sign your name exactly as it appears
hereon. When shares are held as joint tenants, either may
sign. When signing as an attorney, executor, administrator,
trustee or guardian, add such title to your signature.
NOTE: If you receive more than one proxy card, please date
and sign each card and return all proxy cards in the
enclosed envelope.
