<PAGE> 1
Filed pursuant to Rule 424 (b)(3)
Registration No. 333-07507
PEOPLES HERITAGE FINANCIAL GROUP, INC.
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207) 761-8500
July 19, 1996
Dear Shareholder,
You are cordially invited to attend a Special Meeting of Shareholders of
Peoples Heritage Financial Group, Inc. ("PHFG") at 9:00 a.m., Eastern Time, on
August 22, 1996 at the Portland Marriott Hotel, 200 Sable Oaks Drive, South
Portland, Maine (the "Special Meeting"). This is a very important meeting
regarding your investment in PHFG.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated as of May 30, 1996
(the "Agreement"), by and among PHFG, Peoples Heritage Merger Corp. ("PHMC"), a
newly-formed, wholly-owned subsidiary of PHFG, and Family Bancorp ("Family"), a
Massachusetts corporation, pursuant to which, among other things, Family will be
merged with PHMC (the "Merger"). If the Agreement is approved and the Merger is
consummated, each outstanding share of Family Common Stock will be converted
into the right to receive 1.26 shares of PHFG Common Stock, subject to possible
adjustment under certain circumstances, plus cash in lieu of any fractional
share interest.
Your Board of Directors has determined the Merger to be fair to and in the
best interests of PHFG and its shareholders and has unanimously approved the
Agreement and the transactions contemplated thereby, including the Merger. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE AGREEMENT.
Enclosed are a Notice of Special Meeting of Shareholders and a
Prospectus/Joint Proxy Statement which describes the Merger, its effects and the
background of the transaction. A copy of the Agreement is included as Annex I to
the enclosed Prospectus/Joint Proxy Statement. You are urged to read these
materials carefully.
It is very important that your shares be represented at the Special
Meeting. Even if you plan to be present at the Special Meeting, you are
requested to complete, date, sign, and return the proxy card in the enclosed
postage-paid envelope as soon as possible. If you decide to attend the Special
Meeting, you may vote your shares in person whether or not you have previously
submitted a proxy.
On behalf of the Board, I thank you for your attention to this important
matter.
Very truly yours,
By: /s/ WILLIAM J. RYAN
--------------------
WILLIAM J. RYAN
Chairman, President and
Chief Executive Officer
<PAGE> 2
PEOPLES HERITAGE FINANCIAL GROUP, INC.
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207) 761-8500
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 22, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Peoples Heritage Financial Group, Inc. ("PHFG") will be held at
9:00 a.m., Eastern Time, on August 22, 1996 at the Portland Marriott Hotel, 200
Sable Oaks Drive, South Portland, Maine for the following purpose:
To consider and vote upon a proposal to approve an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Agreement"), by and among PHFG,
Peoples Heritage Merger Corp. ("PHMC"), a newly-formed, wholly-owned
subsidiary of PHFG, and Family Bancorp ("Family"), which provides, among
other things, for (i) the merger of Family with PHMC (the "Merger") and
(ii) the conversion of each share of common stock of Family outstanding
immediately prior to the Merger (other than any dissenting shares under
Massachusetts law and certain shares held by PHFG) into the right to
receive 1.26 shares of PHFG common stock, subject to possible adjustment
under certain circumstances, plus cash in lieu of any fractional share
interest.
Pursuant to the Bylaws of PHFG, the Board of Directors has fixed the close
of business on July 19, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting. Only
holders of common stock of PHFG of record at the close of business on that date
will be entitled to notice of and to vote at the Special Meeting or any
adjournment or adjournments thereof.
THE BOARD OF DIRECTORS OF PHFG HAS DETERMINED THE MERGER TO BE FAIR TO AND
IN THE BEST INTERESTS OF PHFG AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
By Order of the Board of Directors
By: /s/ WILLIAM J. RYAN
-------------------
WILLIAM J. RYAN
Chairman, President and
Chief Executive Officer
Portland, Maine
July 19, 1996
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YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. EVEN IF YOU PLAN TO BE
PRESENT AT THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
IF YOU ATTEND THE SPECIAL 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> 3
FAMILY BANCORP
153 MERRIMACK STREET
HAVERHILL, MASSACHUSETTS 01830
(508) 374-1911
July 19, 1996
Dear Shareholder,
You are cordially invited to attend a Special Meeting of Shareholders of
Family Bancorp ("Family") at 9:00 a.m., Eastern Time, on August 22, 1996 at
DiBurro's, 887 Boston Road, Haverhill, Massachusetts (the "Special Meeting").
This is a very important meeting regarding your investment in Family.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated as of May 30, 1996
(the "Agreement"), by and among Peoples Heritage Financial Group, Inc. ("PHFG"),
a Maine corporation, Peoples Heritage Merger Corp. ("PHMC"), a Maine corporation
and a newly-formed, wholly-owned subsidiary of PHFG, and Family, pursuant to
which, among other things, Family will be merged with PHMC (the "Merger"). If
the Agreement is approved and the Merger is consummated, each outstanding share
of Family Common Stock will be converted into the right to receive 1.26 shares
of PHFG Common Stock, subject to possible adjustment under certain
circumstances, plus cash in lieu of any fractional share interest. Following the
Merger, Family Bank, FSB will be a wholly-owned subsidiary of PHFG.
Your Board of Directors has determined the Merger to be fair to and in the
best interests of Family and its shareholders and has unanimously approved the
Agreement and the transactions contemplated thereby, including the Merger. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE AGREEMENT.
Enclosed are a Notice of Special Meeting of Shareholders and a
Prospectus/Joint Proxy Statement which describes the Merger, its effects and the
background of the transaction. A copy of the Agreement is included as Annex I to
the enclosed Prospectus/Joint Proxy Statement. You are urged to read these
materials carefully.
It is very important that your shares be represented at the Special
Meeting. BECAUSE THE MERGER REQUIRES THE APPROVAL OF THE HOLDERS OF TWO THIRDS
OF THE OUTSTANDING FAMILY COMMON STOCK, FAILURE TO RETURN A PROPERLY EXECUTED
PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE AGREEMENT. Accordingly, even if you plan to be present at the
Special Meeting, you are requested to complete, date, sign, and return the proxy
card in the enclosed postage-paid envelope as soon as possible. If you decide to
attend the Special Meeting, you may vote your shares in person whether or not
you have previously submitted a proxy.
On behalf of the Board, I thank you for your attention to this important
matter.
Very truly yours,
By: /s/ DAVID D. HINDLE
---------------------------------
DAVID D. HINDLE
President and Chief Executive Officer
<PAGE> 4
FAMILY BANCORP
153 MERRIMACK STREET
HAVERHILL, MASSACHUSETTS 01830
(508) 374-1911
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 22, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Family Bancorp ("Family") will be held at 9:00 a.m., Eastern Time,
on August 22, 1996 at DiBurro's, 887 Boston Road, Haverhill, Massachusetts for
the following purpose:
To consider and vote upon a proposal to approve an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Agreement"), by and among Peoples
Heritage Financial Group, Inc. ("PHFG"), Peoples Heritage Merger Corp.
("PHMC"), a newly-formed, wholly-owned subsidiary of PHFG, and Family,
which provides, among other things, for (i) the merger of Family with PHMC
(the "Merger") and (ii) the conversion of each share of common stock of
Family outstanding immediately prior to the Merger (other than any
dissenting shares under Massachusetts law and certain shares held by PHFG)
into the right to receive 1.26 shares of PHFG common stock, subject to
possible adjustment under certain circumstances, plus cash in lieu of any
fractional share interest.
Pursuant to the Bylaws of Family, the Board of Directors has fixed the
close of business on July 19, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting. Only
holders of common stock of Family of record at the close of business on that
date will be entitled to notice of and to vote at the Special Meeting or any
adjournment or adjournments thereof.
If the Agreement and the transactions contemplated thereby are approved by
shareholders at the Special Meeting and the Merger is consummated by Family, any
shareholder of record as of the record date for the Special Meeting (i) who
delivers to Family, before the shareholder vote on the Agreement, a written
objection to the Merger stating that he or she intends to demand payment for his
or her shares through the exercise of his or her statutory appraisal rights;
(ii) whose shares are not voted in favor of approving the Agreement; and (iii)
who demands in writing payment for his or her shares within 20 days after the
date of the notice that the Merger has become effective is mailed to the
shareholders, shall be entitled to receive payment for his or her shares and an
appraisal of the value thereof. Family, its successor and any such shareholder
shall in such case have the rights and duties and shall follow the procedures
set forth in Sections 85 through 98 of Chapter 156B of the Massachusetts
Business Corporation Law, which are described under "The Merger -- Dissenters'
Rights" in the accompanying Prospectus/Joint Proxy Statement and a copy of which
are attached as Annex VII to such Prospectus/Joint Proxy Statement.
THE BOARD OF DIRECTORS OF FAMILY HAS DETERMINED THE MERGER TO BE FAIR TO
AND IN THE BEST INTERESTS OF FAMILY AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
By Order of the Board of Directors
By: /s/ DAVID D. HINDLE
---------------------------------
DAVID D. HINDLE
President and Chief Executive Officer
Haverhill, Massachusetts
July 19, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. FAILURE TO RETURN A
PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE AGREEMENT. ACCORDINGLY, EVEN IF YOU PLAN TO BE
PRESENT AT THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
IF YOU ATTEND THE SPECIAL 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.
<PAGE> 5
<TABLE>
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PROSPECTUS PROXY STATEMENT
---------- ---------------
PEOPLES HERITAGE FINANCIAL PEOPLES HERITAGE FINANCIAL
GROUP, INC. GROUP, INC.
----------- AND
Common Stock FAMILY BANCORP
(Par Value $.01 Per Share) --------------
Special Meetings of Shareholders to
be held on August 22, 1996
</TABLE>
------------------------------
This Prospectus/Joint Proxy Statement is being furnished in connection with
the solicitation of proxies by the Board of Directors of Peoples Heritage
Financial Group, Inc. ("PHFG") and the Board of Directors of Family Bancorp
("Family") to be used at special meetings of shareholders of PHFG and Family,
respectively, to be held on August 22, 1996 (the "PHFG Special Meeting" and the
"Family Special Meeting," respectively, and together the "Special Meetings").
The purpose of the Special Meetings is to consider and vote upon an Agreement
and Plan of Merger, dated as of May 30, 1996, by and among PHFG, Peoples
Heritage Merger Corp. ("PHMC"), a newly-formed, wholly-owned subsidiary of PHFG,
and Family (the "Agreement"), which provides, among other things, for the merger
of Family with PHMC (the "Merger").
Upon consummation of the Merger, each share of common stock of Family, par
value $0.10 per share ("Family Common Stock") (other than (i) any dissenting
shares under Massachusetts law and (ii) any shares held by PHFG or a subsidiary
thereof other than in a fiduciary capacity or in satisfaction of a debt
previously contracted) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive 1.26
shares of PHFG Common Stock (as hereinafter defined), subject to possible
adjustment under certain circumstances, plus cash in lieu of any fractional
share interest, as described in this Prospectus/Joint Proxy Statement. See
"Summary," "The Merger" and Annex I.
This Prospectus/Joint Proxy Statement also constitutes a prospectus of PHFG
relating to the shares of common stock of PHFG, par value $.01 per share
(together with the PHFG Rights, as hereinafter defined, attached thereto, the
"PHFG Common Stock") issuable to holders of Family Common Stock upon
consummation of the Merger. Based on 4,215,211 shares of Family Common Stock
outstanding on the date hereof and outstanding options to purchase 207,012 of
such shares as of the same date, a maximum of 5,572,001 shares of PHFG Common
Stock will be issuable upon consummation of the Merger.
------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS/JOINT PROXY STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus/Joint Proxy Statement is July 19, 1996.
<PAGE> 6
AVAILABLE INFORMATION
Each of PHFG and Family is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Reports, proxy statements and other information filed by
PHFG and Family can be inspected and copied at Room 1024 of the SEC's office at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional Office
in New York (7 World Trade Center, Suite 1300, New York, New York 10048), and
copies of such material can be obtained from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Each
of the PHFG Common Stock and the Family Common Stock is quoted on the Nasdaq
Stock Market's National Market ("NASDAQ"). Consequently, reports, proxy
statements and other information relating to PHFG and Family also may be
inspected at the office of the National Association of Securities Dealers, Inc.
("NASD") at 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus/Joint Proxy Statement does not contain all of the
information set forth in the Registration Statement on Form S-4, of which this
Prospectus/Joint Proxy Statement is a part, and exhibits thereto (together with
the amendments thereto, the "Registration Statement"), which has been filed by
PHFG with the SEC under the Securities Act of 1933, as amended, and the rules
and regulations thereunder (the "Securities Act"), certain portions of which
have been omitted pursuant to the rules and regulations of the SEC and to which
reference is hereby made for further information.
THIS PROSPECTUS/JOINT PROXY STATEMENT INCORPORATES DOCUMENTS OF PHFG AND
FAMILY BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. ALL
SUCH DOCUMENTS WITH RESPECT TO PHFG ARE AVAILABLE WITHOUT CHARGE (OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR ORAL REQUEST FROM: PEOPLES
HERITAGE FINANCIAL GROUP, INC., P.O. BOX 9540, ONE PORTLAND SQUARE, PORTLAND,
MAINE 04112-9540, ATTENTION: BRIAN ARSENAULT (TELEPHONE NUMBER (207) 761-8517).
ALL SUCH DOCUMENTS WITH RESPECT TO FAMILY ARE AVAILABLE WITHOUT CHARGE (OTHER
THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR ORAL REQUEST FROM:
FAMILY BANCORP, 153 MERRIMACK STREET, HAVERHILL, MASSACHUSETTS 01830, ATTENTION:
GEORGE E. FAHEY (TELEPHONE NUMBER (508) 374-1911). IN ORDER TO ENSURE TIMELY
DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST 10, 1996.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/JOINT PROXY
STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY PHFG OR FAMILY. NEITHER THE DELIVERY OF
THIS PROSPECTUS/JOINT PROXY STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES TO
WHICH THIS PROSPECTUS/JOINT PROXY STATEMENT RELATES SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF PHFG OR FAMILY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS
PROSPECTUS/JOINT PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR SOLICITATION TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by PHFG (File No. 0-16947) and Family (File
No. 0-17252) with the SEC pursuant to the Exchange Act are hereby incorporated
by reference in this Prospectus/Joint Proxy Statement:
(1) PHFG's Annual Report on Form 10-K for the year ended December 31,
1995;
(2) PHFG's Quarterly Report on Form 10-Q for the three months ended
March 31, 1996;
(3) PHFG's Current Reports on Form 8-K, dated April 3, June 5, June 21
and July 2, 1996;
(4) Family's Annual Report on Form 10-K for the year ended December
31, 1995;
(5) Family's Quarterly Report on Form 10-Q for the three months ended
March 31, 1996; and
(6) Family's Current Report on Form 8-K, dated June 7, 1996.
All documents and reports filed by PHFG and Family pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the Special Meetings also are hereby incorporated herein by reference
into this Prospectus/Joint Proxy Statement and shall be deemed a part hereof
from the date of filing of such documents or reports. Any statement contained
herein, in any supplement hereto or in a document or report incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus/Joint
Proxy Statement to the extent that a statement contained herein, in any
supplement hereto or in any subsequently filed document or report which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Prospectus/Joint Proxy Statement or any supplement hereto.
2
<PAGE> 7
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
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<S> <C>
Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
Summary............................................................................... 5
Market for Common Stock and Dividends................................................. 12
Comparative Per Share Data............................................................ 13
Selected Consolidated Financial Data of PHFG.......................................... 14
Selected Consolidated Financial Data of Family........................................ 16
Selected Pro Forma Consolidated Financial Data........................................ 18
General Information................................................................... 20
The Special Meetings.................................................................. 20
Time and Place...................................................................... 20
Matters to be Considered............................................................ 20
Shares Outstanding and Entitled to Vote; Record Date................................ 20
Votes Required...................................................................... 20
Voting and Revocation of Proxies.................................................... 21
Solicitation of Proxies............................................................. 21
The Merger............................................................................ 22
General............................................................................. 22
Background of the Merger............................................................ 22
Reasons for the Merger; Recommendations of the Boards of Directors.................. 24
Opinions of Financial Advisors...................................................... 26
Exchange of Family Common Stock Certificates........................................ 34
Assumption of Family Stock Options.................................................. 35
Representations and Warranties...................................................... 35
Conditions to the Merger............................................................ 35
Regulatory Approvals................................................................ 36
Business Pending the Merger......................................................... 38
Branch Sale......................................................................... 39
No Solicitation..................................................................... 39
Effective Time of the Merger; Termination and Amendment............................. 40
Interests of Certain Persons in the Merger.......................................... 41
Certain Employee Matters............................................................ 43
Resale of PHFG Common Stock......................................................... 43
Certain Federal Income Tax Consequences............................................. 44
Accounting Treatment of the Merger.................................................. 45
Expenses of the Merger.............................................................. 45
Stock Option Agreements............................................................. 46
Stockholder Agreement............................................................... 48
Dissenters' Rights.................................................................. 48
Pro Forma Combined Consolidated Financial Information................................. 50
Certain Regulatory Considerations..................................................... 56
Description of PHFG Capital Stock..................................................... 58
PHFG Common Stock................................................................... 58
PHFG Preferred Stock................................................................ 58
PHFG Rights......................................................................... 59
</TABLE>
3
<PAGE> 8
<TABLE>
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PAGE
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Other Provisions.................................................................... 60
Transfer Agent...................................................................... 60
Comparison of the Rights of Shareholders.............................................. 60
Authorized Capital Stock............................................................ 60
Issuance of Capital Stock........................................................... 61
Voting Rights....................................................................... 61
Classification and Size of Board of Directors....................................... 61
Director Vacancies and Removal of Directors......................................... 62
Director Duties..................................................................... 62
Director Conflict of Interest Transactions.......................................... 63
Exculpation of Directors............................................................ 63
Special Meetings of Shareholders.................................................... 63
Shareholder Nominations............................................................. 64
Shareholder Proposals............................................................... 64
Shareholder Action without a Meeting................................................ 64
Shareholder's Right to Examine Books and Records.................................... 64
Amendment of Governing Instruments.................................................. 65
Mergers, Consolidations and Sales of Assets......................................... 65
Business Combinations with Certain Persons.......................................... 66
State Anti-takeover Statutes........................................................ 66
Dissenters' Rights of Appraisal..................................................... 67
Shareholder Rights Plans............................................................ 67
Certain Beneficial Owners of PHFG Common Stock........................................ 68
Security Ownership of Management.................................................... 68
Security Ownership of Certain Beneficial Owners..................................... 69
Certain Beneficial Owners of Family Common Stock...................................... 70
Security Ownership of Management.................................................... 70
Security Ownership of Certain Beneficial Owners..................................... 71
Legal Opinion......................................................................... 71
Experts............................................................................... 71
Proposals for the 1997 Annual Meetings................................................ 72
Annexes:
Annex I -- Agreement and Plan of Merger, dated as of May 30, 1996, by and among
PHFG, PHMC and Family
Annex II -- Stock Option Agreement, dated as of May 30, 1996, between Family (as
issuer) and PHFG (as grantee)
Annex III -- Stock Option Agreement, dated as of May 30, 1996, between PHFG (as
issuer) and Family (as grantee)
Annex IV -- Stockholder Agreement, dated as of May 30, 1996, between PHFG and
certain stockholders of Family
Annex V -- Opinion of McConnell, Budd & Downes, Inc.
Annex VI -- Opinion of Keefe, Bruyette & Woods, Inc.
Annex VII -- Sections 85 through 98 of Chapter 156B of the Massachusetts Business
Corporation Law
</TABLE>
4
<PAGE> 9
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SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS/JOINT PROXY STATEMENT AND IN THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE MATTERS DESCRIBED
HEREIN OR THEREIN. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS/JOINT PROXY STATEMENT AND IN THE ANNEXES ATTACHED HERETO, INCLUDING
THE AGREEMENT, A COPY OF WHICH IS ATTACHED HERETO AS ANNEX I, AND THE
INFORMATION INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS ARE URGED TO
CAREFULLY READ ALL SUCH INFORMATION.
THE SPECIAL MEETINGS
The PHFG Special Meeting will be held at 9:00 a.m., Eastern Time, on August
22, 1996 at the Portland Marriott Hotel, 200 Sable Oaks Drive, South Portland,
Maine, and the Family Special Meeting will be held at the same time and on the
same date at DiBurro's, 887 Boston Road, Haverhill, Massachusetts. Only the
holders of record of outstanding shares of PHFG Common Stock and Family Common
Stock at the close of business on July 19, 1996 (the "Record Date") are entitled
to notice of and to vote at the PHFG Special Meeting and the Family Special
Meeting, respectively. On the Record Date, 24,617,359 shares of PHFG Common
Stock and 4,215,211 shares of Family Common Stock were outstanding and entitled
to be voted at the PHFG Special Meeting and the Family Special Meeting,
respectively.
At the Special Meetings, shareholders of PHFG and Family will consider and
vote upon a proposal to approve the Agreement. A majority of the votes cast at
the PHFG Special Meeting by holders of PHFG Common Stock, voting in person or by
proxy, on the proposal to approve the Agreement is necessary to approve the
Agreement on behalf of PHFG. The affirmative vote of the holders of two thirds
of the outstanding shares of Family Common Stock, voting in person or by proxy,
is necessary to approve the Agreement on behalf of Family. Because approval of
the Agreement on behalf of Family will be based on the number of shares
outstanding, rather than the number of shares voting, the failure to vote,
either in person or by proxy, or the abstention from voting, by a shareholder of
Family will have the same effect as a vote against the Agreement. Under
applicable stock exchange rules, brokers who hold shares in street name for
customers are prohibited from giving a proxy to vote such customers' shares with
respect to approval of the Agreement in the absence of specific instructions
from such customers. Accordingly, such broker nonvotes also will have the same
effect as votes against approval of the Agreement.
As of May 31, 1996, the directors and executive officers of PHFG and their
affiliates in the aggregate beneficially owned 520,011 shares, or 2.1%, of the
outstanding PHFG Common Stock, excluding shares subject to options. See "Certain
Beneficial Owners of PHFG Common Stock." As of May 31, 1996, the directors and
executive officers of Family and their affiliates in the aggregate beneficially
owned 310,513 shares, or 7.4%, of the outstanding Family Common Stock, excluding
shares subject to options. In connection with the execution of the Agreement,
PHFG and certain shareholders of Family entered into an agreement pursuant to
which, among other things, such shareholders agreed to vote their shares of
Family Common Stock (which amount to 7.8% of the shares of such stock
outstanding as of the Record Date) in favor of the Agreement. See "Certain
Beneficial Owners of Family Common Stock" and "The Merger -- Stockholder
Agreement."
PARTIES TO THE MERGER
PHFG and PHMC. PHFG is a Maine-chartered, multi-bank holding company
registered under the Bank Holding Company Act of 1956, as amended (the "BHCA").
As used in this Prospectus/Joint Proxy Statement, the term "PHFG" refers to such
corporation and, where the context requires, its subsidiaries.
PHFG conducts business from its headquarters in Portland, Maine and 110
offices located throughout the States of Maine and New Hampshire. At March 31,
1996, PHFG had consolidated assets of $4.3 billion, consolidated deposits of
$3.3 billion and consolidated shareholders' equity of $362.2 million. Based on
total assets at March 31, 1996, PHFG is the largest independent bank holding
company headquartered in the State of Maine and the fifth largest independent
bank holding company headquartered in New England.
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5
<PAGE> 10
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PHFG offers a broad range of commercial and consumer banking services and
products and trust and investment advisory services through two wholly-owned
banking subsidiaries: Peoples Heritage Bank ("PHB") and Bank of New Hampshire
("BNH"). PHB is a Maine-chartered savings bank which operates 61 offices
throughout Maine and, through subsidiaries, engages in mortgage banking,
financial planning and equipment leasing activities. At March 31, 1996, PHB had
consolidated assets of $2.5 billion, consolidated deposits of $1.9 billion and
consolidated shareholder's equity of $189.1 million. BNH is a New Hampshire-
chartered commercial bank which operates 49 offices throughout New Hampshire. At
March 31, 1996, BNH had consolidated assets of $1.7 billion, consolidated
deposits of $1.5 billion and consolidated shareholder's equity of $138.4
million. Each of PHB and BNH is a member of the Bank Insurance Fund ("BIF")
administered by the Federal Deposit Insurance Corporation ("FDIC").
PHMC is a Maine corporation which is wholly-owned by PHFG. PHMC was formed
in May 1996 to facilitate PHFG's acquisition of Family and prior to consummation
of the Merger will conduct no activities other than of an organizational nature
and as required by the Agreement.
Since January 1, 1995, PHFG has completed one acquisition which has been
accounted for under the pooling-of-interests method of accounting and three
acquisitions that have been accounted for under the purchase method of
accounting. See "Other Recent Acquisitions of PHFG" below.
The principal executive offices of PHFG are located at One Portland Square,
Portland, Maine 04112-9540, and its telephone number is (207) 761-8500.
Family. Family is a Massachusetts-chartered savings and loan holding
company registered under the Home Owners' Loan Act, as amended ("HOLA"). As used
in this Prospectus/Joint Proxy Statement, the term "Family" refers to such
corporation and, where the context requires, its subsidiaries.
Family offers a broad range of commercial and retail financial services,
including transaction accounts, savings deposits, residential and commercial
mortgages and other commercial and consumer loans, through Family Bank, FSB
("Family Bank"), a wholly-owned subsidiary of Family. At March 31, 1996, Family
had consolidated assets of $887.4 million, consolidated deposits of $736.6
million and consolidated shareholders' equity of $68.8 million.
Family Bank operates 17 banking offices in the Merrimack Valley area of
Greater Haverhill and Greater Lowell, Massachusetts and six offices in southern
New Hampshire. Family Bank became a federally-chartered savings bank regulated
by the Office of Thrift Supervision ("OTS") in 1995 when Family combined its two
formerly state-chartered savings banks to allow its customers to bank at its
offices in either Massachusetts or New Hampshire. Family Bank is a member of the
BIF administered by the FDIC.
The principal executive offices of Family are located at 153 Merrimack
Street, Haverhill, Massachusetts, and its telephone number is (508) 374-1911.
THE MERGER
In accordance with the terms of and subject to the conditions set forth in
the Agreement, Family will be merged with and into PHMC, with PHMC as the
surviving corporation of the Merger. The Agreement provides that at the
effective time of the Merger, each outstanding share of Family Common Stock
(other than (i) any dissenting shares under Massachusetts law and (ii) any
shares held by PHFG or a subsidiary thereof other than in a fiduciary capacity
or in satisfaction of a debt previously contracted) will be converted into the
right to receive 1.26 shares of PHFG Common Stock (the "Exchange Ratio"),
subject to possible adjustment under certain circumstances.
No fractional shares of PHFG Common Stock will be issued in the Merger. In
lieu thereof, each holder of shares of Family Common Stock entitled to a
fraction of a share of PHFG Common Stock shall be entitled to receive an amount
of cash determined by multiplying such holder's fractional interest by the
closing price of a share of PHFG Common Stock on NASDAQ on the business day
preceding the effective time of the Merger. See "The Merger."
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6
<PAGE> 11
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RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF PHFG AND FAMILY
PHFG. The Board of Directors of PHFG (the "PHFG Board") has determined the
Merger to be fair to and in the best interests of PHFG and its shareholders and
has unanimously approved the Agreement and the transactions contemplated
thereby, including the Merger. ACCORDINGLY, THE PHFG BOARD UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS OF PHFG VOTE "FOR" APPROVAL OF THE AGREEMENT.
Family. The Board of Directors of Family (the "Family Board") has
determined the Merger to be fair to and in the best interests of Family and its
shareholders and has unanimously approved the Agreement and the transactions
contemplated thereby, including the Merger. ACCORDINGLY, THE FAMILY BOARD
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
See "The Merger -- Reasons for the Merger; Recommendations of the Boards of
Directors."
OPINIONS OF FINANCIAL ADVISORS
McConnell, Budd & Downes, Inc. ("MB&D"), Family's financial advisor, has
delivered to the Board of Directors of Family (the "Family Board") its oral
opinion of May 30, 1996, and its written opinion dated as of a date shortly
prior to the date of this Prospectus/Joint Proxy Statement, each to the effect
that, as of the date of such opinions, the Exchange Ratio was fair, from a
financial point of view, to the holders of Family Common Stock. Keefe, Bruyette
& Woods, Inc. ("Keefe Bruyette"), PHFG's financial advisor, has delivered to the
Board of Directors of PHFG (the "PHFG Board") its oral opinion of May 28, 1996,
and its written opinion dated as of a date shortly prior to the date of this
Prospectus/Joint Proxy Statement, each to the effect that, as of the date of
such opinions, the Exchange Ratio was fair, from a financial point of view, to
the holders of PHFG Common Stock.
For information on the assumptions made, matters considered and limits of
the reviews by MB&D and Keefe Bruyette, see "The Merger -- Opinions of Financial
Advisors." Shareholders are urged to read in their entirety the opinions of MB&D
and Keefe Bruyette, which are attached as Annexes V and VI to this
Prospectus/Joint Proxy Statement, respectively.
REGULATORY APPROVALS
Consummation of the Merger is subject to the prior receipt of all required
approvals and consents of the Merger by all applicable federal and state
regulatory authorities, including the Board of Governors of the Federal Reserve
System ("FRB"), the OTS, the Superintendent of the Bureau of Banking of the
State of Maine ("Superintendent") and the Massachusetts Board of Bank
Incorporation ("Massachusetts Board"), the approval of which may not be granted
until it has received notice from the Massachusetts Housing Partnership Fund
("MHPF") that PHFG and the MHPF have made the arrangements required by
Massachusetts law. Applications have been or will be filed with such regulatory
authorities for approval of the Merger. There can be no assurance that the
necessary regulatory approvals will be obtained or as to the timing or
conditions of such approvals. See "The Merger -- Regulatory Approvals."
CONDITIONS TO THE MERGER
The obligations of PHFG, PHMC and Family to consummate the Merger are
subject to, among other things, the following conditions: (i) the Agreement
shall have been approved by the requisite votes of the shareholders of PHFG and
Family; (ii) all necessary regulatory approvals pertaining to the Merger,
without restrictions or conditions which would materially impair the value of
Family to PHFG, shall have been received; (iii) no court or governmental or
regulatory authority shall have taken any action which prohibits, restricts or
makes illegal the Merger; (iv) the Registration Statement shall be effective;
(v) the shares of PHFG Common Stock to be issued in connection with the Merger
shall have been approved for quotation on NASDAQ; and (vi) each of PHFG and
Family shall have received an opinion of its respective counsel with respect to
certain income tax considerations under the Internal Revenue Code of 1986, as
amended (the "Code"). In addition, the obligation of each of PHFG and Family to
consummate the Merger is subject to the accuracy of the other party's
representations and warranties as of certain dates, the performance by the other
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7
<PAGE> 12
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party of its obligations under the Agreement in all material respects and the
other party's delivery of an officer's certificate and legal opinions covering
certain matters, and the obligation of PHFG to consummate the Merger is subject
to a requirement that any dissenting shares of Family Common Stock under
Massachusetts law constitute not more than 10% of the outstanding shares of
Family Common Stock prior to the Effective Time and the receipt of "comfort"
letters from the independent public accountants of Family as of specified dates.
See "The Merger -- Conditions to the Merger." Substantially all of the
conditions to consummation of the Merger (except for required shareholder and
regulatory approvals) may be waived at any time by the party for whose benefit
they were created, and the Agreement may be amended at any time by written
agreement of the parties, except that no waiver or amendment occurring after
approval of the Agreement by the shareholders of PHFG or Family shall change the
amount or form of the consideration which Family's shareholders are entitled to
receive in the Merger.
EFFECTIVE TIME OF THE MERGER
The Merger shall become effective upon the filing of articles of merger
with the Secretary of State of the State of Maine and the Secretary of State of
the Commonwealth of Massachusetts, unless a different date and time is specified
as the effective time in such articles of merger (the "Effective Time"). The
articles of merger will be filed only after the receipt of all requisite
regulatory approvals of the Merger, approval of the Agreement by the requisite
votes of the shareholders of PHFG and Family and the satisfaction or waiver of
all other conditions to the Merger set forth in the Agreement.
TERMINATION; POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
The Agreement may be terminated, either before or after approval by
shareholders of PHFG or Family, under certain circumstances, including without
limitation if the Merger is not consummated on or before May 30, 1997. In
addition, if the average daily closing price of a share of PHFG Common Stock
during the Pricing Period (as defined) is less than $15.00 per share, Family
will have the option to terminate the Agreement unless PHFG subsequently agrees
to increase the Exchange Ratio in a manner specified in the Agreement. Under the
Agreement, the term "Pricing Period" means the period of ten consecutive trading
days following the Determination Date, and the term "Determination Date" means
the earlier of (x) the date on which the last regulatory approval required to
consummate the Merger is obtained and (y) December 1, 1996. See "The
Merger -- Effective Time of the Merger; Termination and Amendment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Family has received an opinion from Foley, Hoag & Eliot LLP to the effect
that, assuming the Merger is consummated, a Family shareholder who receives
shares of PHFG Common Stock in exchange for shares of Family Common Stock upon
consummation of the Merger will recognize no gain or loss as a result of the
Merger, except in respect of cash received in lieu of a fractional share
interest. For a description of these and additional federal income consequences
of the Merger, including the federal income tax consequences of exercising
dissenters' rights and receiving cash in lieu of any fractional share interest
in PHFG Common Stock, see "The Merger -- Certain Federal Income Tax
Consequences."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH FAMILY SHAREHOLDER, EACH SUCH SHAREHOLDER IS
URGED TO CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE FEDERAL AND ANY
APPLICABLE FOREIGN, STATE AND LOCAL INCOME TAX AND OTHER TAX CONSEQUENCES OF THE
MERGER IN HIS OR HER PARTICULAR CIRCUMSTANCES.
ACCOUNTING TREATMENT OF THE MERGER
Peoples Heritage intends to account for the Merger under the purchase
method for accounting and financial reporting purposes. See "The
Merger -- Accounting Treatment of the Merger."
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8
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ASSUMPTION OF FAMILY STOCK OPTIONS
Options to purchase Family Common Stock outstanding on the date of the
Agreement which are not exercised and do not expire in accordance with their
terms prior to the Effective Time will be converted into options to purchase
shares of PHFG Common Stock in accordance with the provisions of the Agreement.
See "The Merger -- Assumption of Family Stock Options."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Pursuant to the Agreement, PHFG agreed (i) to take such action as is
necessary to cause one existing non-employee director of Family designated by
Family and acceptable to PHFG to be elected as a director of PHFG as of the
Effective Time and to nominate such person for re-election as a director of PHFG
upon expiration of his initial term as a director of PHFG; (ii) to honor various
contractual obligations of Family as of the date of the Agreement, including (x)
the employment agreements among Family, Family Bank and each of David D. Hindle,
President and Chief Executive Officer, George E. Fahey, Executive Vice President
and Chief Financial Officer, Ronald G. Trombley, Senior Vice President, David J.
LaFlamme, Senior Vice President, and Bruce Fenn, III, Senior Vice President, (y)
the supplemental executive retirement plan between the Company and each of the
above-named executive officers of Family and (z) the split-dollar insurance
agreements between Family Bank and each of Messrs. Hindle, Fahey, LaFlamme and
Trombley; and (iii) to continue rights to indemnification and liability
insurance for directors and officers of Family and Family Bank for specified
periods. Assuming the Merger were to be consummated as of December 31, 1996, the
aggregate amount of the lump sum severance payments due to Messrs. Hindle,
Fahey, Trombley, LaFlamme and Fenn pursuant to his respective employment
agreement would be approximately $550,000, $343,000, $348,000, $306,000 and
$278,000, respectively. Other than as set forth above, no director or executive
officer of Family has any direct or indirect material interest in the Merger,
except insofar as ownership of Family Common Stock and options to acquire Family
Common Stock might be deemed such an interest. See "The Merger -- Interests of
Certain Persons in the Merger."
DESCRIPTION OF PHFG COMMON STOCK
Subject to the rights of the holders of any class of preferred stock of
PHFG if and when outstanding, the holders of PHFG Common Stock possess exclusive
voting rights in PHFG, are entitled to such dividends as may be declared from
time to time by the Board of Directors of PHFG and would be entitled to receive
all assets of PHFG available for distribution in the event of any liquidation,
dissolution or winding up of PHFG. Holders of PHFG Common Stock do not have any
preemptive rights with respect to any shares which may be issued by PHFG in the
future. Upon receipt by PHFG of certificates evidencing the shares of Family
Common Stock surrendered in exchange for PHFG Common Stock pursuant to the
Merger, each share of PHFG Common Stock offered hereby will be fully paid and
non-assessable. See "Description of PHFG Capital Stock."
DIFFERENCES IN SHAREHOLDERS' RIGHTS
PHFG is a Maine corporation subject to the provisions of the Maine Business
Corporation Act ("MBCA"), and Family is a Massachusetts corporation subject to
the provisions of the Massachusetts Business Corporation Law ("MBCL"). Upon
consummation of the Merger, shareholders of Family will become shareholders of
PHFG and their rights as shareholders of PHFG will be governed by PHFG's
Articles of Incorporation and Bylaws and the MBCA. The rights of shareholders of
PHFG differ in certain respects from the rights of shareholders of Family. See
"Comparison of the Rights of Shareholders."
RESALE OF PHFG COMMON STOCK
The shares of PHFG Common Stock to be issued in connection with the Merger
will be freely tradeable by the holders of such shares, except for those shares
held by persons who may be deemed to be "affiliates" of PHFG or Family under
applicable federal securities laws. See "The Merger -- Resale of PHFG Common
Stock."
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STOCK OPTION AGREEMENTS
As an inducement and a condition to PHFG's entering into the Agreement,
PHFG and Family also entered into a Stock Option Agreement, dated as of May 30,
1996 (the "Family Stock Option Agreement"), pursuant to which Family granted
PHFG an option (the "Family Option") to purchase, upon the occurrence of certain
events (none of which has occurred as of the date hereof to the best of the
knowledge of PHFG and Family), up to 832,000 shares of Family Common Stock,
representing 19.9% of the outstanding shares of Family Common Stock, at a price
of $20.50 per share, subject to adjustment in certain circumstances and
termination within certain periods. As an inducement and a condition to Family's
entering into the Agreement, PHFG and Family also entered into a Stock Option
Agreement, dated as of May 30, 1996 (the "PHFG Stock Option Agreement," and
together with the Family Option Agreement, the "Stock Option Agreements"),
pursuant to which PHFG granted Family an option (the "PHFG Option") to purchase,
upon the occurrence of certain events (none of which has occurred as of the date
hereof to the best of the knowledge of PHFG and Family), up to 1,500,000 shares
of PHFG Common Stock, representing approximately 6.0% of the outstanding shares
of PHFG Common Stock, at a price of $19.75 per share, subject to adjustment in
certain circumstances and termination within certain periods. The Stock Option
Agreements are intended to increase the likelihood that the Merger will be
consummated in accordance with the terms of the Agreement and may have the
effect of discouraging competing offers to the Merger. Copies of the Family
Stock Option Agreement and the PHFG Stock Option Agreement are included as
Annexes II and III to this Prospectus/Joint Proxy Statement, respectively, and
reference is made thereto for the complete terms thereof. See "The
Merger -- Stock Option Agreements."
STOCKHOLDER AGREEMENT
In connection with the execution of the Agreement, PHFG entered into a
Stockholder Agreement, dated as of May 30, 1996, with the directors of Family
and senior executive officers of Family and Family Bank in their capacities as
shareholders of Family. Pursuant to the Stockholder Agreement, a copy of which
is included as Annex IV hereto, each of such shareholders agreed, among other
things, to vote his or her shares of Family Common Stock in favor of the
Agreement. See "The Merger -- Stockholder Agreement."
DISSENTERS' RIGHTS
Under Massachusetts law, holders of Family Common Stock have the right to
dissent from the Merger and, if the Merger is consummated and all requirements
of Massachusetts law are satisfied by holders seeking to exercise dissenters'
rights, to receive payment equal to the fair value of their shares of Family
Common Stock. The procedures which must be followed in connection with the
exercise of dissenters' rights by dissenting shareholders are described herein
under "The Merger -- Dissenters' Rights" and in Sections 85 through 98 of
Chapter 156B of the MBCL, a copy of which are attached as Annex VII to this
Prospectus/Joint Proxy Statement. Failure to take any required step in
connection with the exercise of such rights may result in termination or waiver
thereof.
Holders of PHFG Common Stock do not have rights under the MBCA or otherwise
to dissent from the Merger and obtain the fair value of their shares of PHFG
Common Stock.
OTHER RECENT ACQUISITIONS OF PHFG
On April 2, 1996, PHFG acquired all of the outstanding shares of capital
stock of Bank of New Hampshire Corporation ("BNHC"), a New Hampshire-based bank
holding company for BNH, by exchanging two shares of PHFG Common Stock for each
outstanding share of BNHC Common Stock. The acquisition of BNHC was accounted
for as a pooling of interests for accounting and financial reporting purposes
and, as a result, all financial information relating to PHFG contained herein
reflects the combined financial position and results of operations of PHFG and
BNHC as if the acquisition of BNHC had taken place prior to the periods covered
by such financial information. For additional information in this regard,
reference is made to the supplemental consolidated financial statements and
related financial information of PHFG contained in the Report on Form 8-K filed
by PHFG on July 2, 1996. The supplemental consolidated
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10
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financial statements of PHFG included in the Form 8-K have been prepared to give
retroactive effect to acquisition of BNHC on April 2, 1996. Generally accepted
accounting principles proscribe giving effect to a consummated business
combination accounted for by the pooling of interests method in financial
statements that do not include the date of consummation. These financial
statements do not extend through the date of consummation; however, they will
become the historical consolidated financial statements of PHFG after financial
statements covering the date of consummation of the business combination are
issued.
Subsequent to the acquisition of BNHC, PHFG merged its other New
Hampshire-based banking subsidiary -- The First National Bank of Portsmouth
("FNBP") -- into BNH under the pooling-of-interests method of accounting
effective June 28, 1996.
Since January 1, 1995, PHFG also has effected several acquisitions under
the purchase method of accounting which in the aggregate are not considered to
be significant within the meaning of Regulation S-X of the SEC. These
acquisitions are briefly noted below.
On February 16, 1996, PHFG purchased five branch offices of Fleet Bank NH
which are located in central and southern New Hampshire and which were divested
by Fleet Bank NH in connection with the merger of Fleet Financial Group, Inc.
and Shawmut National Corporation. The purchase resulted in PHFG's acquisition of
approximately $218.3 million of loans, including $178.6 million of single-family
residential mortgage loans, and its assumption of $160.9 million of deposits.
On July 1, 1995, PHFG acquired all of the outstanding shares of capital
stock of Bankcore, Inc. ("Bankcore"), a New Hampshire-based bank holding company
for North Conway Bank, and immediately thereafter North Conway Bank was merged
into FNBP. At the time of acquisition, Bankcore had $132.8 million of total
assets and shareholders' equity of $17.8 million.
On June 15, 1995, PHFG purchased all the branches and associated deposits,
as well as certain loans, of Fleet Bank of Maine located in Aroostook County,
Maine. Five of the seven purchased branches were combined with existing branches
of PHB. The purchase resulted in the transfer of $17.1 million of loans to PHFG
and its assumption of $46.1 million of deposits.
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MARKET FOR COMMON STOCK AND DIVIDENDS
Each of the PHFG Common Stock and the Family Common Stock is traded on
NASDAQ under the symbol "PHBK" and "FMLY," respectively. As of the Record Date,
there were 24,617,359 shares of PHFG Common Stock outstanding, which were held
by approximately 5,230 shareholders of record, and there were 4,215,211 shares
of Family Common Stock outstanding, which were held by approximately 975
shareholders of record. Such numbers of shareholders do not reflect the number
of individuals or institutional investors holding stock in nominee name through
banks, brokerage firms and others.
<TABLE>
The following table sets forth during the periods indicated the high and
low prices of the PHFG Common Stock and the Family Common Stock as reported on
NASDAQ and the dividends declared per share of PHFG Common Stock and Family
Common Stock.
<CAPTION>
PHFG FAMILY(1)
-------------------------------- ------------------------------
MARKET PRICE DIVIDENDS MARKET PRICE DIVIDENDS
------------------ DECLARED ---------------- DECLARED
1996 HIGH LOW PER SHARE HIGH LOW PER SHARE
- ---- ------- ------- --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter...................... $22.75 $19.00 $.14 $23.50 $17.50 $.10
Second Quarter..................... 22.25 19.375 .17 25.50 20.00 .12
Third Quarter (through July 14).... 20.63 19.375 -- 24.63 23.75 --
1995
- ----
First Quarter...................... 14.00 11.75 .09 15.50 11.50 .083
Second Quarter..................... 16.75 12.375 .12 15.67 14.33 .10
Third Quarter...................... 20.50 15.25 .12 18.33 14.67 .10
Fourth Quarter..................... 22.875 18.25 .13 18.75 16.83 .10
1994
- ----
First Quarter...................... 12.50 10.125 .01 13.50 10.33 .083
Second Quarter..................... 14.00 10.125 .05 16.33 11.17 .083
Third Quarter...................... 15.00 12.25 .08 16.00 12.67 .083
Fourth Quarter..................... 15.125 10.375 .09 13.67 11.00 .083
- ---------------
<FN>
(1) Amounts reflect a three-for-two split of the outstanding Family Common Stock
on November 27, 1995.
</TABLE>
Set forth below is information regarding the price per share of PHFG Common
Stock and Family Common Stock on May 30, 1996, the last trading day preceding
public announcement of the Agreement. The historical prices are as reported on
NASDAQ.
<TABLE>
<CAPTION>
HISTORICAL MARKET
VALUE PER SHARE
----------------- EQUIVALENT MARKET VALUE
DATE PHFG FAMILY PER SHARE OF FAMILY(1)
- ---- ------ ------ -----------------------
<S> <C> <C> <C>
May 30, 1996......................................... $19.75 $22.25 $24.89
- ---------------
<FN>
(1) Equivalent market value per share of Family Common Stock represents the
historical market value per share of PHFG Common Stock multiplied by the
Exchange Ratio.
</TABLE>
Shareholders are advised to obtain current market quotations for the PHFG
Common Stock and the Family Common Stock. Because the consideration to be
provided to shareholders of Family in connection with the Merger is based on a
fixed number of shares of PHFG Common Stock, shareholders of Family are not
assured of receiving a specific market value of PHFG Common Stock (and thus a
specific market value for their shares of Family Common Stock) at the Effective
Time. The market price of the PHFG Common Stock at the Effective Time may be
higher or lower than the market price at the time the Agreement was executed, at
the date of mailing of this Prospectus/Joint Proxy Statement or at the time of
the Special Meetings.
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COMPARATIVE PER SHARE DATA
<TABLE>
The following table sets forth certain supplemental per share, pro forma
combined per share and pro forma equivalent per share information with respect
to the PHFG Common Stock and the Family Common Stock at the dates and for the
periods indicated, giving effect to the Merger using the purchase method of
accounting and reflecting PHFG's planned repurchase of approximately 2.6 million
shares of PHFG Common Stock in connection with the acquisition of Family. See
"The Merger -- Accounting Treatment of the Merger" and "Pro Forma Combined
Consolidated Financial Information."
The selected per share data set forth below should be read in conjunction
with, and is qualified in its entirety by, the historical consolidated financial
statements of PHFG and Family, including the related notes, incorporated herein
by reference, the supplemental consolidated financial statements, including the
related notes, of PHFG incorporated herein by reference and the unaudited pro
forma combined consolidated financial information appearing elsewhere herein.
See "Available Information," "Incorporation of Certain Documents by Reference"
and "Pro Forma Combined Consolidated Financial Information." The data set forth
below is not necessarily indicative of the results of the future operations of
PHFG upon consummation of the Merger or the actual results that would have been
achieved had the Merger been consummated prior to the periods indicated.
<CAPTION>
PHFG COMMON STOCK FAMILY COMMON STOCK
------------------------- ----------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED(1) HISTORICAL(2) EQUIVALENT(3)
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Income per share:
Three months ended March 31, 1996............ $ 0.50 $ 0.48 $ 0.50 $ 0.60
Year ended December 31, 1995................. 1.80 1.71 1.90 2.16
Dividends declared per share:
Three months ended March 31, 1996............ 0.14 0.14(4)(5) 0.10 0.18(5)
Year ended December 31, 1995................. 0.46 0.46(4) 0.383 0.58
Book value per share:
March 31, 1996............................... 14.40 14.81 16.84 18.66
December 31, 1995............................ 14.16 14.59 16.83 18.38
Tangible book value per share:
March 31, 1996............................... 12.80 11.87 15.41 14.96
December 31, 1995............................ 13.25 12.26 15.34 15.45
- ---------------
<FN>
(1) Reflects (i) estimated purchase accounting adjustments to be recorded in
connection with the Merger, consisting of mark-to-market valuation
adjustments for significant tangible net assets acquired and adjustments for
intangible assets established, and the resultant amortization/accretion of
all such adjustments over appropriate future periods, and (ii) the effects
of PHFG's planned acquisition of approximately 2.6 million shares of PHFG
Common Stock in connection with the acquisition of Family.
(2) Amounts reflect a three-for-two split of the outstanding Family Common Stock
on November 27, 1995.
(3) Represents the PHFG pro forma combined amounts multiplied by the Exchange
Ratio.
(4) Assumes no change in the PHFG historical dividends declared per share.
(5) The current annualized dividend rate per share of PHFG Common Stock, based
upon the most recent quarterly dividend rate of $0.17 per share payable on
May 10, 1996, would be $0.68. On a pro forma equivalent basis per share of
Family Common Stock, such current annualized PHFG dividend per share of
Family Common Stock would be $0.86.
</TABLE>
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SELECTED CONSOLIDATED FINANCIAL DATA OF PHFG
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
The following selected supplemental consolidated financial data for the
five years ended December 31, 1995 is derived in part from the audited
supplemental consolidated financial statements of PHFG which give retroactive
effect to PHFG's acquisition of BNHC in April 1996; and the following selected
supplemental consolidated financial data for the three months ended March 31,
1996 and 1995 is derived from unaudited supplemental consolidated financial
statements which give retroactive effect to the same. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which PHFG considers necessary for a fair presentation of the
financial position and the results of operations for these periods. Operating
results for the three months ended March 31, 1996 are not necessarily indicative
of the results that may be expected for any other interim period or the entire
year ending December 31, 1996. The selected supplemental consolidated financial
data set forth below should be read in conjunction with, and is qualified in its
entirety by, the supplemental consolidated financial statements of PHFG,
including the related notes, incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Documents by Reference."
<CAPTION>
DECEMBER 31,
MARCH 31, ----------------------------------------------------------------------
BALANCE SHEET DATA: 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets........................ $4,257,912 $4,058,126 $3,737,906 $3,624,641 $3,523,094 $3,750,333
Debt and equity securities,
net(1)............................ 767,539 766,648 719,194 717,467 557,787 548,226
Total loans, net(2)................. 2,956,910 2,717,608 2,575,902 2,368,348 2,425,020 2,603,780
Goodwill and other intangibles...... 40,100 22,792 20,713 22,758 22,310 26,470
Deposits............................ 3,347,427 3,197,138 2,885,845 2,939,826 2,948,549 3,198,366
Borrowings.......................... 497,720 456,932 505,347 359,935 288,024 308,469
Shareholders' equity................ 362,155 354,925 304,439 287,438 249,862 216,462
Nonperforming assets(3)............. 53,922 56,752 78,339 120,076 185,733 253,857
Allowance for loan and lease
losses............................ 65,533 60,975 63,675 67,385 71,223 88,067
Book value per share................ 14.40 14.16 12.26 11.61 10.73 13.20
Tangible book value per share....... 12.80 13.25 11.42 10.69 9.77 11.59
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------------------------
OPERATIONS DATA: 1996 1995 1995 1994 1993 1992 1991
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income........ $80,754 $71,833 $305,849 $256,597 $243,452 $272,596 $343,316
Interest expense.................... 35,615 30,727 134,895 108,002 112,305 150,458 224,739
------- ------- -------- -------- -------- -------- --------
Net interest income................. 45,139 41,106 170,954 148,595 131,147 122,138 118,577
Provision for loan losses........... 450 1,030 4,230 3,374 14,047 32,025 71,480
------- ------- -------- -------- -------- -------- --------
Net interest income after provision
for loan losses................... 44,689 40,076 166,724 145,221 117,100 90,113 47,097
Net securities gains (losses)....... 504 (95) 116 (254) 1,183 2,859 1,520
Net gains on sales of consumer
loans............................. -- -- -- 33 2,576 -- --
Other noninterest income............ 8,965 7,192 31,301 27,847 24,842 26,747 21,310
Noninterest expense................. 34,582 32,143 130,280 125,137 122,391 125,091 116,610
------- ------- -------- -------- -------- -------- --------
Income (loss) before income tax
expense (benefit) and cumulative
effect of a change in accounting
principle......................... 19,576 15,030 67,861 47,710 23,310 (5,372) (46,683)
Income tax expense (benefit)........ 6,970 4,969 23,375 13,662 799(4) 1,510 (15,095)
Cumulative effect on years prior to
1992 of a change in accounting
principle......................... -- -- -- -- -- 1,100(5) --
------- ------- -------- -------- -------- -------- --------
Net income (loss)................... $12,606 $10,061 $ 44,486 $ 34,048 $ 22,511 $ (5,782) $(31,588)
======= ======= ======== ======== ======== ======== ========
Net income (loss) per share......... $ 0.50 $ 0.41 $ 1.80 $ 1.37 $ 0.95 $ (0.36) $ (1.95)
Dividends per share................. $ 0.14 $ 0.09 $ 0.46 $ 0.23 $ 0.01 $ 0.00 $ 0.00
</TABLE>
- -------------------------------------------------------------------------------
14
<PAGE> 19
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------- --------------------------------------------
OTHER DATA(6): 1996 1995 1995 1994 1993 1992 1991
- ------------- ------ ------ ------ ------ ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets..................... 1.24% 1.10% 1.16% 0.94% 0.64% (0.16)% (0.83)%
Return on average equity(7).................. 14.20 13.04 13.53 11.42 8.57 (2.69) (14.22)
Average equity to average assets(7).......... 8.76 8.46 8.55 8.21 7.50 5.98 5.85
Interest rate spread(8)...................... 4.19 4.35 4.20 4.01 3.76 3.41 3.56
Net interest margin(8)....................... 4.79 4.87 4.79 4.44 4.11 3.71 3.43
Tier I leverage capital ratio at end of
period..................................... 7.95 7.86 8.33 7.96 7.63 7.00 5.73
Dividend payout ratio........................ 27.38 21.90 25.42 16.45 1.44 0.00 0.00
Nonperforming loans as a percent of total
loans at end of period(3).................. 1.36 2.18 1.53 2.13 3.18 4.36 6.11
Nonperforming assets as a percent of total
assets at end of period(3)................. 1.27 1.97 1.40 2.10 3.31 5.29 6.77
Allowance for loan and lease losses as a
percent of nonperforming loans at end of
period..................................... 159.96 103.95 143.40 113.17 86.95 65.39 53.50
Banking offices.............................. 111 97 106 96 98 100 103
- ---------------
<FN>
(1) All securities were classified as available for sale at March 31, 1996 and
December 31, 1995.
(2) Does not include loans held for sale.
(3) Nonperforming assets consist of nonperforming loans, other real estate owned
and repossessions, net of related reserves where appropriate. Nonperforming
loans consist of non-accrual loans, accruing loans 90 days or more overdue
and troubled debt restructurings.
(4) PHFG's results of operations for 1993 reflect the elimination of the
valuation allowance relating to deferred income tax assets of $6.5 million.
(5) Reflects the adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," effective January 1, 1992.
(6) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(7) Average equity excludes the effect of unrealized gains or losses on
securities available for sale.
(8) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing
demand accounts), and net interest margin represents net interest income as
a percent of average interest-earning assets, in each case calculated on a
fully-taxable equivalent basis.
</TABLE>
- ------------------------------------------------------------------------------
15
<PAGE> 20
- -------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA OF FAMILY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
The following selected historical consolidated financial data for the five
years ended December 31, 1995 is derived in part from the audited consolidated
financial statements of Family. The historical consolidated financial data for
the three months ended March 31, 1996 and 1995 is derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which Family considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the three months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for any other interim period or the entire year
ending December 31, 1996. The selected historical consolidated financial data
set forth below should be read in conjunction with, and is qualified in its
entirety by, the historical consolidated financial statements of Family,
including the related notes, incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Documents by Reference."
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------------------------------------------------------
BALANCE SHEET DATA: 1996 1995 1994 1993 1992 1991
- ------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total assets........................ $887,387 $892,167 $817,746 $712,133 $651,224 $666,984
Debt and equity securities, net(1).. 354,721 351,437 291,461 289,315 238,464 228,061
Total loans, net(2)................. 443,791 451,199 449,760 350,386 312,842 354,570
Goodwill............................ 5,865 6,073 6,761 977 1,167 1,357
Deposits............................ 736,646 734,017 709,697 589,723 575,269 589,813
Borrowings.......................... 67,926 75,533 46,161 41,123 17,500 26,892
Shareholders' equity................ 68,843 68,696 53,547 56,801 48,559 40,820
Nonperforming assets(3)............. 11,016 12,733 13,495 15,090 19,693 28,885
Allowance for loan losses........... 6,506 6,427 6,714 6,481 6,701 7,864
Book value per share(4)............. 16.84 16.83 13.35 14.23 12.39 10.43
Tangible book value per share(4).... 15.41 15.34 11.66 13.99 12.09 10.08
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------------------------
OPERATIONS DATA: 1996 1995 1995 1994 1993 1992 1991
- ---------------- ------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income........ $15,653 $14,359 $59,984 $49,293 $43,895 $48,444 $47,064
Interest expense.................... 7,573 6,221 27,732 20,070 19,317 25,337 30,713
------- ------- ------- ------- ------- ------- -------
Net interest income................. 8,080 8,138 32,252 29,223 24,578 23,107 16,351
Provision for loan losses........... 250 250 1,150 600 1,500 2,567 4,750
------- ------- ------- ------- ------- ------- -------
Net interest income after provision
for loan losses................... 7,830 7,888 31,102 28,623 23,078 20,540 11,601
------- ------- ------- ------- ------- ------- -------
Net securities gains (losses)....... 202 (14) 979 (1,117) 1,878 1,334 3,143
Other noninterest income............ 1,295 1,309 5,202 3,755 6,218 6,382 3,439
Noninterest expense................. 5,880 6,028 23,702 21,023 20,076 21,216 20,930
------- ------- ------- ------- ------- ------- -------
Income (loss) before income tax
expense (benefit), extraordinary
item and cumulative effect of a
change in accounting principle.... 3,447 3,155 13,581 10,238 11,098 7,040 (2,747)
Income tax expense (benefit)........ 1,335 1,244 5,582 4,001 4,389 2,335 (1,470)
Extraordinary item net of income
taxes............................. -- -- -- -- -- -- 561
Cumulative effect on years prior to
1992 of a change in accounting
principle(5)...................... -- -- -- -- -- 2,901 --
------- ------- ------- ------- ------- ------- -------
Net income (loss)................... $ 2,112 $ 1,911 $ 7,999 $ 6,237 $ 6,709 $ 7,606 $ (716)
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share(4)...... $ 0.50 $ 0.45 $ 1.90 $ 1.49 $ 1.63 $ 1.87 $ (0.18)
Dividends per share(4).............. $ 0.10 $ 0.083 $ 0.383 $ 0.333 $ 0.10 $ -- $ --
</TABLE>
- -------------------------------------------------------------------------------
16
<PAGE> 21
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------- -----------------------------------------
OTHER DATA(6): 1996 1995 1995 1994 1993 1992 1991
- -------------- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets.......................... 0.95% 0.94% 0.95% 0.85% 1.01% 1.16% (0.13)%
Return on average equity.......................... 12.22 13.60 12.91 11.43 12.85 16.87 (1.77)
Average equity to average assets.................. 7.81 6.94 7.40 7.45 7.88 6.87 7.54
Interest rate spread(7)........................... 3.40 3.83 3.62 3.83 3.64 3.44 2.69
Net interest margin(7)............................ 3.90 4.25 4.10 4.21 3.97 3.77 3.18
Leverage (core) capital ratio at end of
period(8)....................................... 6.48 6.59 6.38 6.31 6.12 6.97 5.62
Dividend payout ratio............................. 20.00 18.44 20.16 22.35 6.13 -- --
Nonperforming loans as a percent of total loans at
end of period(3)................................ 1.54 1.78 2.03 1.75 2.43 1.95 2.97
Nonperforming assets as a percent of total assets
at end of period(3)............................. 1.24 1.65 1.43 1.65 2.12 3.02 4.33
Allowance for loan losses as a percent of
nonperforming loans at end of period............ 93.49 80.16 69.09 83.90 74.58 93.09 72.81
Banking offices................................... 23 23 23 23 17 17 18
- ---------------
<FN>
(1) All securities were classified as available for sale at March 31, 1996 and
December 31, 1995.
(2) Does not include loans held for sale.
(3) Nonperforming assets consist of nonperforming loans, other real estate owned
and repossessions, net of related reserves where appropriate. Nonperforming
loans consist of non-accrual loans, accruing loans 90 days or more overdue,
troubled debt restructurings and other impaired loans.
(4) Amounts reflect a three-for-two split of the outstanding Family Common Stock
on November 27, 1995.
(5) Reflects the adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," effective January 1, 1992.
(6) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(7) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing
demand accounts), and net interest margin represents net interest income as
a percent of average interest-earning assets, in each case calculated on a
fully-taxable equivalent basis.
(8) Applicable to Family Bank and, as a result, does not include capital held
directly by Family.
</TABLE>
- -------------------------------------------------------------------------------
17
<PAGE> 22
- -------------------------------------------------------------------------------
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
The following table sets forth selected unaudited consolidated pro forma
financial data of PHFG and Family at the dates and for the periods indicated,
giving effect to the Merger using the purchase method of accounting and
reflecting PHFG's planned repurchase of approximately 2.6 million shares of PHFG
Common Stock in connection with the acquisition of Family. See "The
Merger -- Accounting Treatment of the Merger" and "Pro Forma Combined
Consolidated Financial Information."
The selected consolidated financial data set forth below should be read in
conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of PHFG and Family, including the related
notes, incorporated by reference herein, the supplemental consolidated financial
statements of PHFG, including the related notes, incorporated by reference
herein, and the other unaudited pro forma combined condensed consolidated
financial information appearing elsewhere herein. See "Available Information,"
"Incorporation of Certain Documents by Reference" and "Pro Forma Combined
Consolidated Financial Information." The data set forth below is not necessarily
indicative of the results of the future operations of PHFG upon consummation of
the Merger or the actual results that would have been achieved had the Merger
been consummated prior to the periods indicated.
<CAPTION>
MARCH 31,
1996(1)
----------
<S> <C>
BALANCE SHEET DATA:
Total assets..................................................................... $5,135,561
Debt and equity securities, net.................................................. 1,077,660
Total loans, net(2).............................................................. 3,403,481
Goodwill and other intangibles................................................... 81,886
Deposits......................................................................... 4,082,160
Borrowings....................................................................... 567,725
Shareholders' equity............................................................. 413,154
Nonperforming assets(3).......................................................... 64,495
Allowance for loan and lease losses.............................................. 72,039
Book value per share............................................................. 14.81
Tangible book value per share.................................................... 11.87
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1996 1995
------------------ ------------
<S> <C> <C>
OPERATIONS DATA:
Interest and dividend income.................................. $95,415 $361,865
Interest expense.............................................. 43,167 162,544
------- --------
Net interest income........................................... 52,248 199,321
Provision for loan losses..................................... 700 5,380
------- --------
Net interest income after provision for loan losses........... 51,548 193,941
Net securities gains.......................................... 706 1,095
Other noninterest income...................................... 10,109 35,901
Noninterest expense........................................... 41,061 156,380
------- --------
Income before income tax expense.............................. 21,302 74,556
Income tax expense............................................ 7,902 27,344
------- --------
Net income.................................................... $13,400 $ 47,212
======= ========
Net income per share.......................................... $ 0.48 $ 1.71
Dividends per share........................................... $ 0.14 $ 0.46
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE> 23
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1996 1995
------------------ -------------
<S> <C> <C>
OTHER DATA(4):
Return on average assets...................................... 1.09% 1.01%
Return on average equity(5)................................... 13.20 12.66
Average equity to average assets(5)........................... 8.23 7.90
Interest rate spread(6)....................................... 4.06 4.11
Net interest margin(6)........................................ 4.60 4.63
Tier I leverage capital ratio at end of period................ 6.81 7.34
Dividend payout ratio......................................... 28.83 27.24
Nonperforming loans as a percent of total loans at end
of period(3)................................................ 1.37 1.56
Nonperforming assets as a percent of total assets at end of
period(3)................................................... 1.26 1.38
Allowance for loan losses as a percent of nonperforming loans
at end of period............................................ 151.71 133.15
Banking offices............................................... 134 129
<FN>
- ---------------
(1) The consolidated balance sheet data at March 31, 1996 reflects an estimated
$4.96 million of one-time reorganization and restructuring costs related to
the Merger. The effect of the one time charges has been reflected in the
consolidated balance sheet data but not in the consolidated operations and
other financial data because it is nonrecurring.
(2) Does not include loans held for sale.
(3) Nonperforming assets consist of nonperforming loans, other real estate owned
and repossessions, net of related reserves where appropriate. Nonperforming
loans consist of non-accrual loans, accruing loans 90 days or more overdue
and troubled debt restructurings.
(4) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(5) Average equity excludes the effect of unrealized gains or losses on
securities available for sale.
(6) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing
demand accounts), and net interest margin represents net interest income as
a percent of average interest-earning assets, in each case calculated on a
fully-taxable equivalent basis.
</TABLE>
- -------------------------------------------------------------------------------
19
<PAGE> 24
GENERAL INFORMATION
This Prospectus/Joint Proxy Statement is being furnished to the holders of
PHFG Common Stock and Family Common Stock in connection with the solicitation of
proxies by the Boards of Directors of PHFG and Family for use at the PHFG
Special Meeting and the Family Special Meeting, respectively, and at any
adjournment or adjournments thereof. This Prospectus/Joint Proxy Statement also
serves as a prospectus of PHFG in connection with the issuance of PHFG Common
Stock to holders of Family Common Stock upon consummation of the Merger.
All information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to PHFG has been supplied by PHFG,
and all information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to Family has been supplied by
Family.
This Prospectus/Joint Proxy Statement and the other documents enclosed
herewith are first being mailed to shareholders of PHFG and Family on or about
July 19, 1996.
THE SPECIAL MEETINGS
TIME AND PLACE
The PHFG Special Meeting will be held at 9:00 a.m., Eastern Time, on August
22, 1996 at the Portland Marriott Hotel, 200 Sable Oaks Drive, South Portland,
Maine. The Family Special Meeting will be held at 9:00 a.m., Eastern Time, on
August 22, 1996 at DiBurro's, 887 Boston Road, Haverhill, Massachusetts.
MATTERS TO BE CONSIDERED
At the Special Meetings, shareholders of PHFG and Family will consider and
vote upon a proposal to approve the Agreement. Pursuant to applicable law and
the articles of incorporation and bylaws of PHFG and the articles of
organization and bylaws of Family, respectively, no other business may properly
come before the PHFG Special Meeting and the Family Special Meeting and any
adjournment or adjournments thereof.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on July 19, 1996 has been fixed by the PHFG Board as
the Record Date for the determination of holders of PHFG Common Stock entitled
to notice of and to vote at the PHFG Special Meeting and any adjournment or
adjournments thereof. At the close of business on the Record Date, there were
24,617,359 shares of PHFG Common Stock outstanding and entitled to vote. Each
share of PHFG Common Stock entitles the holder thereof to one vote at the PHFG
Special Meeting on all matters properly presented thereat.
The close of business on July 19, 1996 has been fixed by the Family Board
as the Record Date for the determination of holders of Family Common Stock
entitled to notice of and to vote at the Family Special Meeting and any
adjournment or adjournments thereof. At the close of business on the Record
Date, there were 4,215,211 shares of Family Common Stock outstanding and
entitled to vote. Each share of Family Common Stock entitles the holder thereof
to one vote at the Family Special Meeting on all matters properly presented
thereat.
VOTES REQUIRED
A quorum, consisting of the holders of a majority of the issued and
outstanding shares of PHFG Common Stock or Family Common Stock, as the case may
be, must be present in person or by proxy before any action may be taken at the
PHFG Special Meeting or the Family Special Meeting, as the case may be. A
majority of the votes cast at the PHFG Special Meeting by holders of PHFG Common
Stock, voting in person or by proxy, on the proposal to approve the Agreement is
necessary to approve the Agreement on behalf of PHFG, and the affirmative vote
of the holders of two thirds of the outstanding shares of Family Common Stock,
voting in person or by proxy, is necessary to approve the Agreement on behalf of
Family.
20
<PAGE> 25
The proposal to adopt the Agreement is considered a "non-discretionary
item" whereby brokerage firms may not vote in their discretion on behalf of
their clients if such clients have not furnished voting instructions.
Abstentions and such broker "non-votes" at the PHFG Special Meeting and the
Family Special Meeting will be considered in determining the presence of a
quorum at the PHFG Special Meeting and the Family Special Meeting, respectively,
but will not be counted as a vote cast with respect to the Agreement.
Abstentions and broker "non-votes" will have no effect on the voting with
respect to the proposal to adopt the Agreement at the PHFG Special Meeting.
However, because the proposal to adopt the Agreement is required to be approved
by the holders of two thirds of the outstanding shares of Family Common Stock,
abstentions and broker "non-votes" will have the same effect as a vote against
this proposal at the Family Special Meeting.
VOTING AND REVOCATION OF PROXIES
Each copy of this Prospectus/Joint Proxy Statement mailed to holders of
PHFG Common Stock and Family Common Stock is accompanied by a form of proxy for
use at the PHFG Special Meeting or the Family Special Meeting, as the case may
be. Any shareholder executing a proxy may revoke it at any time before it is
voted by (i) filing with the Secretary of PHFG (in the case of a PHFG
shareholder) or the Secretary of Family (in the case of a Family shareholder) at
the address of PHFG or Family set forth on its respective Notice of Special
Meeting of Shareholders, written notice of such revocation; (ii) executing a
later-dated proxy; or (iii) attending the PHFG Special Meeting or the Family
Special Meeting, as applicable, and giving notice of such revocation in person.
Attendance at the applicable Special Meeting will not, in and of itself,
constitute revocation of a proxy.
Each proxy returned to PHFG or Family (and not revoked) by a holder of PHFG
Common Stock and Family Common Stock, respectively, will be voted in accordance
with the instructions indicated thereon. If no instructions are indicated, the
proxy will be voted for approval of the Agreement.
It is not expected that any matter other than those referred to herein will
be brought before either of the Special Meetings. If other matters are properly
presented, however, the persons named as proxies will vote in accordance with
their judgment with respect to such matters. The parties may propose one or more
adjournments of the PHFG Special Meeting or the Family Special Meeting, as the
case may be, in order to permit further solicitation of proxies in favor of the
Agreement. No proxy which is voted against the proposal to approve the
Agreement, however, will be voted in favor of any such adjournment.
SOLICITATION OF PROXIES
Each of PHFG and Family will bear its costs of mailing this
Prospectus/Joint Proxy Statement to its shareholders, as well as all other costs
incurred by it in connection with the solicitation of proxies from its
shareholders on behalf of its Board of Directors, except that PHFG and Family
will share equally the cost of printing this Prospectus/Joint Proxy Statement.
In addition to solicitation by mail, the directors, officers and employees of
each company and its subsidiaries may solicit proxies from shareholders of such
company by telephone, telegram or in person without compensation other than
reimbursement for their actual expenses. Arrangements also will be made with
brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and PHFG or Family, as the case may be, will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
PHFG and Family have retained Morrow & Co. and Corporate Investor
Communications, Inc., respectively, professional proxy solicitation firms, to
assist PHFG and Family, respectively, in the solicitation of proxies. The fee
payable to such firms in connection with the Merger is $5,500 and $4,000 in the
case of PHFG and Family, respectively, plus in each case reimbursement for
reasonable out-of-pocket expenses.
21
<PAGE> 26
THE MERGER
The following information relating to the Merger does not purport to be
complete and is qualified in its entirety by reference to the Agreement, a copy
of which is attached to this Prospectus/Joint Proxy Statement as Annex I. All
shareholders are urged to read the Agreement carefully.
GENERAL
In accordance with the terms of and subject to the conditions set forth in
the Agreement, Family will be merged with and into PHMC, with PHMC as the
surviving corporation of the Merger. Upon consummation of the Merger, PHMC shall
succeed to all the rights, obligations and properties of Family, the separate
corporate existence of which shall cease as a result of the Merger.
The Agreement provides that at the Effective Time each outstanding share of
Family Common Stock (other than (i) any dissenting shares under the MBCL and
(ii) any shares held by PHFG or a subsidiary thereof other than in a fiduciary
capacity or in satisfaction of a debt previously contracted) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive 1.26 shares of PHFG Common Stock, subject to
possible adjustment under certain circumstances, plus cash in lieu of any
fractional share interest.
No fractional shares of PHFG Common Stock shall be issued in the Merger to
holders of shares of Family Common Stock. Each holder of shares of Family Common
Stock who otherwise would have been entitled to a fraction of a share of PHFG
Common Stock shall receive in lieu thereof, at the time of surrender of the
certificate or certificates representing such holder's shares of Family Common
Stock, an amount of cash (without interest) determined by multiplying the
fractional share interest to which such holder would otherwise be entitled by
the closing per share price of the PHFG Common Stock on NASDAQ on the business
day preceding the Effective Time.
Each of the PHFG Board and the Family Board has unanimously approved the
Agreement and the transactions contemplated thereby and believes that the Merger
is fair to and in the best interests of PHFG and Family, respectively, and its
respective shareholders. ACCORDINGLY, THE BOARD OF DIRECTORS OF EACH OF PHFG AND
FAMILY UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF PHFG AND FAMILY,
RESPECTIVELY, VOTE "FOR" APPROVAL OF THE AGREEMENT.
BACKGROUND OF THE MERGER
Over the past several years, the Family Board and its senior executive
officers have regularly reviewed Family's strategic alternatives with the
assistance of Family's financial advisor. These reviews have focused on
assessing Family's opportunities for increasing long-term shareholder value,
including opportunities for enhancing earnings internally and for growth through
possible strategic acquisitions or affiliations with other financial
institutions. Family's successful acquisitions of Lowell Institution for Savings
from the FDIC in 1991 and Plaistow Bank and Trust Company in 1994 ("Plaistow")
were two results of Family's long-term strategic planning process.
In 1995, the first full year of operations that included Plaistow, Family
enjoyed record earnings of approximately $8.0 million. Although gratified by
this success and optimistic about its ability to maintain this level of
earnings, Family recognized that its ability to continually produce increasing
earnings growth in the future would be difficult for a number of reasons,
including intense competition for loans in Family's market, the fact that
Family's operating expenses had already been reduced to a level below peer
averages and the reduced availability of small in-market banks that might be
acquisition targets.
In early 1996, after an extensive review of the banking environment,
Family's management and Board concluded that, while Family was poised to
continue earning a good return for its shareholders, it was appropriate to
explore whether a strategic combination with another financial institution might
have the potential for creating even greater shareholder value. Exploring
possible strategic alliances seemed especially advisable following the late 1995
announcements of two significant New Hampshire bank acquisitions
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(including PHFG's acquisition of BNHC), which resulted in increasing attention
being focused on Merrimack Valley financial institutions as potential
acquisition targets.
Given PHFG's recent acquisition activity in New Hampshire (contiguous to
Family's New Hampshire franchise), its financial strength, and its community
banking focus, it appeared to Family that PHFG might have a strong strategic
interest in Family's franchise and that an affiliation with PHFG might be
possible on terms that would enhance long-term shareholder value. Therefore,
after consulting with members of the Family Board's Mergers and Acquisitions
Committee, Family's President, David Hindle, scheduled a meeting for January 16,
1996 with PHFG's President, William Ryan. At that meeting, Mr. Hindle and Mr.
Ryan spoke in general terms about the two companies' business philosophies,
their complementary geographic and product franchises and the rationale for a
potential business combination between them. At that meeting, Mr. Ryan indicated
that PHFG was interested in moving into northern Massachusetts and that,
although there were other possible targets in Family's market, Family appeared
to be the most attractive vehicle for an entrance into northern Massachusetts
for a variety of reasons, including Family's geographic franchise and earnings
performance.
Following the initial meeting between the two presidents, the Family Board
met on January 19, 1996 to discuss strategic alternatives available to Family,
including the pursuit of potential acquisition targets, adopting a "wait and
see" attitude toward the consolidation activity in the New England market,
pursuing a "merger of equals" with another similarly-sized institution or
exploring a strategic affiliation with a larger institution such as PHFG. After
much discussion of various options available to Family, the Family Board agreed
that it made sense to keep the lines of communication open with PHFG, with the
understanding that PHFG was not in a position to engage in serious negotiations
at that time in light of its pending acquisition of BNHC. To that end, Mr.
Hindle and Mr. Ryan continued their informal discussions at two subsequent
meetings, on February 22, 1996 and March 14, 1996.
During this period, Family's management, with the assistance of MB&D, its
financial advisor, continued to consider whether or not there were other
possible strategic partners that seemed as potentially attractive as PHFG from a
shareholder, employee, and strategic "fit" perspective. After determining that
only New England-based financial institutions would be likely to have a
strategic interest in an $890 million institution headquartered in the Merrimack
Valley, Family compiled a list of New England institutions that appeared to have
the financial capability to pursue a combination with Family. State laws
limiting total deposits in Massachusetts and New Hampshire appeared to place
certain large financial institutions at a disadvantage as potential partners. Of
those few institutions remaining on the list, Family and its advisors made
judgments (based on publicly-available information) about the apparent depth of
financial capacity, the apparent strategic logic of an entrance into Family's
markets and the apparent cultural "fit" with Family's community banking
philosophy. Based upon this analysis, Family confirmed its earlier judgment that
PHFG appeared to be the most logical potential partner, and would be most likely
to be in a position to enter into a strategic alliance on terms that would be
attractive to Family's shareholders, employees, customers and community.
At a meeting of the Family Board on March 25, 1996, representatives of MB&D
and Foley, Hoag & Eliot LLP (Family's legal counsel) made presentations to the
Family Board outlining various factors to be considered in evaluating various
strategic alternatives, including remaining an independent entity, seeking to
acquire smaller institutions, seeking a merger of equals and entering into a
strategic combination with a larger institution. Family's financial advisor also
reviewed with the Family Board an analysis of PHFG and the other New England
financial institutions that appeared to have the financial capacity to consider
a transaction with Family. After the presentations and lengthy discussions, the
Family Board authorized Mr. Hindle to seek a nonbinding expression of interest
from PHFG, outlining the proposed terms of a possible business combination.
On March 28, 1996, Family received a letter from PHFG which indicated
PHFG's interest in discussing a transaction with Family and proposed in general
terms the structure of a possible transaction and potential plans for
integrating the combined companies. The March 28 letter summarized the informal
discussions that Mr. Hindle and Mr. Ryan had held, but did not constitute an
offer or propose any financial terms of a possible
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transaction. The March 28 letter included a Confidentiality Agreement, which the
parties signed as of April 3, 1996.
During the month of April, Family and PHFG were occupied with other
matters, including preparing for their respective annual shareholders meetings,
and as a result the parties held no further meetings until May 3, 1996. At the
May 3 meeting, Family and PHFG exchanged and discussed certain confidential
financial information to enable the parties to further assess the viability of a
business combination between them. Over the next several days, officers of PHFG
and Family continued to exchange confidential financial and operational data.
On May 15, 1996, PHFG sent a letter to Family setting forth a proposed
exchange ratio and other terms of a possible combination. Over the next several
days, senior management and financial advisors of each of Family and PHFG
continued to discuss the financial and other terms of the proposed merger,
including the Exchange Ratio, and issues relating to the management and
operations of the parties following the Merger. During this period the Exchange
Ratio was determined on the basis of arms'-length negotiations between the
parties.
On May 22, 1996, the Family Board met to discuss the terms of the proposal.
Mr. Hindle reviewed with the Family Board the reasons for and the potential
benefits of the Merger, and Family's financial and legal advisors made further
presentations about the terms of the proposal, the available alternatives and
the factors to be considered. After a lengthy discussion, the Family Board
authorized management to move forward to negotiate the terms of a definitive
Merger Agreement for presentation to the Family Board at a meeting the following
week.
Over the next week, the parties and their representatives conducted due
diligence with respect to the other's financial condition and other relevant
matters. Also during that week, the parties and their legal counsel negotiated
the terms of the definitive Agreement and the Stock Option Agreements. Family
representatives met with Family's legal and financial advisors on May 27, 1996
to discuss a draft Agreement and the provisions requiring further negotiation.
After discussing various provisions with PHFG representatives by phone and
circulating written comments by fax, the parties and their legal and financial
advisors met on May 28 to negotiate the remaining issues in the Agreement.
On May 29, 1996, Mr. Hindle met with each of the Family directors
individually to deliver drafts of the Agreement for their review and to inform
them of the status of the negotiations.
At a meeting on May 30, 1996, the Family Board met to consider the
Agreement in final form. The Family Board heard detailed reports on the results
of the due diligence on the financial condition and operations of PHFG,
including its recently-acquired subsidiary, Bank of New Hampshire. Family's
legal counsel reviewed the terms of the Agreement, the Stock Option Agreements
and the Stockholders Agreement. Representatives of MB&D made a detailed
presentation regarding the financial terms of the Merger, and advised the Family
Board that, in the opinion of MB&D, and based on facts known to MB&D at that
date, the Exchange Ratio was fair, from a financial point of view, to the Family
shareholders as of that date, and that absent significant change in the two
companies' financial condition or in the market for their securities, MB&D
anticipated that it would be prepared to issue a similar written opinion as of
the date of the proxy statement mailed to shareholders of Family to solicit
approval of the Agreement. After several hours of discussion, the Family Board
unanimously voted to approve the Agreement and the Stock Option Agreements and
the transactions contemplated thereby.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Family. In reaching its determination to approve and adopt the Agreement
and the transactions contemplated thereby, the Family Board considered a number
of factors, including, without limitation, the following:
(i) the Family Board's belief, based on the analysis of and
presentation to the Family Board by MB&D of Family's strategic
alternatives, that the Merger represented an attractive strategic
alternative to Family for enhancing shareholder value;
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(ii) the Family Board's review of the banking environment in which
Family is now, and in the future would be, competing, including, but not
limited to, the significant consolidation and increasingly competitive
climate in the banking and financial services markets, both in the United
States as a whole and in New England in particular, and the prospect for
further changes in these markets;
(iii) the Family Board's view of the increasing importance of the
economies of scale and of access to greater financial resources to a bank's
ability to capitalize on opportunities in the banking and financial
services markets;
(iv) the Family Board's review, with the assistance of management and
MB&D, of the financial condition, results of operations, business and
overall prospects of PHFG, as well as of management's best estimates of
Family's prospects;
(v) the financial presentation of MB&D and the opinion of MB&D as to
the fairness from a financial point of view of the Exchange Ratio to Family
and its shareholders (see "The Merger -- Opinions of Financial
Advisors -- Family");
(vi) the anticipated cost savings and operating efficiencies available
to the combined institution from the Merger;
(vii) the Family Board's belief that the terms of the Agreement are
attractive in that the agreement allows Family shareholders to become
shareholders in a combined institution with a strong competitive position
in the Maine, New Hampshire and northern Massachusetts markets while
permitting the continued existence of Family Bank and the "Family Bank"
name;
(viii) the Family Board's belief that the Merger provides an
opportunity for the shareholders of Family to receive an increase in
dividends;
(ix) the Family Board's assessment that affiliation with a
community-based institution would put Family in a good position to be able
to continue its high level of personal service to its customers and the
Massachusetts and New Hampshire communities that it serves;
(x) the expected effects of the Merger on Family's other
constituencies, including its senior management and other employees and the
communities served by Family and Family Bank;
(xi) the Family Board's awareness and assessment of the potential that
the Merger could be expected to provide more Family employees with
continued employment and other benefits than certain other potential
business combinations might have provided (see "The Merger -- Interests of
Certain Persons in the Merger");
(xii) the expectation that the Merger will generally be a tax-free
transaction to Family and its shareholders (see "The Merger -- Certain
Federal Income Tax Consequences"); and
(xiii) the nature of, and likelihood of obtaining, the regulatory
approvals that would be required with respect to the Merger.
The foregoing discussion of the information and factors discussed by the
Board of Directors is not meant to be exhaustive but is believed to include all
material factors considered by Family's Board. The Board did not quantify or
attach any particular weight to the various factors that it considered in
reaching its determination that the Merger is in the best interests of Family
and its shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE FAMILY BOARD HAS DETERMINED THE MERGER
TO BE FAIR TO AND IN THE BEST INTERESTS OF FAMILY AND ITS SHAREHOLDERS AND HAS
UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER. ACCORDINGLY, THE FAMILY BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
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PHFG. In reaching its determination to approve and adopt the Merger
Agreement and the transactions contemplated thereby, the PHFG Board considered a
number of factors, including, without limitation, the following:
(i) the PHFG Board's review, with the assistance of management and of
Keefe Bruyette, of the financial condition, results of operations, business
and overall prospects of Family;
(ii) the fact that Family's strong banking franchise is contiguous to
PHFG's existing banking franchise in New Hampshire and that the Merger
would result in PHFG having a significant presence in important markets in
northern Massachusetts;
(iii) the enhanced ability of the combined entity to compete against
larger competitors;
(iv) the financial presentations of senior management and Keefe
Bruyette and the opinion of Keefe Bruyette as to the fairness of the
Exchange Ratio from a financial point of view to the PHFG shareholders (see
"The Merger -- Opinions of Financial Advisors -- PHFG");
(v) the anticipated cost savings and operating efficiencies available
to the combined institution from the Merger;
(vi) the expectation that the Merger will be a tax-free transaction to
PHFG and its subsidiaries;
(vii) the nature of, and likelihood of obtaining, the regulatory
approvals that would be required with respect to the Merger; and
(viii) the estimated effects of a program to repurchase approximately
2.6 million shares of PHFG Common Stock in connection with the acquisition
of Family (see "Pro Forma Combined Consolidated Financial Information").
The foregoing discussion of the information and factors discussed by the
Board of Directors is not meant to be exhaustive but is believed to include all
material factors considered by PHFG's Board. The Board did not quantify or
attach any particular weight to the various factors that it considered in
reaching its determination that the Merger is in the best interests of PHFG and
its shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE PHFG BOARD HAS DETERMINED THE MERGER
TO BE FAIR TO AND IN THE BEST INTERESTS OF PHFG AND ITS SHAREHOLDERS AND HAS
UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER. ACCORDINGLY, THE PHFG BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
Family. MB&D has delivered to the Family Board its written opinion, as of
a date shortly prior to the date of this Prospectus/Joint Proxy Statement, that
the Exchange Ratio is fair, from a financial point of view, to Family's
shareholders. MB&D has acted as financial advisor to Family since July 1995 in
connection with Family's ongoing strategic planning process, including the
evaluation of strategic and business plans, the evaluation of hypothetical
affiliation opportunities and a variety of general corporate finance issues. In
addition, one of the members of MB&D's Corporate Finance Department served as
Family's financial advisor for over three years prior to his affiliation with
MB&D in July 1995.
MB&D advised Family during the negotiation process leading up to the
execution of the Agreement and provided Family with various analyses as to the
range of financially feasible exchange ratios that might be received in a
hypothetical transaction. Representatives of MB&D met with the executive
management and the Family Board on a number of occasions in connection with the
preparation and analysis of Family's strategy. Family consulted with MB&D in
connection with its negotiation of the Exchange Ratio.
MB&D was retained based on its qualifications and experience in the
financial analysis of banking and thrift institutions, knowledge of the
Massachusetts and New England banking markets and its experience with
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merger and acquisition transactions involving banking institutions. Members of
the Corporate Finance Department of MB&D have advised financial institution
clients on more than 50 successfully completed mergers or acquisitions of
financial institutions, many of those in the New England marketplace.
The full text of the opinion of MB&D, which sets forth assumptions made,
matters considered and limits on the review undertaken by MB&D, is attached
hereto as Annex V. Family's shareholders are urged to read the opinion in its
entirety. MB&D's opinion is directed only to the Exchange Ratio and does not
constitute a recommendation to any holder of Family Common Stock as to how such
holder should vote on the Agreement. The summary of the opinion of MB&D set
forth in this Prospectus/Joint Proxy Statement was provided to Family by MB&D
and is qualified in its entirety by reference to the full text of the opinion
itself. MB&D's opinion was necessarily based upon conditions as they existed and
should be evaluated on the date hereof and the information made available to
MB&D through the date hereof.
In arriving at its opinion, MB&D (i) reviewed the Agreement and this
Prospectus/Joint Proxy Statement in substantially the form to be sent to Family
shareholders; (ii) reviewed publicly available business and financial
information with respect to both Family and PHFG and certain internal financial
information and financial projections prepared by the managements of Family and
PHFG; (iii) held discussions with members of the senior management and Family
Board concerning the past and current results of operations of Family, its
current financial condition and management's opinion of its future prospects;
(iv) reviewed the historical reported price and record of trading volume for the
Family Common Stock and the PHFG Common Stock; (v) held discussions with the
senior management of PHFG concerning the current and past results of operations
of PHFG, its current financial condition and management's opinion of its future
prospects; (vi) considered the current state of and future prospects for the
economies of Massachusetts, Maine and New Hampshire generally and the relevant
market areas for Family and PHFG in particular; (vii) reviewed the specific
acquisition analysis models employed by MB&D to evaluate potential business
combinations of banking companies; (viii) reviewed the reported financial terms
of certain recent business combinations in the banking industry; and (ix)
performed such other studies and analyses as MB&D considered appropriate under
the circumstances associated with this particular transaction. No limitations
were imposed by the Family Board upon MB&D with respect to the investigations
made or procedures followed by MB&D in rendering its opinions.
MB&D's opinion takes into account its assessment of general economic,
market and financial conditions and its experience in other transactions, as
well as its experience in securities valuation and its knowledge of the banking
industry generally. For purposes of reaching its opinion, MB&D has assumed and
relied upon the accuracy and completeness of the information provided to it by
Family and PHFG, and does not assume any responsibility for the independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of either Family or PHFG. With respect to the
financial projections reviewed by MB&D in the course of rendering its opinion,
MB&D has assumed that such projections have been reasonably prepared to reflect
the best currently available estimates and judgment of the management of each of
Family and PHFG as to the most likely future performance of their respective
companies.
The following is a summary of material analyses employed by MB&D in
connection with rendering its written opinion. Given that it is a summary, it
does not purport to be a complete and comprehensive description of all the
analyses performed, or an enumeration of all the matters considered by MB&D in
arriving at its opinion. The preparation of a fairness opinion is a complicated
process, involving a determination as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, such an opinion is not readily susceptible
to a summary description. In arriving at its fairness opinion, MB&D did not
attribute any particular weight to any one specific analysis or factor
considered by it and made qualitative as well as quantitative judgments as to
the significance of each analysis and factor. Therefore, MB&D believes that its
analyses must be considered as a whole and believes that attributing undue
weight to any single analysis or factor considered could create a misleading or
incomplete view of the process leading to the formation of its opinion. In its
analyses, MB&D has made certain assumptions with respect to banking industry
performance, general business and economic conditions and other factors, many of
which are beyond the control of management of either Family or PHFG. Any
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estimates which are referred to in MB&D's analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
vary significantly from those set forth.
(a) Analysis of the Anticipated Merger and the Exchange Ratio in Relation
to PHFG. The consideration of the Exchange Ratio, valued at the closing price
of the Family Common Stock, $22.25, on the day prior to the announcement of the
Agreement (May 30, 1996), and the closing price of the PHFG Common Stock,
$19.75, on the day prior to the announcement of the Agreement, as well as the
30-day average closing price of the PHFG Common Stock, $20.51, on the day prior
to the announcement of the Agreement, represents the following transaction
multiples:
Transaction value: $24.89 per share of Family Common Stock based upon
the PHFG Common Stock closing price on May 30, 1996 and $25.84 based upon
the 30-day average closing price for the PHFG Common Stock for the period
ended May 30, 1996.
Multiple of earnings based upon the May 30, 1996 PHFG Common Stock
single-day closing price: (i) 12.76 times Family's annualized earnings per
share for the 12 months ended March 31, 1996; (ii) 13.10 times Family's
earnings per share for 1995 and (iii) 13.38 times Family's budgeted
earnings per share for 1996.
Multiple of earnings based upon the 30-day average closing price for
the PHFG Common Stock for the period ended May 30, 1996: (i) 13.25 times
Family's annualized earnings per share for the 12 months ended March 31,
1996; (ii) 13.60 times Family's earnings per share for 1995 and (iii) 13.89
times Family's budgeted earnings per share for 1996.
Multiple of tangible book value based upon the May 30, 1996 PHFG
Common Stock single-day closing price: 1.61 times Family's tangible book
value per share as of March 31, 1996.
Multiple of tangible book value based upon the 30-day average closing
price for the PHFG Common Stock for the period ended May 30, 1996: 1.68
times Family's tangible book value per share as of March 31, 1996.
Multiple of book value based upon the May 30, 1996 PHFG Common Stock
single-day closing price: 1.48 times Family's book value per share as of
March 31, 1996.
Multiple of book value based upon the 30-day average closing price for
the PHFG Common Stock for the period ended May 30, 1996: 1.53 times
Family's book value per share as of March 31, 1996.
Multiple of market value based upon the May 30, 1996 PHFG Common Stock
single-day closing price: The approximate $24.89 in market value of the
consideration for each share of Family Common Stock based upon the PHFG
Common Stock closing price on the day prior to the announcement of the
Agreement represents a 12% premium over the closing price of a share of
Family Common Stock reported on NASDAQ on May 30, 1996 and a 26% premium
over the six-month average closing price of the Family Common Stock.
Multiple of market value based upon the 30-day average closing price
for the PHFG Common Stock for the period ended May 30, 1996: The
approximate $25.84 in market value of the consideration per share of Family
Common Stock based upon the 30-day average closing price of the PHFG Common
Stock represents a 16% premium to the closing price of the Family Common
Stock reported on NASDAQ on May 30, 1996 and a 30% premium over the
six-month average closing price of the Family Common Stock.
(b) Specific Acquisition Analysis. MB&D employs a number of proprietary
analysis models to examine hypothetical transactions involving banking and/or
thrift companies. The models use forecast earnings data, selected current period
balance sheet and income statement data, current market and trading information
and a number of assumptions as to interest rates for borrowed funds, opportunity
costs of funds, discount rates, dividend streams, effective tax rates and
transaction structures (the alternative or combinative uses of common equity,
cash, debt or other securities to fund a transaction). The models distinguish
between purchase and pooling accounting treatments and inquire into the likely
economic feasibility of a given
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hypothetical transaction, at a given price level or specified exchange rate and
employing a specified transaction structure. The models also permit an
examination of pro forma capital adequacy.
In connection with the Agreement, MB&D evaluated the Exchange Ratio in an
all common stock purchase accounting transaction based on PHFG's stated intent
to repurchase approximately 2.6 million shares of PHFG Common Stock in
connection with the acquisition of Family. Based upon the financial projections
of the respective managements and after consideration of the potential for the
realization of reasonable expense savings which are expected by PHFG and Family
to result from the consolidation of selected operational functions of Family and
PHFG, little or no ongoing earnings dilution is projected to result from the
contemplated transaction. MB&D anticipates that if the potential for cost
savings is realized, the transaction will become accretive to the projected
future stand-alone earnings per share of PHFG. Such accretion may be further
enhanced as identified product cross-selling opportunities and other revenue
enhancement options are pursued.
(c) Discounted Cash Flow Analysis. MB&D also completed two discounted cash
flow analyses to permit the conceptual examination of the present discounted
values of potential future results employing selected assumptions and discount
rates.
In the first discounted cash flow analysis, MB&D discussed with the
management of Family a projection of hypothetical earnings per share results for
calendar years 1996, 1997 and 1998 of $2.09, $2.35 and $2.71, respectively, with
subsequent earnings equal to a return on assets of 1.25%, and employed a
hypothetical dividend pay-out ratio assumption which depicted average annual
pay-outs as a percentage of earnings increasing gradually from a level of 22% to
40% over a five-year period and a long-term growth rate of 4.0%. MB&D then
assumed that the control sale price/earnings ratio at the end of a five-year
period would approximate 12.5 times earnings, and in a separate exercise, a
price to tangible book value ratio of 160%. Given the five-year time horizon and
a discount rate of 12.5%, these cash flow calculations resulted in a range of
present discounted values of cash flows of $21.38 to $23.99, which can be
compared to the nominal present value of the proposed Exchange Ratio of
approximately $25.84 based upon the trailing 30-day average closing price of the
PHFG Common Stock and $24.89 based upon the closing price of the PHFG Common
Stock on the day before announcement of the Agreement.
In the second discounted cash flow analysis, MB&D employed an earnings
annuity concept in which it assumed that future earnings for Family would result
in a return on average equity of 1.25% in the twelve months subsequent to March
31, 1996 for the five following years, with average asset growth equal to 4.0%
in the twelve months subsequent to March 31, 1996 for the five following years,
and that the dividend pay-out ratio would increase to 30% for the five-year
period. MB&D employed a discount rate for all cash flows of 12.5% and a
long-term growth rate of earnings in years six and beyond of 4.0% annually.
Given a five-year time horizon, this resulted in a present discounted value of
the resulting cash flows of $24.69, which can be compared to the nominal present
value of the proposed Exchange Ratio of approximately $25.84 based upon the
trailing 30-day average closing price of the PHFG Common Stock and $24.89 based
upon the closing price of the PHFG Common Stock on the day before announcement
of the Agreement.
It is important to note that the discount factors employed embody both the
concept of a riskless time value of money and risk factors that reflect the
uncertainty of the forecast cash flows and terminal price/earnings multiples.
Use of higher discount rates would result in lower discounted present values.
Conversely, use of lower discount rates would result in higher discounted
present values. MB&D advised the Family Board that although discounted cash flow
analysis is a widely used valuation methodology, it relies on numerous
assumptions, including discount rates, terminal values, earnings and asset
growth, as well as dividend payout ratios. Any or all of these assumptions may
vary from actual future performance and results.
MB&D also considered the fact that Family shareholders would substantially
increase their prospect for annual dividends based upon current and projected
dividend streams of both Family and PHFG. Based upon an annualization of the
quarterly dividend payout rate of PHFG as of May 30, 1996, Family shareholders
would receive an equivalent dividend per share of Family Common Stock of $0.86
per year based on the Exchange Ratio, which represents a 79% increase in the
annualized dividend of $0.48 per share of Family Common Stock being paid by
Family at May 30, 1996.
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(d) Analysis of Other Comparable Transactions. MB&D is reluctant to place
excessive emphasis on "comparables analysis" as a valuation methodology due to
what it considers to be inherent limitations of the application of the results
to specific cases. It has observed that such analysis as employed by some
industry observers and financial advisors frequently fails to adequately take
into consideration such factors as material differences in the underlying
capitalization of the comparable institutions which are being acquired;
differences in the historic earnings (or loss) patterns recorded by the compared
institutions which can depict a very different trend than might be implied by
examining only recent financial results; failure to exclude non-recurring profit
or loss items from the last twelve months' earnings streams of target companies,
which can distort apparent earnings multiples; differences in the form or forms
of consideration used to complete the transaction; differences between the
planned method of accounting for the completed transaction; and such less
accessible factors as the relative population, business and economic
demographics of the acquired entities' markets as compared or contrasted to such
factors for the markets in which comparable entities are doing business.
Comparables analysis also rarely seems to take into consideration the degree of
facilities overlap between the acquirer's market and that of the target or the
absence of such overlap and the resulting cost savings differentials between
otherwise apparently comparable transactions. MB&D consequently believes that
comparables analysis has limitations.
Nevertheless, between March and May of 1996, MB&D reviewed a universe of 27
publicly announced transactions in the financial institutions industry in which
either a bank or a thrift (or their respective holding companies) engaged in the
acquisition of another financial institution. These transactions were announced
after August 1, 1994 and prior to May 30, 1996. All of the examined transactions
involved entities doing business in New England.
The 27 transactions reviewed by MB&D are as follows: Hubco Inc.'s
acquisition of Hometown Bancorp.; CFX Corporation's acquisition of Milford Co-op
Bank; Hubco Inc.'s acquisition of Lafayette American Bank and Trust Company; CFX
Corporation's acquisition of The Safety Fund Corporation; NE Community Bancorp's
acquisition of Manchester State Bank; Citizens Financial Group, Inc.'s
acquisition of First NH Banks, Inc.; Bank of Boston Corporation's acquisition of
BayBanks, Inc.; PHFG's acquisition of BNHC; Chittenden Corp.'s acquisition of
Flagship Bank & Trust; Community Bankshares' acquisition of Centerpoint Bank;
Center Financial Corp.'s acquisition of Great Country Bank; Albank Financial
Corp.'s acquisition of Marble Financial Corp.; Webster Financial Corp.'s
acquisition of Shelton Bancorp; The Co-operative Bank of Concord's acquisition
of Bank of Braintree; Bank of New York Co.'s acquisition of Putnam Trust Co.;
BayBanks, Inc.'s acquisition of Cornerstone Financial; Main Street Community
Bancorp's acquisition of Lexington Savings Bank; PHFG's acquisition of Bankcore,
Inc.; Fleet Financial Group, Inc.'s acquisition of Shawmut National Corporation;
BayBanks, Inc.'s acquisition of NFS Financial Corp.; Peterborough Savings Bank's
acquisition of Horizon Banks; Chittenden Corp.'s acquisition of Bank of Western
Massachusetts; First NH Banks, Inc.'s acquisition of Great Bay Bankshares, Inc.;
CFX Corporation's acquisition of Orange Savings Bank; Citizens Financial Group,
Inc.'s acquisition of Quincy Savings Bank; Shawmut National Corporation's
acquisition of Northeast Federal Corp.; and Fleet Financial Group, Inc.'s
acquisition of NBB Bancorp, Inc. From this universe, MB&D selected 12
transactions involving the acquisition of thrift institutions as being most
representative of the PHFG/Family transaction.
The 12 transactions selected as most representative were: CFX Corporation's
acquisition of Milford Co-op Bank; Center Financial Corp.'s acquisition of Great
Country Bank; Albank Financial Corp.'s acquisition of Marble Financial Corp.;
Webster Financial Corp.'s acquisition of Shelton Bancorp; The Co-operative Bank
of Concord's acquisition of Bank of Braintree; Main Street Community Bancorp's
acquisition of Lexington Savings Bank; BayBanks, Inc.'s acquisition of NFS
Financial Corp.; First NH Banks, Inc.'s acquisition of Great Bay Bankshares,
Inc.; CFX Corporation's acquisition of Orange Savings Bank; Citizens Financial
Group, Inc.'s acquisition of Quincy Savings Bank; Shawmut National Corporation's
acquisition of Northeast Federal Corp.; and Fleet Financial Group, Inc.'s
acquisition of NBB Bancorp, Inc.
Within this group of 12 transactions, the median multiple of tangible book
value paid by the acquiror was 152.5%, the maximum multiple paid was 199.3% and
the minimum multiple was 95.6%. These statistics can be compared to multiples of
tangible book value for the acquisition of Family based upon the values on the
day before announcement of the Agreement, which amount to 167.7% based upon the
nominal present value of the
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<PAGE> 35
Exchange Ratio of approximately $25.84 based upon the trailing 30-day average
closing price of the PHFG Common Stock on the day before announcement of the
Agreement and 161.5% based upon the nominal present value of the Exchange Ratio
of approximately $24.89 based upon the closing price of the PHFG Common Stock on
the day before announcement of the Agreement.
With respect to trailing 12 months earnings multiples for this same data
sample of 12 transactions, the median price/earnings multiple paid was 12.75 and
the maximum multiple was 16.74, while the minimum multiple was 9.95. These
statistics can be compared to 12 months earnings multiples for the acquisition
of Family based upon the indicated values on the day before announcement of the
Agreement, which amount to 13.25 based upon the nominal present value of the
Exchange Ratio of approximately $25.84 based upon the trailing 30-day average
closing price of the PHFG Common Stock on the day before the announcement of the
Agreement and 12.76 based upon the nominal present value of the Exchange Ratio
of approximately $24.89 based upon the closing price of the PHFG Common Stock on
the day before announcement of the Agreement.
Pursuant to a letter agreement with Family dated May 30, 1996, MB&D will
receive a fee of 1.0% of the value of the Merger consideration received by the
shareholders of Family for services rendered to Family in conjunction with the
proposed Merger. The fee represents compensation for services rendered in
connection with the analysis of the transaction, participation in the
negotiations between the parties and for the rendering of its opinions. Family
paid MB&D $75,000 upon signing the letter agreement with MB&D, $200,000
following the execution of the Agreement and an additional $275,000 upon receipt
of MB&D's opinion included in this Prospectus/Joint Proxy Statement. MB&D will
be paid any additional amounts needed to bring the total compensation received
to 1.0% of the transaction value at the time of closing of the transaction, or
$1.1 million, whichever is less, provided that MB&D will receive no less than
$880,000 in the event the Merger is consummated. Based upon a hypothetical
transaction value of $120 million at consummation, MB&D would receive
compensation of $1.1 million. In addition, Family has agreed to reimburse MB&D
for its reasonable out-of-pocket expenses incurred in connection with the
Merger. Family also has agreed to indemnify MB&D and its directors, officers and
employees against certain losses, claims, damages and liabilities relating to or
arising out of MB&D's engagement, including liabilities under the federal
securities laws.
PHFG. In the ordinary course of business Keefe Bruyette provides financial
advisory and investment banking services to PHFG. In recent years these services
have included acting as a financial advisor in connection with certain
acquisitions by PHFG and as a financial advisor and a standby underwriter in
connection with a public offering of PHFG Common Stock.
Keefe Bruyette was selected to act as PHFG's financial advisor in
connection with the acquisition of Family based upon its qualifications,
expertise and reputation. Keefe Bruyette specializes in the securities of
banking enterprises and regularly engages in the valuation of banking businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
In the ordinary course of business, Keefe Bruyette may from time to time
have long or short positions in, and buy or sell, debt and equity securities or
options on securities of PHFG and Family.
On May 28, 1996, at the meeting at which the PHFG Board approved and
adopted the Agreement and the transactions contemplated thereby, Keefe Bruyette
rendered its oral opinion to the PHFG Board that, as of such date, the Exchange
Ratio was fair to the shareholders of PHFG from a financial point of view. That
opinion was updated as of a date shortly prior to the date of this
Prospectus/Joint Proxy Statement. In connection with its opinion dated as of a
date shortly prior to the date of this Prospectus/Joint Proxy Statement, Keefe
Bruyette also confirmed the appropriateness of its reliance on the analysis used
to render its May 28, 1996 opinion by performing procedures to update certain of
such analyses and by reviewing the assumptions on which such analyses were based
and the factors considered in connection therewith. No limitations were imposed
by the PHFG Board upon Keefe Bruyette with respect to the investigations made or
procedures followed by Keefe Bruyette in rendering its opinions.
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<PAGE> 36
Keefe Bruyette's opinion is addressed to the Board of Directors of PHFG and
does not constitute a recommendation as to how any shareholder of PHFG should
vote with respect to the Merger.
THE FULL TEXT OF THE OPINION OF KEEFE BRUYETTE, WHICH SETS FORTH A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROSPECTUS/JOINT PROXY
STATEMENT AS ANNEX VI AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS ARE
URGED TO READ THE OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF THE OPINION
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In rendering its opinion, Keefe Bruyette (i) reviewed the Agreement, Annual
Report to Shareholders of PHFG and Annual Reports on Form 10-K of PHFG and
Family for the year ended December 31, 1995, certain interim reports to
shareholders and Quarterly Reports on Form 10-Q of PHFG and Family and certain
internal financial analyses and forecasts prepared by PHFG management; (ii) held
discussions with members of senior management of PHFG regarding the past and
current business operations, regulatory relationships, financial condition and
future prospects of PHFG; (iii) compared certain financial and stock market
information for PHFG and Family with similar information for certain other
companies the securities of which are publicly traded; (iv) reviewed the
financial terms of certain recent business combinations in the banking and
thrift industries; and (v) performed such other studies and analyses as it
considered appropriate.
In conducting its review and arriving at its opinions, Keefe Bruyette
relied upon and assumed the accuracy and completeness of all of the financial
and other information provided to it or publicly available and Keefe Bruyette
did not assume any responsibility for independently verifying any of such
information. Keefe Bruyette relied upon the management of PHFG as to the
reasonableness and achievability of the financial and operating forecasts and
projections (and the assumptions and bases therefor) provided to it, and Keefe
Bruyette assumed that such forecasts and projections reflect the best currently
available estimates and judgments of PHFG and that such forecasts and
projections will be realized in the amounts and in the time periods currently
estimated by PHFG management. Keefe Bruyette also assumed that the aggregate
allowances for loan losses for PHFG and Family are adequate to cover such
losses. In rendering its opinion, Keefe Bruyette did not make or obtain any
evaluations or appraisals of the property of PHFG or Family, nor did it examine
any individual credit files.
The following is a summary of the material financial analyses employed by
Keefe Bruyette in connection with providing its oral opinion of May 28, 1996 and
does not purport to be a complete description of all analyses employed by Keefe
Bruyette.
(a) Summary of the Family Transaction. Keefe Bruyette calculated the
imputed per share value of the PHFG offer to holders of Family Common Stock
based on an Exchange Ratio of 1.26 shares of PHFG Common Stock for each share of
Family Common Stock and a PHFG Common Stock price of $19.88, which was the
closing price of a share of PHFG Common Stock on NASDAQ on May 24, 1996. The
resulting per share value of $25.04 was compared to Family's March 31, 1996
stated book value per share of $16.84 to render a multiple of 1.49 times book
value per share, its March 31, 1996 stated tangible book value per share of
$15.41 to render a multiple of 1.63 times tangible book value per share, its
trailing twelve months earnings per share of $1.95 to render a multiple of 12.84
times twelve months trailing earnings per share, its estimated 1996 earnings per
share of $2.05 as published by the Keefe Bruyette Research Department to render
a multiple of 12.22 times estimated future earnings per share and its stock
price of $24.00 as of May 24, 1996 to render a market premium of 4.34%. Keefe
Bruyette also calculated a deposit premium of 7.04% by dividing the premium paid
over tangible equity by the total deposits of Family as of March 31, 1996.
(b) Contribution Analysis. Keefe Bruyette analyzed the relative
contribution of each of Family and PHFG to certain balance sheet and income
statement items, including assets, deposits, shareholders' equity and estimated
earnings. Keefe Bruyette then compared the relative contribution of such balance
sheet and income statement items, with the pro forma ownership percentage of
approximately 18.0% for Family shareholders based on the Exchange Ratio. This
does not give effect to the planned repurchase by PHFG of approximately 2.6
million shares of PHFG Common Stock in connection with the acquisition of
Family. See "Pro Forma Combined Consolidated Financial Information." The
contribution analysis showed that under the PHFG proposal, Family would
contribute approximately 17.25% of the combined assets, 17.98% of the
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<PAGE> 37
combined deposits, 16.71% of the combined tangible equity and 12.93% of the
estimated 1996 combined net income.
(c) Comparable Transaction Analysis. Keefe Bruyette analyzed certain
comparable merger and acquisition transactions for financial institutions based
upon the acquisition price relative to stated book value, stated tangible book
value, latest twelve months earnings and projected earnings for the next fiscal
year. The information analyzed was compiled by Keefe Bruyette from both internal
sources and a data firm that monitors and publishes transaction summaries and
descriptions of mergers and acquisitions in the financial services industry. The
analysis included a review and comparison of the average book value multiples
and median earnings multiples represented by a sample of recently completed or
announced transactions, as segmented into: (a) all year to date May 28, 1996
announced transactions in which the selling institution was a thrift; (b) all
transactions announced in 1995 in which the selling institution was a thrift
located in New England; (c) transactions announced between January 1994 and May
1996 in which the seller was a thrift located in New England with assets greater
than $500 million and less than $5 billion; and (d) transactions announced
between January 1994 and May 1996 in which the seller was a commercial bank
located in New England with assets greater than $500 million and less than $5
billion. The following thrift acquisitions comprised group (c): Bank of Boston
Corporation acquisition of Boston Bancorp; BayBanks, Inc. acquisition of NFS
Financial Corporation; Citizens Financial Group, Inc. acquisition of Quincy
Savings Bank; Shawmut National Corporation acquisition of Northeast Federal
Corp.; Fleet Financial Group, Inc. acquisition of NBB Bancorp, Inc.; and Bank of
Boston Corporation acquisition of Pioneer Financial Co-operative Bank. The
following bank transactions comprised group (d): Hubco, Inc. acquisition of
Lafayette American Bank and Trust Company; PHFG acquisition of BNHC; Bank of New
York Co. acquisition of Putnam Trust Co.; and KeyCorp, Inc. acquisition of Casco
Northern Corporation from Bank of Boston Corporation.
<TABLE>
Based on stock price of PHFG of $19.88, the value to be issued in PHFG
Common Stock was $25.04 per share of Family Common Stock. The relative multiples
and implied transaction values for each of the comparable transaction groups are
provided in the following table:
<CAPTION>
AVERAGE
PRICE/
AVERAGE MEDIAN ESTIMATED
AVERAGE PRICE/ PRICE/ 1996
PRICE/ TANGIBLE LAST FOUR EARNINGS
BOOK VALUE BOOK VALUE QUARTERS PER SHARE
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
(a) Year to Date Nationwide Thrift Deals........... 145.50% 150.00% $19.50 NA
Implied Value per share of Family Common Stock..... $24.50 $23.12 38.03 NA
(b) All New England Thrift Transactions 1995....... 150.40% 150.40% 12.80 NA
Implied Value per share of Family Common Stock..... $25.33 $23.18 24.96 NA
(c) New England Comparable Thrift Transactions..... 174.15% 177.56% 14.77 $13.20
Implied Value per share of Family Common Stock..... $29.33 $27.36 28.80 27.06
(d) New England Comparable Bank Transactions....... 218.28% 224.19% 15.39 14.25
Implied Value per share of Family Common Stock..... $36.76 $34.55 30.01 29.21
</TABLE>
The high and low implied value per share of Family Common Stock set forth
in the above table is $38.03 and $23.12, respectively, and the average implied
value per share of Family Common Stock with and without banking transactions set
forth in the above table was $28.73 and $27.17, respectively.
(d) Financial Impact Analysis. Keefe Bruyette analyzed the estimated
financial impact of the Merger on PHFG based on various projections provided by
management of PHFG, estimated purchase accounting adjustments provided by
management of PHFG and the planned repurchase by PHFG of approximately 2.6
million shares of PHFG Common Stock in connection with the acquisition of
Family. For additional information in this regard, see "Pro Forma Combined
Consolidated Financial Information."
The preparation of a fairness opinion is a complex process and is not
necessarily amenable to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying Keefe Bruyette's opinion. In arriving at its fairness determination,
Keefe Bruyette considered the results of all such
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<PAGE> 38
analyses. None of the financial institutions selected for use in developing
comparisons is identical to PHFG and none of the other acquisitions evaluated by
Keefe Bruyette is identical to the Merger. Accordingly, Keefe Bruyette indicated
to the PHFG Board that analyses of the results described above are not purely
mathematical, but rather involve complex considerations and judgments concerning
differences in operating and financial characteristics, including, among other
things, differences in revenue composition and earnings performance among PHFG,
Family and the selected companies and acquisitions reviewed. The analyses were
prepared by Keefe Bruyette solely for the purpose of preparing its opinion of
May 28, 1996 to the PHFG Board as to the fairness of the Exchange Ratio to the
shareholders of PHFG, and do not purport to be appraisals or necessarily reflect
the prices at which PHFG or its securities may actually be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses.
The fairness opinion of Keefe Bruyette was provided to PHFG as part of its
services under a retainer agreement between PHFG and Keefe Bruyette, pursuant to
which PHFG pays to Keefe Bruyette an annual retainer of $50,000, plus reasonable
expenses, and in anticipation of Keefe Bruyette's involvement in the repurchase
program which PHFG intends to implement in connection with the acquisition of
Family. See "Pro Forma Combined Consolidated Financial Information." Pursuant to
the retainer agreement between PHFG and Keefe Bruyette, PHFG also agreed to
reimburse Keefe Bruyette for reasonable out-of-pocket expenses and disbursements
incurred in connection with its retention and to indemnify Keefe Bruyette
against certain liabilities, including liabilities under the federal securities
laws.
EXCHANGE OF FAMILY COMMON STOCK CERTIFICATES
At the Effective Time, each holder of a certificate or certificates
theretofore evidencing issued and outstanding shares of Family Common Stock,
upon surrender of the same to an agent, duly appointed by PHFG ("Exchange
Agent"), shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of full shares of PHFG Common Stock into
which the shares of Family Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been converted by virtue
of the Merger. As promptly as practicable after the Effective Time (and in no
event later than the fifth business day following the Effective Time), the
Exchange Agent shall mail to each holder of record of an outstanding certificate
which immediately prior to the Effective Time evidenced shares of Family Common
Stock, and which is to be exchanged for PHFG Common Stock by virtue of the
Merger, a form of letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to such certificate shall pass, only
upon delivery of such certificate to the Exchange Agent) advising such holder of
the terms of the exchange effected by the Merger and of the procedure for
surrendering to the Exchange Agent such certificate in exchange for a
certificate or certificates evidencing PHFG Common Stock and cash in lieu of any
fractional share interest. Upon surrender to the Exchange Agent of one or more
certificates evidencing shares of Family Common Stock, together with a properly
completed and executed letter of transmittal, the Exchange Agent will mail to
the holder thereof after the Effective Time a certificate or certificates
representing the number of full shares of PHFG Common Stock into which the
aggregate number of shares of Family Common Stock previously represented by such
certificate or certificates surrendered shall have been converted pursuant to
the Agreement, plus cash in lieu of any fractional share interest. PHFG shall be
entitled, after the Effective Time, to treat certificates representing shares of
Family Common Stock as evidencing ownership of the number of full shares of PHFG
Common Stock into which the shares of Family Common Stock represented by such
certificates shall have been converted pursuant to the Agreement,
notwithstanding the failure on the part of the holder thereof to surrender such
certificates.
After the Effective Time, there shall be no further transfer on the records
of Family of certificates representing shares of Family Common Stock. If any
such certificates are presented to Family or the transfer agent for the Family
Common Stock for transfer after the Effective Time, they shall be cancelled
against delivery of certificates for PHFG Common Stock in accordance with the
Agreement.
No dividends which have been declared on the PHFG Common Stock will be
remitted to any person entitled to receive shares of PHFG Common Stock under the
Agreement until such person surrenders the
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<PAGE> 39
certificate or certificates representing Family Common Stock, at which time such
dividends shall be remitted to such person, without interest.
ASSUMPTION OF FAMILY STOCK OPTIONS
Directors, officers and employees of Family have been granted options (the
"Family Options") to purchase shares of Family Common Stock, generally pursuant
to Family's 1995 Incentive and Nonqualified Stock Option Plan, 1986 Incentive
and Nonqualified Stock Option Plan and 1986 Nonemployees Nonqualified Stock
Option Plan (collectively, the "Family Stock Option Plans"). Under the
Agreement, each Family Option which is outstanding at the Effective Time,
whether or not exercisable, shall cease to represent a right to acquire shares
of Family Common Stock and shall be converted into an option to purchase shares
of PHFG Common Stock, and PHFG shall assume each Family Option, in accordance
with the terms of the applicable Family Stock Option Plan and stock option or
other agreement by which it is evidenced, except that from and after the
Effective Time, (i) PHFG and the Human Resources Committee of its Board of
Directors shall be substituted for Family and the committee of Family's Board of
Directors (including, if applicable, the entire Board of Directors of Family)
administering such Family Stock Option Plan, (ii) each Family Option assumed by
PHFG may be exercised solely for shares of PHFG Common Stock, (iii) the number
of shares of PHFG Common Stock subject to such Family Option shall be equal to
the number of shares of Family Common Stock subject to such Family Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
provided that any fractional shares of PHFG Common Stock resulting from such
multiplication shall be rounded down to the nearest share, and (iv) the per
share exercise price under each such Family Option shall be adjusted by dividing
the per share exercise price under each such Family Option by the Exchange
Ratio, provided that such exercise price shall be rounded up to the nearest
cent. The Agreement also provides that within 30 days after the Effective Time,
PHFG shall file a registration statement on Form S-3 or Form S-8, as the case
may be (or any successor or other appropriate forms), with respect to the shares
of PHFG Common Stock subject to such options and shall use its reasonable
efforts to maintain the current status of the prospectus or prospectuses
contained therein for so long as such options remain outstanding.
As of the date of the Agreement, there were Family Options to purchase an
aggregate of 233,606 shares of Family Common Stock outstanding, including Family
Options held by Messrs. Hindle, Fahey, Trombley, LaFlamme and Fenn to purchase
20,358 shares, 22,858 shares, 22,608 shares, 3,657 shares and 28,250 shares,
respectively, at prices which range from $3.33 per share to $17.50 per share.
The foregoing Family Options will be converted into options to purchase shares
of PHFG Common Stock in the manner set forth in the Agreement to the extent that
they are not exercised and do not expire in accordance with their terms prior to
the Effective Time.
REPRESENTATIONS AND WARRANTIES
In the Agreement each of PHFG and Family made customary representations and
warranties relating to, among other things, (i) corporate organization and
similar corporate matters; (ii) capital structure; (iii) authorization,
execution, delivery, performance and enforceability of the Agreement; (iv) the
absence of material conflicts or violations with organizational documents,
applicable laws or material contracts or agreements; (v) required regulatory
approvals; (vi) the absence of a Material Adverse Effect, as defined, since
March 31, 1996; (vii) the absence of material litigation; (viii) compliance with
applicable laws; (ix) the accuracy of documents filed with the SEC and banking
authorities; (x) employee benefit plans and related matters; (xi) tax returns
and payment of taxes; (xii) environmental matters; (xiii) brokers' and finders'
fees; and (xiv) the accuracy of information relating to it in this
Prospectus/Joint Proxy Statement.
CONDITIONS TO THE MERGER
The Agreement provides that consummation of the Merger is subject to the
satisfaction of certain conditions, or the waiver of such conditions by the
party or parties entitled to do so, at or before the Effective Time. Each of the
parties' obligations under the Agreement is subject to the following conditions:
(i) all corporate action (including without limitation approval by the requisite
votes of the shareholders of PHFG
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<PAGE> 40
and Family) necessary to authorize the execution and delivery of the Agreement
and consummation of the transactions contemplated thereby shall have been duly
and validly taken; (ii) the receipt of all necessary regulatory approvals and
consents required to consummate the Merger by any governmental authority, and
the expiration of all notice periods and waiting periods with respect thereto,
provided, however, that no required approval or consent shall be deemed to have
been received if it shall include any condition or requirement that,
individually or in the aggregate, would so materially reduce the economic or
business benefits of the transactions contemplated by the Agreement to PHFG that
had such condition or requirement been known PHFG, in its reasonable judgment,
would not have entered into the Agreement; (iii) none of PHFG or Family or their
respective subsidiaries shall be subject to any statute, rule, regulation, order
or decree which prohibits, restricts or makes illegal the consummation of the
Merger; (iv) the Registration Statement shall have become effective under the
Securities Act, and PHFG shall have received all permits, authorizations or
exemptions necessary under all state securities laws to issue PHFG Common Stock
in connection with the Merger, and neither the Registration Statement nor any
such permit, authorization or exemption shall be subject to a stop order or
threatened stop order by any governmental authority; (v) the shares of PHFG
Common Stock to be issued in connection with the Merger shall have been approved
for quotation on NASDAQ; and (vi) each of PHFG and Family shall have received an
opinion of its respective counsel to the effect that the Merger qualifies as a
reorganization within the meaning of Section 368 of the Code and, in the case of
Family, with respect to certain other related federal income tax considerations.
In addition to the foregoing conditions, the obligations of PHFG and PHMC
under the Agreement are conditioned upon (i) the accuracy in all material
respects as of the date of the Agreement and as of the Effective Time of the
representations and warranties of Family set forth in the Agreement, except as
to any representation or warranty which specifically relates to an earlier date
and except as otherwise contemplated by the Agreement; (ii) the performance in
all material respects of all covenants and obligations required to be complied
with and satisfied by Family; (iii) the receipt of a certificate from specified
officers of Family with respect to compliance with the conditions relating to
(i) and (ii) immediately above as set forth in the Agreement; (iv) the receipt
of an opinion from Family's legal counsel covering specified matters; (v) any
dissenting shares of Family Common Stock under the MBCL shall constitute not
more than 10% of the outstanding shares of Family Common Stock prior to the
Effective Time; (vi) the receipt of "comfort" letters from the independent
public accountants of Family as of specified dates; and (vii) the receipt by
PHFG of such certificates of Family's officers or others and such other
documents to evidence fulfillment of the conditions relating to Family as PHFG
may reasonably request. Any of the foregoing conditions may be waived by PHFG
and PHMC.
In addition to the other conditions set forth above, Family's obligations
under the Agreement are conditioned upon (i) the accuracy in all material
respects as of the date of the Agreement and as of the Effective Time of the
representations and warranties of PHFG set forth in the Agreement, except as to
any representation or warranty which specifically relates to an earlier date and
except as otherwise contemplated by the Agreement; (ii) the performance in all
material respects of all covenants and obligations required to be complied with
and satisfied by PHFG and PHMC; (iii) the receipt of a certificate from
specified officers of PHFG with respect to compliance with the conditions
relating to (i) and (ii) immediately above as set forth in the Agreement; (iv)
the receipt of an opinion from legal counsel to PHFG covering specified matters;
and (v) the receipt by Family of such certificates of PHFG's or PHMC's officers
or others and such other documents to evidence fulfillment of the conditions
relating to them as Family may reasonably request. Any of the foregoing
conditions may be waived by Family.
REGULATORY APPROVALS
Consummation of the Merger is subject to prior receipt of all required
approvals and consents of the Merger by all applicable federal and state
regulatory authorities. In order to consummate the Merger, PHFG must obtain the
prior consent and approval, as applicable, of the FRB, the OTS, the
Superintendent and the Massachusetts Board, the approval of which may not be
granted until it has received notice from the MHPF that PHFG and the MHPF have
made the arrangements required by Massachusetts law.
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<PAGE> 41
The Merger is subject to the prior approval of the FRB under Section 4 of
the BHCA, which requires PHFG to provide the FRB written notice of the Merger at
least 60 days before its consummation. In connection with such notice, the FRB
shall consider whether the acquisition of Family by PHFG can reasonably be
expected to produce benefits to the public such as greater convenience,
increased competition or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices.
The Merger is subject to the prior approval of the OTS under Section 10(e)
of the HOLA and regulations of the OTS thereunder. The OTS may deny an
application by an acquiror to acquire control of a savings association if (i)
the OTS finds that the financial and managerial resources and future prospects
of the acquiror and the savings association would be detrimental to the savings
association or the insurance risk to the FDIC or (ii) the acquiror fails or
refuses to furnish information requested by the OTS. Pursuant to the applicable
provisions of the HOLA and regulations thereunder, the OTS may not approve an
acquisition of control of a savings association if (i) such transaction would
result in a monopoly or would be in furtherance of any combination or conspiracy
to monopolize or attempt to monopolize the business of banking in any part of
the United States; (ii) the effect of such transaction, in any section of the
country, may be to substantially lessen competition, or tend to create a
monopoly, or in any other manner to restrain trade, in each case unless the OTS
finds that the anticompetitive effects of the proposed transaction are clearly
outweighed in the public interests by the probable effect of the transaction in
meeting the convenience and needs of the community to be served; or (iii) the
acquiror fails to provide adequate assurances to the OTS that the acquiror will
make available to the OTS such information on the operations or activities of
the acquiror and any affiliate thereof as the OTS determines to be appropriate
to determine and enforce compliance with the HOLA. Consideration of the
managerial resources of an acquiror or savings association shall include
consideration of the competence, experience and integrity of the directors,
officers and controlling shareholders of the acquiror and the savings
association.
Consummation of the Merger also requires the approval of the Superintendent
under Part 10 of Title 9-B of the Maine Revised Statutes. The Superintendent
shall not approve an application for such a transaction unless he determines,
after a consideration of all relevant evidence, that it would contribute to the
financial strength and success of the applicant and promote the convenience and
advantage of the public. The factors to be considered by the Superintendent in
this regard are substantially similar to those to be considered by federal
banking agencies, as discussed above.
The Merger also is subject to approval of the Massachusetts Board under
Sections 2 and 4 of Chapter 167A of the Massachusetts General Laws.
Massachusetts law requires that the Massachusetts Board find that the Merger
would not unreasonably affect competition among banking institutions and that it
would promote public convenience and advantage. In making such a determination,
the Massachusetts Board must consider, among other things, a showing of net new
benefits, including initial capital investments, job creation plans, consumer
and business services, commitments to maintain and open branch offices within
Family Bank's statutorily delineated local community, and such other matters as
the Massachusetts Board may deem necessary or advisable.
In addition, Massachusetts law provides that the Massachusetts Board cannot
approve the Merger until it has received notice from the MHPF that arrangements
satisfactory to the MHPF have been made for the proposed acquiror to make 0.9
percent of its assets located in Massachusetts available for call by the MHPF
for a period of ten years for purposes of funding various affordable housing
programs. Massachusetts law provides that such funds shall bear interest at
rates approved by the Massachusetts Commissioner of Banks ("Massachusetts
Commissioner"), which shall be based upon the cost (not to include lost
opportunity costs) incurred in making funds available to the MHPF. Pursuant to
this requirement, Family Bank and PHFG, as lender and guarantor, respectively,
will enter into a loan agreement with the MHPF pursuant to which Family Bank
will agree to make funds available for call by MHPF's Board.
Under Massachusetts law, PHFG also would be required to maintain, for a
period of two years following the consummation of the Merger, the asset base of
Family Bank at a level equal to or greater than the total assets of such bank on
the date of consummation, provided, however, that the Massachusetts Commissioner
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may waive such asset retention requirement if, in his judgment, economic
conditions warrant such waiver. PHFG currently intends to request confirmation
from the Massachusetts Commissioner that this requirement does not apply to the
assets of Family Bank located in New Hampshire and, thus, the sale of certain of
Family Bank's branch offices in New Hampshire to BNH. See "The Merger -- Branch
Sale."
Applications have been or will be filed with applicable regulatory
authorities for approval of the Merger. Although neither PHFG nor Family is
aware of any basis for disapproving the Merger, there can be no assurance that
all requisite approvals will be obtained, that such approvals will be received
on a timely basis or that such approvals will not impose conditions or
requirements which, individually or in the aggregate, would so materially reduce
the economic or business benefits of the transactions contemplated by the
Agreement to PHFG that had such condition or requirement been known PHFG, in its
reasonable judgment, would not have entered into the Agreement. If any such
condition or requirement is imposed, the Agreement permits the Board of
Directors of PHFG to terminate the Agreement.
BUSINESS PENDING THE MERGER
Pursuant to the Agreement, Family agreed that, except as contemplated by
the Agreement or with the prior written consent of PHFG, during the period from
the date of the Agreement and continuing until the Effective Time it and Family
Bank shall carry on their respective businesses in the ordinary course
consistent with past practice. Pursuant to the Agreement, Family also agreed to
use all reasonable efforts to (i) preserve its business organization and that of
Family Bank intact, (ii) keep available to itself and PHFG the present services
of the employees of Family and Family Bank and (iii) preserve for itself and
PHFG the goodwill of the customers of Family and Family Bank and others with
whom business relationships exist. In addition, under the terms of the
Agreement, Family agreed not to take certain actions, nor permit its
subsidiaries to take certain actions, without the prior written consent of PHFG,
including, among other things, the following: (i) declare, set aside, make or
pay any dividend or other distribution in respect of Family Common Stock, except
for regular quarterly cash dividends at a rate per share of Family Common Stock
not in excess of $.12 per share, which shall have the same record and payment
dates as the record and payment dates relating to dividends on the PHFG Common
Stock, it being the intention of the parties that the shareholders of Family
receive dividends for any particular quarter on either the Family Common Stock
or the PHFG Common Stock but not both, provided, however, that if the Effective
Time does not occur prior to the record date for the first regular quarterly
dividend in 1997, the regular per share quarterly dividend on the Family Common
Stock for such quarter (and any subsequent quarterly dividends prior to the
Effective Time) may be increased to up to $.14 per share; (ii) issue, grant or
authorize any capital stock or rights to acquire the same, other than in each
case pursuant to the Family Stock Option Agreement or upon the exercise of
Family Options; purchase any shares of Family Common Stock; or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization; (iii) amend its articles of organization or bylaws; impose,
or suffer the imposition of, any lien, charge or encumbrance on any share of
stock held by Family in a subsidiary of Family, or permit any such lien to
exist; or waive or release any material right or cancel or compromise any
material debt or claim; (iv) increase the rate of compensation of, pay or agree
to pay any bonus or severance to, or provide any other new employee benefit or
incentive to, any of its directors, officers or employees, except (a) as may be
required pursuant to binding commitments as of the date of the Agreement and (b)
such as may be granted in the ordinary course of business consistent with past
practice; (v) enter into or modify any employee benefit plan, or make any
contributions to Family's defined benefit pension plan or 401(k) Plan other than
in the ordinary course of business consistent with past practice, or make any
contributions to Family's Employee Stock Ownership Plan, other than necessary to
enable such plan to make required payments on existing indebtedness; (vi) enter
into (w) any agreement, arrangement or commitment not made in the ordinary
course of business, (x) any agreement, indenture or other instrument relating to
the borrowing of money by Family or Family Bank or guarantee by Family or Family
Bank of any such obligation, except for deposits and certain other borrowings in
the ordinary course of business consistent with past practice, (y) any
employment, consulting or severance contracts or agreements, or amend any such
existing agreement, or (z) any contract, agreement or understanding with a labor
union; (vii) change its methods of accounting or tax reporting, except as may be
required by changes in generally accepted accounting principles or applicable
law; (viii) make any capital expenditures in excess of $50,000 individually or
$250,000 in the aggregate, other
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than pursuant to binding commitments existing on the date of the Agreement and
other than expenditures necessary to maintain existing assets in good repair;
(ix) file any applications or make any contract with respect to branching or
site location or relocation; (x) acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) any business or entity; (xi) enter
into any futures contract, option contract, interest rate caps, interest rate
floors, interest rate exchange agreement or other agreement for purposes of
hedging interest rate risk; (xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its assets or
rights or requiring the consent of any party to the transfer and assignment of
any such assets or rights; (xiii) take any action that would prevent or impede
the Merger from qualifying as a reorganization within the meaning of Section 368
of the Code, provided that this covenant shall not limit the ability of Family
to exercise its rights under the PHFG Stock Option Agreement; (xiv) take any
action that would result in any of the representations and warranties of Family
contained in the Agreement not to be true and correct in any material respect at
the Effective Time; or (xv) agree to do any of the foregoing.
Pursuant to the Agreement, PHFG agreed that during the period from the date
of the Agreement to the Effective Time it shall continue to conduct its business
in a manner designed in its reasonable judgment to enhance the long-term value
of the PHFG Common Stock and the business prospects of PHFG. In addition, under
the terms of the Agreement, PHFG agreed not to take the following actions, nor
permit its significant subsidiaries to take the following actions, without the
prior written consent of Family: (i) declare, set aside, make or pay any
dividend or other distribution in respect of PHFG Common Stock, except for
regular quarterly cash dividends in an amount determined by the Board of
Directors of PHFG in the ordinary course of business and consistent with past
practice; (ii) amend its articles of incorporation or bylaws in a manner which
would adversely affect the terms of the PHFG Common Stock or the ability of PHFG
to consummate the transactions contemplated by the Agreement; (iii) make any
acquisition or take any other action that individually or in the aggregate could
materially adversely affect the ability of PHFG to consummate the transactions
contemplated by the Agreement in a reasonably timely manner; (iv) take any
action that would prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code, provided that this
covenant shall not limit the ability of PHFG to exercise its rights under the
Family Stock Option Agreement; (v) take any action that would result in any of
the representations and warranties of PHFG contained in the Agreement not to be
true and correct in any material respect at the Effective Time; or (vi) agree to
do any of the foregoing.
Pursuant to the Agreement, PHFG and Family also agreed to provide the other
party and its representatives with such financial data and other information
with respect to its and its subsidiaries' business and properties as such party
shall from time to time reasonably request. Each party will cause all non-public
financial and business information obtained by it from the other to be treated
confidentially. If the Merger is not consummated, each party will return to the
other all non-public financial statements, documents and other materials
previously furnished by such party.
BRANCH SALE
In the Agreement PHFG and Family agreed to cause BNH and Family Bank,
respectively, to take all necessary and appropriate actions to effect the sale
of the branch office maintained by Family Bank in Seabrook, New Hampshire, and
such other branch offices maintained by Family Bank in New Hampshire as may be
determined by PHFG and Family, to BNH immediately after the Effective Time, or
at such other time thereafter as may be determined by PHFG (the "Branch Sale").
Consummation of the Branch Sale is subject to the approval of the FDIC and the
New Hampshire Bank Commissioner, but is not a condition to the closing of the
Merger and the closing of the Merger shall not be delayed in order to facilitate
a simultaneous closing of the Merger and the Branch Sale.
NO SOLICITATION
Pursuant to the Agreement, Family agreed to not, and to cause its
subsidiaries not to, solicit or encourage inquiries or proposals with respect
to, furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition, lease or purchase of all or a
substantial portion of the assets of, or any
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equity interest in, Family or any of its subsidiaries, other than as
contemplated by the Agreement, provided, however, that the Board of Directors of
Family may furnish such information or participate in such negotiations or
discussions if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the failure to do
the same would cause the members of such Board of Directors to breach their
fiduciary duties under applicable law. Family shall promptly inform PHFG of any
such request for information or of any such negotiations or discussions, as well
as to instruct its and its subsidiaries' directors, officers, representatives
and agents to refrain from taking any action prohibited by the above-described
restrictions.
EFFECTIVE TIME OF THE MERGER; TERMINATION AND AMENDMENT
The Effective Time of the Merger shall be the date and time of the filing
of articles of merger with the Secretary of State of Maine pursuant to the MBCA
and the Secretary of State of the Commonwealth of Massachusetts pursuant to the
MBCL, unless a different date and time is specified as the effective time in
such articles of merger. The articles of merger will be filed only after the
receipt of all requisite regulatory approvals of the Merger, approval of the
Agreement by the requisite votes of the shareholders of PHFG and Family and the
satisfaction or waiver of all other conditions to the Merger set forth in the
Agreement.
A closing (the "Closing") shall take place immediately prior to the
Effective Time on the fifth business day, or under certain circumstances on the
first day which is at least two business days, following the satisfaction or
waiver (to the extent permitted) of all the conditions to consummation of the
Merger specified in the Agreement (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing), or
on such other date as the parties may mutually agree upon.
The Agreement may be terminated as follows: (i) at any time on or prior to
the Effective Time by the mutual consent in writing of the parties; (ii) at any
time on or prior to the Effective Time by either party in the event of a
material breach by the other party of any material covenant or agreement or
representation and warranty, in any case which would have a material adverse
effect, as defined, and which has not been cured within the time period
specified in the Agreement; (iii) at any time by any party in writing if any
application for any required federal or state regulatory approval has been
denied or is approved with any condition or requirement which would prevent
satisfaction of this condition to PHFG's obligation to consummate the Merger,
and the time period for appeals and requests for reconsideration has run; (iv)
at any time by any party in writing if the shareholders of PHFG or Family fail
to approve the Agreement at a meeting duly called for the purpose, unless the
failure of such occurrence is due to the failure of the party seeking to
terminate to perform or observe in any material respect its agreements set forth
in the Agreement; (v) by any party in writing in the event that the Merger is
not consummated by May 30, 1997, provided that this right to terminate shall not
be available to any party whose failure to perform an obligation under the
Agreement resulted in the failure of the Merger to be consummated by such date;
and (vi) by Family at any time during the five-day period following the Pricing
Period (as defined below) if the average of the daily closing prices of a share
of PHFG Common Stock, as reported on NASDAQ, during the Pricing Period (the
"Average Closing Price") is less than $15.00, subject, however, to the following
three sentences. If Family elects to exercise its termination right pursuant to
clause (vi) above, it shall give written notice to PHFG (which may be withdrawn
by it at any time during the aforementioned five-day period). During the
five-day period commencing with its receipt of such notice, PHFG shall have the
option to increase the consideration to be received by the holders of Family
Common Stock under the Agreement by adjusting the Exchange Ratio to equal a
number (calculated to the nearest one-thousandth) obtained by dividing (x)
$18.90 by (y) the Average Closing Price. If PHFG so elects within such five-day
period, it shall give prompt written notice to Family of such election and the
revised Exchange Ratio, whereupon no termination shall have occurred pursuant to
clause (vi) above and the Agreement shall remain in effect in accordance with
its terms (except as the Exchange Ratio shall have been so modified). Under the
Agreement, the term "Pricing Period" means the period of ten consecutive trading
days following the Determination Date and the term "Determination Date" means
the earlier of (x) the date on which the last regulatory approval required to
consummate the Merger is obtained and (y) December 1, 1996. In accordance with
applicable securities laws, PHFG will not
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effect any repurchases of PHFG Common Stock under its planned repurchase program
during the period commencing two business days prior to the Pricing Period
through the end of the Pricing Period.
Family may elect not to terminate the Agreement even if the Average Closing
Price is below $15.00 per share. In determining whether to elect to terminate
the Agreement in these circumstances, the Family Board will take into account,
consistent with its fiduciary duties, all relevant facts and circumstances
existing at the time, including, without limitation, whether it believes that
PHFG is prepared to increase the Exchange Ratio, the market for bank and thrift
stocks in general, the relative value of the PHFG Common Stock in the market and
the advice of its financial advisors and legal counsel. By approving the
Agreement, the Family shareholders would be permitting the Family Board to
determine, in the exercise of its fiduciary duties, to proceed with the Merger
even if the Average Closing Price of the PHFG Common Stock during the Pricing
Period is less than $15.00 per share.
In the event of termination, the Agreement shall become null and void,
except that certain provisions thereof relating to expenses and confidentiality
shall survive any such termination and any such termination shall not relieve
any breaching party from liability for any willful breach of any covenant,
undertaking, representation or warranty giving rise to such termination.
To the extent permitted under applicable law, the Agreement may be amended
or supplemented at any time by written agreement of the parties whether before
or after the approval of the shareholders of PHFG or Family, provided that after
any such approval the Agreement may not be amended or supplemented in a manner
which modifies either the amount or form of the consideration to be received by
Family's shareholders or otherwise materially adversely affects Family or PHFG
shareholders without further approval by those shareholders who are so affected.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of Family may be deemed to have
interests in the Merger in addition to their interests as shareholders
generally. The Board of Directors of Family was aware of these factors and
considered them, among other matters, in approving the Agreement and the
transactions contemplated thereby.
Election of Directors. Pursuant to the Agreement, PHFG agreed that it will
take such action as is necessary to appoint or elect, effective as of the
Effective Time, one non-employee director of Family as of the date hereof who is
designated by Family and who both meets the director qualification requirements
set forth in PHFG's Bylaws and is otherwise acceptable to PHFG as a director of
PHFG. Such person shall serve until the first annual meeting of shareholders of
PHFG following the Effective Time and until his successor is elected and
qualified. Subject to compliance with the director qualification requirements
set forth in PHFG's Bylaws, PHFG shall include such person on the list of
nominees for director presented by the Board of Directors of PHFG and for which
said Board shall solicit proxies at the first annual meeting of shareholders of
PHFG following the Effective Time, which person shall be nominated for a
three-year term. The member of the Family Board who will become a director of
PHFG pursuant to the Agreement has not been identified as of the date hereof.
Employment Agreements. Pursuant to the Agreement, PHFG agreed to honor, or
to cause PHMC and/or Family Bank to honor, the obligations of Family and Family
Bank under the Amended and Restated Employment Agreements among Family, Family
Bank and each of Messrs. Hindle, Fahey, Trombley, LaFlamme and Fenn (each an
"Employment Agreement" and together the "Employment Agreements"). The Employment
Agreements are substantially the same and provide for severance pay benefits if
the officer's employment is terminated under certain circumstances following a
"change in control," which would include the Merger. In the event that an
officer's employment is terminated within three years after a change in control
(i) by the employers for any reason other than death, disability or cause or
(ii) by the officer because various adverse actions had been taken with respect
to his employment, the officer generally would be entitled to receive a lump-sum
payment from Family Bank equal to approximately three times his average annual
compensation during the five most recently completed calendar years preceding
the change in control. Assuming the Merger were to be consummated as of December
31, 1996, the aggregate amount of the lump
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sum payments due to Messrs. Hindle, Fahey, Trombley, LaFlamme and Fenn under the
Employment Agreements would be approximately $550,000, $343,000, $348,000,
$306,000 and $278,000, respectively. In the event that any of the above-named
officers desire to become employees of PHFG or its subsidiaries following
consummation of the Merger, he will be required to waive his rights under his
respective Employment Agreement for consideration of $50,000 paid by PHFG.
Supplemental Executive Retirement Plan. Pursuant to the Agreement, PHFG
agreed to honor, or to cause PHMC and/or Family Bank to honor, the obligations
of Family Bank under the supplemental executive retirement plan between Family
Bank and each of Messrs. Hindle, Fahey, Trombley, LaFlamme and Fenn (each a
"SERP" and together the "SERPs"). The SERPs are substantially the same and
generally provide that if the officer remains in the employ of Family Bank until
he reaches age 65, he will be entitled to receive a 15-year retirement benefit
equal to 65% of the officer's average annual compensation during the five years
that such compensation was the highest, offset by the full value of all other
retirement benefits funded by Family Bank and 50% of the officer's social
security retirement benefit. This benefit is reduced if the officer has
completed fewer than 25 years of service with Family Bank at the time he reaches
age 65. If the officer's employment is terminated, voluntarily or involuntarily,
for any reason other than for "cause," as defined, the officer is entitled to
receive, at age 65, a 15-year "accrued benefit," determined by multiplying the
benefit he would have received if he had stayed in the employ of Family Bank
until age 65 by a fraction whose numerator is the actual number of months of the
officer's employment with Family Bank and the denominator of which is 300
months.
Each SERP generally provides that neither Family nor Family Bank shall
merge into another corporation unless (i) the officer and the resulting
corporation agree that the officer shall continue in the employ of the resulting
corporation and the resulting corporation agrees to assume and discharge the
obligations of Family Bank under the Agreement or (ii) in the absence of either
of the foregoing, Family Bank pays to the officer, in one lump sum, his "accrued
benefit," calculated as if the officer's employment had terminated as of the
date of the merger.
Split-Dollar Insurance Agreements. Pursuant to the Agreement, PHFG agreed
to honor, or to cause PHMC and/or Family Bank to honor, the split-dollar
insurance agreements between Family Bank and each of Messrs. Hindle, Fahey,
Trombley and LaFlamme (each a "Split-Dollar Agreement" and together the "Split-
Dollar Agreements"). Under the Split-Dollar Agreements, which are substantially
the same, Family Bank purchased a life insurance policy on the officer's life
which provides the officer with a death benefit equal to three times his base
salary. Family Bank pays all premiums due under the policy so long as the
officer remains an employee of Family Bank. At the officer's death (or prior
termination of the insurance policy) Family Bank will receive an amount equal to
the aggregate amount of its premium payments under the policy and the officer or
the officer's beneficiary will receive the excess. Pursuant to the Split-Dollar
Agreements, each officer's insurance policy has been assigned to Family Bank as
collateral for its premium payments thereunder. The Split-Dollar Agreements
provide that at any time after the date of termination of the officer's
employment with Family Bank the officer shall have the option of obtaining the
release of the collateral assignment of the insurance policy to Family Bank. To
obtain such release, the officer must pay to Family Bank an amount in cash equal
to the aggregate amount of premiums paid under the insurance policy by Family
Bank to date.
Indemnification and Insurance. Pursuant to the Agreement, PHFG agreed,
from and after the Effective Time through the sixth anniversary of the Effective
Time, to indemnify and hold harmless each present and former director, officer
and employee of Family or a Family subsidiary, in each case determined as of the
Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent to which such Indemnified Parties were entitled
under the Articles of Organization and Bylaws of Family or in similar
organizational documents of a Family subsidiary, in each case as in effect on
the date of the Agreement, provided, however, that all rights to indemnification
in respect of any claim asserted or made within such period shall continue until
the final disposition of such claim. Without
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limiting the foregoing obligation, PHFG also agreed that all limitations of
liability existing in favor of the Indemnified Parties in the Articles of
Organization and Bylaws of Family or in similar organizational documents of a
Family subsidiary, in each case as in effect on the date of the Agreement,
arising out of matters existing or occurring at or prior to the Effective Time
shall survive the Merger and shall continue in full force and effect for a
period of six years from the Effective Time, provided, however, that all such
rights in respect of any claim asserted or made within such period shall
continue until the final disposition of such claim.
Pursuant to the Agreement, PHFG also agreed to cause Family to maintain
Family's existing directors' and officers' liability insurance policy (or a
policy providing coverage on substantially the same terms and conditions) for
acts or omissions occurring prior to the Effective Time by persons who are
currently covered by such insurance policy maintained by Family for a period of
three years following the Effective Time.
Other than as set forth above, no director or executive officer of Family
has any direct or indirect material interest in the Merger, except insofar as
ownership of Family Common Stock and options to acquire Family Common Stock
might be deemed such an interest.
CERTAIN EMPLOYEE MATTERS
The Agreement provides that as soon as administratively practicable after
the Effective Time, PHFG shall take all reasonable action so that employees of
Family and its subsidiaries shall be entitled to participate in PHFG's employee
benefit plans of general applicability, and until such time Family's employee
benefit plans shall remain in effect, provided that no employee of Family or a
Family subsidiary who becomes an employee of PHFG and subject to PHFG's medical
insurance plans shall be excluded coverage thereunder on the basis of a
preexisting condition that was not also excluded under Family's medical
insurance plans, except to the extent such preexisting condition was excluded
from coverage under Family's medical insurance plans, in which case the
Agreement does not require coverage for such preexisting condition. For purposes
of determining eligibility to participate in and the vesting of benefits under
PHFG's employee benefit plans, PHFG shall recognize years of service with Family
and a Family subsidiary as such service is recognized by Family and a Family
subsidiary.
All employees of Family or a Family subsidiary as of the Effective Time
shall become employees of PHFG or a PHFG subsidiary as of the Effective Time,
provided that PHFG or a PHFG subsidiary shall have no obligation to continue the
employment of any such person and nothing contained in the Agreement shall give
any employee of Family or a Family subsidiary a right to continuing employment
with PHFG or a PHFG subsidiary after the Effective Time. To the extent that the
employment of any employee of Family or a Family subsidiary (other than any
employee who is party to an employment agreement) is involuntarily terminated
following the Effective Time, such employee will be entitled to receive
severance payments in accordance with, and to the extent provided in, PHFG's
severance plan regarding the Merger. For purposes of determining benefits under
such severance plan, PHFG shall recognize years of service with Family or a
Family subsidiary prior to the Effective Time.
RESALE OF PHFG COMMON STOCK
The PHFG Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any Family
shareholder who may be deemed to be an affiliate of PHFG for purposes of Rule
144 promulgated under the Securities Act ("Rule 144") or an affiliate of Family
for purposes of Rule 145 promulgated under the Securities Act ("Rule 145") (each
an "Affiliate"). Affiliates will include persons (generally executive officers,
directors and 10% shareholders) who control, are controlled by or are under
common control with (i) PHFG or Family at the time of the Family Special Meeting
or (ii) PHFG at or after the Effective Time.
Rules 144 and 145 will restrict the sale of PHFG Common Stock received in
the Merger by Affiliates and certain of their family members and related
interests. Generally speaking, during the two years following the Effective
Time, those persons who are Affiliates of Family at the time of the Family
Special Meeting, provided they are not Affiliates of PHFG at or following the
Effective Time, may publicly resell any PHFG Common
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Stock received by them in the Merger, subject to certain limitations as to,
among other things, the amount of PHFG Common Stock sold by them in any
three-month period and as to the manner of sale. After the two-year period, such
Affiliates may resell their shares without such restrictions so long as there is
adequate current public information with respect to PHFG as required by Rule
144. Persons who are Affiliates of PHFG after the Effective Time may publicly
resell the PHFG Common Stock received by them in the Merger subject to similar
limitations and subject to certain filing requirements specified in Rule 144.
The ability of Affiliates to resell shares of PHFG Common Stock received in
the Merger under Rule 144 or 145 as summarized herein generally will be subject
to PHFG's having satisfied its Exchange Act reporting requirements for specified
periods prior to the time of sale. Affiliates also would be permitted to resell
PHFG Common Stock received in the Merger pursuant to an effective registration
statement under the Securities Act or another available exemption from the
Securities Act registration requirements. This Prospectus/Joint Proxy Statement
does not cover any resales of PHFG Common Stock received by persons who may be
deemed to be Affiliates of PHFG or Family in the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion generally describes the material United States
federal income tax consequences to holders of Family Common Stock as a result of
the Merger. The discussion is intended as a general summary of the material
United Stated federal income tax consequences of the Merger to such holders and
is not intended as a substitute for professional tax advice that takes into
account the particular circumstances relevant to a specific holder. In addition,
holders should note that the following discussion does not address state or
local tax considerations or taxation under the laws of jurisdictions other than
those of the United States.
The summary is based on the Code, administrative pronouncements, judicial
decisions and existing and proposed U.S. Treasury regulations, changes to any of
which subsequent to the date hereof may affect the tax consequences described
herein. The summary discusses only shares that are held as capital assets within
the meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to a holder of stock or stock options in light
of such holder's particular circumstances, or to holders subject to special
rules, such as certain financial institutions, insurance companies, tax-exempt
investors and dealers in securities; nor does it discuss the tax consequences to
a holder that, for United States federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign partnership or a foreign
estate or trust. Holders should consult their own professional tax advisors with
regard to the application of the United States federal income tax laws to their
particular situations.
Family has received an opinion from Foley, Hoag & Eliot LLP, special
counsel to Family, as set forth below. The opinion of Foley, Hoag & Eliot LLP is
not binding upon the Internal Revenue Service, and there can be no assurance
that the Internal Revenue Service will not contest the conclusions expressed in
the opinion. The opinion states that Foley, Hoag & Eliot LLP are of opinion, as
of the date hereof and under existing law, for United States federal income tax
purposes, as follows:
1. Except to the extent of cash received in lieu of fractional shares,
as described below, no gain or loss will be recognized by the stockholders
of Family upon the receipt in the Merger of shares of PHFG Common Stock in
exchange for their shares of Family Common Stock.
2. Cash received in lieu of a fractional share interest in PHFG Common
Stock will be treated as if the fractional share interest had been
distributed in exchange for shares of PHFG Common Stock and then the
fractional share had been redeemed by PHFG. The cash will be treated as a
distribution in full payment in exchange for the fractional share interest,
provided the redemption is not essentially equivalent to a dividend, and
will accordingly result in the recognition of gain, if any, measured by the
difference between the portion of the basis of the shares of Family Common
Stock allocable to such fractional share and the cash received in full
payment therefor. If such shares of Family Common Stock are capital assets
in the hands of the Family shareholder, then such gain will be capital
gain.
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3. The aggregate basis of the PHFG Common Stock received by a Family
shareholder in the Merger will be the same as the aggregate basis of the
Family Common Stock surrendered in exchange therefor.
4. The holding period for each share of PHFG Common Stock received by
a Family shareholder in exchange for Family Common Stock will include the
period for which such shareholder held such Family Common Stock, so long as
the shareholder's Family Common Stock is held as a capital asset at the
Effective Time.
5. A Family shareholder who validly exercises dissenters' rights as to
all such holder's shares of Family Common Stock and who is not deemed to be
an owner of any shares of Family Common Stock held by others will recognize
gain or loss measured by the difference between the basis of such
shareholder's dissenting shares and the cash received in exchange therefor.
Such gain or loss will be capital gain or loss, provided that the holder's
dissenting shares are held as a capital asset at the Effective Time.
These opinions are based upon certain customary representations made by
Family, PHFG and certain shareholders of Family and upon certain factual
assumptions. If any of these representations or assumptions is not correct, then
each holder of Family Common Stock may be required to recognize gain or loss
with respect to each share of Family Common Stock surrendered in the Merger,
equal to the difference between (i) such shareholder's basis in the share and
(ii) the fair market value of the PHFG Common Stock received in exchange for the
share plus the cash received in lieu of any fractional share interest. In such
event, the shareholder's aggregate basis in the shares of PHFG Common Stock
received in the exchange would equal the fair market value of such shares, and
the shareholder's holding period for such shares of PHFG Common Stock would not
include the period during which the shareholder had held the Family shares
exchanged therefor. In addition, Family would recognize taxable gain in an
amount equal to the difference between the fair market value of its assets and
its tax basis in such assets.
Each party's obligation to effect the Merger is conditioned on the delivery
of an opinion to Family from Foley, Hoag & Eliot LLP, dated as of the Effective
Time, with respect to the foregoing federal income tax consequences of the
Merger, as well as an opinion of Elias, Matz, Tiernan & Herrick L.L.P., special
counsel to PHFG, dated as of the Effective Time, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368 of the Code.
Each of such opinions will be based upon certain customary representations and
assumptions set forth therein.
ACCOUNTING TREATMENT OF THE MERGER
It is expected that the Merger will be accounted for as a purchase under
generally accepted accounting principles. Under the purchase method of
accounting, the acquired assets and liabilities as of the effective date of the
acquisition are recorded at their respective fair market values and added to
those of PHFG. Financial statements of PHFG issued after consummation of the
transaction reflect such values. Financial statements of PHFG issued before
consummation of a transaction recorded under the purchase method are not
restated retroactively to reflect the historical financial position or results
of operations of the acquired assets and liabilities. The unaudited pro forma
financial information contained in this Prospectus/Joint Proxy Statement has
been prepared using the purchase method to account for the Merger. See "Selected
Pro Forma Consolidated Financial Data" and "Pro Forma Combined Consolidated
Financial Data."
EXPENSES OF THE MERGER
The Agreement provides that each party thereto shall each bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated by the Agreement, including fees and expenses of its own financial
consultants, accountants and counsel, except that expenses of printing the
Registration Statement and the registration fee to be paid to the SEC in
connection therewith shall be shared equally between PHFG and Family.
45
<PAGE> 50
STOCK OPTION AGREEMENTS
As an inducement and a condition to PHFG's entering into the Agreement,
PHFG and Family also entered into the Family Stock Option Agreement, pursuant to
which Family, as issuer, granted PHFG, as grantee, the Family Option, upon the
occurrence of certain events (none of which has occurred as of the date hereof
to the best of the knowledge of PHFG and Family), to purchase up to 832,000
shares of Family Common Stock, representing 19.9% of the outstanding shares of
Family Common Stock, at a price of $20.50 per share, subject to adjustment in
certain circumstances and termination within certain periods. As an inducement
and a condition to Family's entering into the Agreement, PHFG and Family also
entered into the PHFG Stock Option Agreement, pursuant to which PHFG, as issuer,
granted Family, as grantee, the PHFG Option, upon the occurrence of certain
events (none of which has occurred as of the date hereof to the best of the
knowledge of PHFG and Family), to purchase up to 1,500,000 shares of PHFG Common
Stock, representing approximately 6.0% of the outstanding shares of PHFG Common
Stock, at a price of $19.75 per share, subject to adjustment in certain
circumstances and termination within certain periods. With the exception of the
number and percentage of shares of common stock of the Issuer ("Issuer Common
Stock") subject to an Option ("Option Shares") and the per share price at which
an Option may be exercised, the terms of the Family Stock Option Agreement and
the PHFG Stock Option Agreement are substantially identical.
For purposes of the following summary of the material provisions of the
Stock Option Agreements, the term (i) "Issuer" means Family with respect to the
Family Stock Option Agreement and PHFG with respect to the PHFG Stock Option
Agreement, (ii) "Grantee" means PHFG with respect to the Family Stock Option
Agreement and Family with respect to the PHFG Stock Option Agreement and (iii)
"Option" means the Family Option or the PHFG Option, as applicable.
Provided that the holder of an Option (which is initially the Grantee
thereof) is not in material breach of the Agreement or the applicable Stock
Option Agreement and there is no applicable injunction or order in effect, the
holder of the Option may exercise the Option, in whole or in part, at any time
and from time to time following the occurrence of a Purchase Event (as defined),
provided that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (i) the Effective Time, (ii) termination of the
Agreement in accordance with its terms prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event (as defined), other than a termination of
the Agreement by Grantee as a result of the Issuer having breached a material
covenant or obligation in the Agreement (a "Default Termination"); (iii) 12
months after termination of the Agreement by Grantee pursuant to a Default
Termination and (iv) 12 months after termination of the Agreement (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event. The purchase of any shares of Issuer Common
Stock pursuant to a Stock Option Agreement is subject to compliance with
applicable law, including the receipt of necessary approvals under the BHCA and
the HOLA.
Each Stock Option Agreement defines a "Purchase Event" to mean any of the
following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction involving Issuer or any
of its subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its subsidiaries representing in
either case 15% or more of the consolidated assets of Issuer and its
subsidiaries, or (C) the issuance, sale or other disposition of (including
by way of merger, consolidation, share exchange or any similar transaction)
securities representing 15% or more of the voting power of Issuer or any of
its subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 25% or more of
the then outstanding shares of Issuer Common Stock.
46
<PAGE> 51
Each Stock Option Agreement defines a "Preliminary Purchase Event" to
include any of the following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to as a "Tender Offer" and an
"Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Agreement at the meeting of such shareholders held for the purpose of
voting on the Agreement, (B) such meeting shall not have been held or shall
have been canceled prior to termination of the Agreement, or (C) Issuer's
Board of Directors shall have withdrawn or modified in a manner adverse to
Grantee the recommendation of Issuer's Board of Directors with respect to
the Agreement, in each case after it shall have been publicly announced
that any person (other than Grantee or any subsidiary of Grantee) shall
have (x) made, or disclosed an intention to make, a proposal to engage in
an Acquisition Transaction, (y) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an Exchange
Offer, or (z) filed an application (or given notice), whether in draft or
final form, under certain banking laws for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Agreement and such breach would
entitle Grantee to terminate the Agreement in accordance with its terms
(without regard to the cure period provided for therein unless such cure is
promptly effected without jeopardizing consummation of the Merger pursuant
to the terms of the Agreement), after (x) a bona fide proposal is made by
any person (other than Grantee or any subsidiary of Grantee) to Issuer or
its shareholders to engage in an Acquisition Transaction, (y) any person
(other than Grantee or any subsidiary of Grantee) states its intention to
Issuer or its shareholders to make a proposal to engage in an Acquisition
Transaction if the Agreement terminates, or (z) any person (other than
Grantee or any subsidiary of Grantee) shall have filed an application or
notice with an applicable governmental authority to engage in an
Acquisition Transaction.
As used in the Stock Option Agreements, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
Each Stock Option Agreement provides that, subject to limitations set forth
therein, the holder of the Option may demand that Issuer promptly prepare, file
and keep current a registration statement under the Securities Act covering the
Option Shares and use its reasonable efforts to cause such registration
statement to become effective and remain current in order to permit the
disposition of the Option Shares by such holder.
Each Stock Option Agreement provides for adjustment in the number of Option
Shares to reflect any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, exchange of shares or similar
transaction. Each Stock Option Agreement also provides that upon the occurrence
of certain events set forth therein the Option must be converted into, or
exchanged for, an option, at the election of the holder of the Option, covering
the stock of another corporation or Issuer (the "Substitute Option"). The number
of shares subject to the Substitute Option and the exercise price per share will
be determined in accordance with a formula set forth in each Stock Option
Agreement.
At the request of a holder of an Option at any time beginning on the first
occurrence of certain events, including, among others, the acquisition by a
third party of beneficial ownership of 50% or more of the outstanding Issuer
Common Stock, and ending 12 months thereafter, Issuer will repurchase from the
holder of the Option (i) the Option and (ii) all shares of Issuer Common Stock
purchased by the holder of the Option pursuant to the applicable Stock Option
Agreement with respect to which such holder then has beneficial ownership. The
manner for determining the repurchase price of the Option and such shares of
Issuer Common Stock is set forth in each Stock Option Agreement.
47
<PAGE> 52
The Stock Option Agreements are intended to increase the likelihood that
the Merger will be consummated in accordance with the terms of the Agreement and
may have the effect of discouraging competing offers to the Merger.
Copies of the Family Stock Option Agreement and the PHFG Stock Option
Agreement are included as Annexes II and III to this Prospectus/Joint Proxy
Statement, respectively, and reference is made thereto for the complete terms
thereof.
STOCKHOLDER AGREEMENT
In conjunction with the Agreement, PHFG also entered into a Stockholder
Agreement, dated as of May 30, 1996, with each of the directors of Family and
senior executive officers of Family and Family Bank. Pursuant to the Stockholder
Agreement, a copy of which is included as Annex IV hereto, each of such persons,
solely in his or her capacity as a shareholder of Family, agreed, among other
things, not to sell, pledge, transfer or otherwise dispose of his or her shares
of Family Common Stock (which amount to 7.8% of the shares of such stock
outstanding as of the Record Date) prior to the meeting of shareholders of
Family at which the Agreement is considered and to vote such shares of Family
Common Stock in favor of the Agreement. See "Certain Beneficial Owners of Family
Common Stock."
DISSENTERS' RIGHTS
Shareholders of record of Family as of the Record Date have the statutory
right to dissent from the Merger and, if the Merger is consummated, to receive
compensation equal to the fair value of their shares as determined in an
appraisal proceeding brought in accordance with Sections 85 through 98
(inclusive) of Chapter 156B of the MBCL. The text of Sections 85 through 98 is
set forth in full in Annex VII attached hereto, which all Family shareholders
are urged to read in its entirety.
A shareholder electing to exercise his or her statutory appraisal rights
must: (i) deliver to Family before the shareholder vote on the Agreement a
written objection to the Merger stating that he or she intends to demand payment
for his or her shares through the exercise of his or her statutory appraisal
rights; (ii) not vote in favor of approval of the Agreement; and (iii) in the
event that the Merger is approved by Family's shareholders and is consummated,
demand in writing payment for his or her shares from PHMC, as Family's
successor, within 20 days after the date of the notice that the Merger has
become effective is mailed to the shareholder (a "Dissenting Shareholder").
Failure to vote against the Agreement will not constitute a waiver of appraisal
rights. Neither a vote against the proposed Merger nor a proxy directing such
vote will, by itself, satisfy the requirement that a written objection to the
Merger be delivered to Family. Written demands for appraisal must be delivered
to Family before the vote at the Family Special Meeting, at Family Bancorp, 153
Merrimack Street, Haverhill, Massachusetts 01830, Attention: George E. Fahey.
Within ten days after the Effective Time, PHMC, as Family's successor, will give
notice to each shareholder who has complied with conditions (i) and (ii) above
that the Merger was effective as of the Effective Time. Shareholders who fail to
comply with the appraisal procedures set forth in Annex VII will receive shares
of PHFG Common Stock in exchange for each share of Family Common Stock held by
such shareholders in accordance with the terms of the Agreement.
PHMC will be required to make payment of the fair value of the shares owned
by each Dissenting Shareholder within 30 days after the expiration of the 20-day
period during which a demand for payment for shares may be made. If PHMC and any
such Dissenting Shareholder fail during the 30-day period to agree as to the
value of such shares of Family Common Stock , PHMC or any Dissenting Shareholder
may, within four months after the expiration of the 30-day period, file a bill
in equity in the Essex County Superior Court of Massachusetts for determination
of the fair value of the shares held by all Dissenting Shareholders who have not
reached agreement with PHMC as to the value of their shares of Family Common
Stock. Dissenting Shareholders seeking to exercise appraisal rights should not
assume that PHMC will file a petition with respect to the fair appraisal of the
value of their shares or that PHMC will initiate any negotiations with respect
to the fair value of such shares. PHMC does not currently plan to file such a
petition. Accordingly, Dissenting Shareholders should regard it as their
obligation to initiate all necessary actions with respect to the
48
<PAGE> 53
perfection of their appraisal rights within the time periods prescribed in
Sections 85 through 98 of Chapter 156B of the MBCL. If no Dissenting Shareholder
files a bill in equity in the Essex County Superior court within four months
after the expiration of the 30-day period, the rights of all Dissenting
Shareholders to appraisal will cease.
At a trial, the Essex County Superior Court will appraise the shares and
determine their fair value as of the day preceding the date of the meeting at
which the Merger was approved, exclusive of any element of value arising from
the Merger, which may be greater or less than the consideration offered to the
shareholders of Family under the Agreement. The court will direct payment by
Family of the fair value of the shares held by the Dissenting Shareholders,
together with interest, if any. The costs of the proceeding would be determined
by the court and taxed upon the parties, including any Dissenting Shareholders,
as the court may deem equitable.
Under Massachusetts statutory law, procedures relating to dissenters'
rights are stated to be the exclusive remedy available to a shareholder
objecting to the Merger, except upon the grounds that the Merger will be or is
illegal or fraudulent as to such shareholder. Under Massachusetts case law,
however, dissenting shareholders may not be limited to the statutory remedy of
judicial appraisal where violations of fiduciary duty are found.
The above summary of Sections 85 through 98 of Chapter 156B of the MBCL
does not purport to be complete and is qualified in its entirety by reference to
such provisions in Annex VII hereto, which should be reviewed carefully by any
holder of Family Common Stock who wishes to exercise statutory appraisal rights
with respect thereto or who wishes to preserve the right to do so. Failure to
comply with the procedures set forth in Sections 85 through 98 of Chapter 156B
of the MBCL may result in the loss of appraisal rights.
Holders of PHFG Common Stock do not have rights under the MBCA or otherwise
to dissent from the Merger and obtain the fair value of their shares of PHFG
Common Stock.
49
<PAGE> 54
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed consolidated balance
sheet presents the combined balance sheets of PHFG and Family, assuming the
Merger was consummated as of March 31, 1996, and the following unaudited pro
forma combined condensed consolidated statements of operations present the
combined consolidated statements of operations of PHFG and Family assuming the
Merger was consummated as of the beginning of the indicated periods. The Merger
will be accounted for under the purchase method of accounting. For a description
of the purchase method of accounting, see "The Merger -- Accounting Treatment of
the Merger." Certain insignificant reclassifications have been reflected in the
pro forma information to conform statement presentations.
The effect of reorganization and restructuring charges in connection with
the Merger have been reflected in the pro forma combined condensed consolidated
balance sheet; however, because the charges are nonrecurring, they have not been
reflected in the pro forma combined condensed consolidated statements of
operations. The pro forma financial data does not give effect to anticipated
cost savings in connection with the Merger.
The following unaudited pro forma combined condensed consolidated balance
sheet of PHFG and Family also presents the effects of PHFG's plan to repurchase
approximately 2.6 million shares of PHFG Common Stock in connection with the
acquisition of Family (the "Repurchase Program"), assuming the Repurchase
Program was consummated as of March 31, 1996, and the following unaudited pro
forma combined consolidated statements of operations of PHFG and Family present
the combined consolidated statements of operations of PHFG and Family assuming
the Repurchase Program was consummated as of the beginning of the indicated
periods. In each case it is assumed that shares of PHFG Common Stock, which may
be purchased pursuant to an issuer tender offer, in the open market and/or in
privately-negotiated transactions with existing shareholders, are purchased at a
weighted average effective cost of $21 per share. Although PHFG intends to
repurchase all or substantially all of the desired number of shares of PHFG
Common Stock by the date of consummation of the Merger, repurchases will be
subject to market and economic conditions and, as a result, there can be no
assurance that PHFG will repurchase such shares or that such shares will be
repurchased at the assumed weighted average effective cost set forth above.
Consummation of the Repurchase Program is not a condition to the obligations of
the parties to the Agreement to consummate the Merger.
The pro forma information presented is not necessarily indicative of the
combined financial position that would have resulted had the Merger and the
Repurchase Program been consummated at March 31, 1996 or the combined results of
operations that would have resulted had the Merger and the Repurchase Program
been consummated at the beginning of the indicated periods, nor is the pro forma
information necessarily indicative of the future financial position or results
of operations of the combined entities.
The pro forma information should be read in conjunction with the historical
consolidated financial statements of PHFG and Family, including the related
notes, incorporated by reference herein, the supplemental consolidated financial
statements of PHFG, including the related notes, incorporated by reference
herein and the selected consolidated and other pro forma financial information,
including the notes thereto, appearing elsewhere in this Prospectus/Joint Proxy
Statement. See "Incorporation of Certain Documents by Reference."
50
<PAGE> 55
<TABLE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
PHFG AND FAMILY
MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
PHFG PHFG
AND AND
PRO FORMA FAMILY REPURCHASE FAMILY
PHFG FAMILY ADJUSTMENTS COMBINED PROGRAM COMBINED
---------- -------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks............... $ 164,587 $ 31,032 $ -- $ 195,619 $ -- $ 195,619
Federal funds sold.................... 49,000 5,135 -- 54,135 -- 54,135
Securities available for sale at
market value........................ 767,539 364,721 -- 1,132,260 (54,600) 1,077,660
Loans held for sale................... 88,185 8,009 -- 96,194 -- 96,194
Loans and leases (net of deferred
fees)............................... 3,022,443 450,297 2,780 (1) 3,475,520 -- 3,475,520
Less: Allowance for loan and lease
losses.............................. 65,533 6,506 -- 72,039 -- 72,039
---------- -------- -------- ---------- -------- ----------
Net loans and leases.............. 2,956,910 443,791 2,780 3,403,481 -- 3,403,481
---------- -------- -------- ---------- -------- ----------
Premises and equipment................ 56,809 12,641 99 (2) 69,549 -- 69,549
Goodwill and other intangibles........ 40,100 5,865 35,921 (3) 81,886 -- 81,886
Mortgage servicing rights............. 23,187 83 4,217 (4) 27,487 -- 27,487
Other real estate and repossessed
assets owned........................ 12,954 4,057 -- 17,011 -- 17,011
Deferred income taxes................. 33,045 2,676 1,844 (5) 37,565 -- 37,565
Interest and dividends receivable..... 31,019 5,596 -- 36,615 -- 36,615
Other assets.......................... 34,577 3,781 -- 38,358 -- 38,358
---------- -------- -------- ---------- -------- ----------
Total assets.................. $4,257,912 $887,387 $ 44,862 $5,190,161 $(54,600) $5,135,561
========== ======== ======== ========== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Regular savings..................... $ 599,424 $175,689 $ -- $ 775,113 $ -- $ 775,113
Money market access accounts........ 510,216 60,912 -- 571,128 -- 571,128
Certificates of deposit............. 1,463,867 340,876 (1,913)(6) 1,802,830 -- 1,802,830
NOW accounts........................ 357,891 82,437 -- 440,328 -- 440,328
Demand deposits..................... 416,029 76,732 -- 492,761 -- 492,761
---------- -------- -------- ---------- -------- ----------
3,347,427 736,646 (1,913) 4,082,160 -- 4,082,160
---------- -------- -------- ---------- -------- ----------
Federal funds purchased............... 20,337 -- -- 20,337 -- 20,337
Securities sold under repurchase
agreements.......................... 164,674 2,615 -- 167,289 -- 167,289
Borrowings from the Federal Home Loan
Bank of Boston...................... 291,444 65,311 2,079 (7) 358,834 -- 358,834
Other borrowings...................... 21,265 -- -- 21,265 -- 21,265
Deferred income taxes................. 10,566 261 2,908 (8) 13,807 -- 13,807
Other liabilities..................... 40,044 13,711 4,960 (9) 58,715 -- 58,715
---------- -------- -------- ---------- -------- ----------
Total liabilities............. 3,895,757 818,544 8,106 4,722,407 -- 4,722,407
---------- -------- -------- ---------- -------- ----------
Shareholders' equity:
Preferred Stock..................... -- -- -- -- -- --
Common Stock:
PHFG.............................. 256 54 (10) 310 -- 310
Family............................ 562 (562)(10) -- -- --
Paid in capital....................... 224,268 30,040 75,505 (10) 329,813 -- 329,813
Retained earnings..................... 143,379 48,857 (48,857)(10) 143,379 -- 143,379
Net unrealized gain (loss) on
securities available for sale....... 807 (679) 679 (10) 807 -- 807
Treasury stock at cost................ (6,555) (9,883) 9,883 (10) (6,555) (54,600) (61,155)
Unearned compensation -- ESOP......... -- (54) 54 (10) -- -- --
---------- -------- -------- ---------- -------- ----------
Total shareholders' equity.... 362,155 68,843 36,756 467,754 (54,600) 413,154
---------- -------- -------- ---------- -------- ----------
Total liabilities and
shareholders' equity........ $4,257,912 $887,387 $ 44,862 $5,190,161 $(54,600) $5,135,561
========== ======== ======== ========== ======== ==========
</TABLE>
51
<PAGE> 56
<TABLE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND FAMILY
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
PHFG PHFG
PRO FORMA AND FAMILY REPURCHASE AND FAMILY
PHFG FAMILY ADJUSTMENTS COMBINED PROGRAM COMBINED
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and
leases.......................... $ 67,930 $ 9,987 $ (139)(11) $ 77,778 $ -- $ 77,778
Interest on mortgage-backed
investments..................... 3,496 4,131 -- 7,627 -- 7,627
Interest on other investments..... 8,904 1,406 -- 10,310 (853) 9,457
Dividends on equity securities.... 424 129 -- 553 -- 553
----------- ---------- ---------- ----------- ----------- -----------
Total interest and dividend
income................... 80,754 15,653 (139) 96,268 (853) 95,415
----------- ---------- ---------- ----------- ----------- -----------
Interest expense:
Interest on deposits.............. 29,568 6,565 239 (12) 36,372 -- 36,372
Interest on borrowed funds........ 6,047 1,008 (260)(13) 6,795 -- 6,795
----------- ---------- ---------- ----------- ----------- -----------
Total interest expense..... 35,615 7,573 (21) 43,167 -- 43,167
----------- ---------- ---------- ----------- ----------- -----------
Net interest income........ 45,139 8,080 (118) 53,101 (853) 52,248
Provision for loan losses........... 450 250 -- 700 -- 700
----------- ---------- ---------- ----------- ----------- -----------
Net interest income after
provision for loan
losses................... 44,689 7,830 (118) 52,401 (853) 51,548
----------- ---------- ---------- ----------- ----------- -----------
Noninterest income:
Mortgage banking services......... 3,364 224 (151)(14) 3,437 -- 3,437
Customer services................. 3,269 938 -- 4,207 -- 4,207
Trust and investment advisory
services........................ 1,644 46 -- 1,690 -- 1,690
Loan related services............. 442 25 -- 467 -- 467
Net securities gains.............. 504 202 -- 706 -- 706
Other noninterest income.......... 246 62 -- 308 -- 308
----------- ---------- ---------- ----------- ----------- -----------
9,469 1,497 (151) 10,815 -- 10,815
----------- ---------- ---------- ----------- ----------- -----------
Noninterest expenses:
Salaries and employee benefits.... 18,238 2,823 -- 21,061 -- 21,061
Occupancy......................... 3,297 466 1 (15) 3,764 -- 3,764
Data processing................... 2,798 250 -- 3,048 -- 3,048
Equipment......................... 2,008 487 -- 2,495 -- 2,495
Advertising and marketing......... 993 300 -- 1,293 -- 1,293
Deposit and other assessments..... 345 106 -- 451 -- 451
Collection and carrying costs of
nonperforming assets............ 504 53 -- 557 -- 557
Other noninterest expenses........ 6,399 1,395 598 (16) 8,392 -- 8,392
----------- ---------- ---------- ----------- ----------- -----------
34,582 5,880 599 41,061 -- 41,061
----------- ---------- ---------- ----------- ----------- -----------
Income before income tax............ 19,576 3,447 (868) 22,155 (853) 21,302
Applicable income tax............... 6,970 1,335 (113)(17) 8,192 (290) 7,902
----------- ---------- ---------- ----------- ----------- -----------
Net income................. $ 12,606 $ 2,112 $ (755) $ 13,963 $ (563) $ 13,400
=========== ========== ========== =========== =========== ===========
Net income per share................ $ 0.50 $ 0.50 $ -- $ 0.45 $ -- $ 0.48
Average shares outstanding.......... 25,128,427 4,261,651 1,305,132 30,695,210 (2,600,000) 28,095,210
</TABLE>
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<PAGE> 57
<TABLE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND FAMILY
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
PHFG PHFG
PRO FORMA AND FAMILY REPURCHASE AND FAMILY
PHFG FAMILY ADJUSTMENTS COMBINED PROGRAM COMBINED
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and
leases.......................... $ 253,787 $ 40,207 $ (556)(11) $ 293,438 $ -- $ 293,438
Interest on mortgage-backed
investments..................... 12,627 12,285 -- 24,912 -- 24,912
Interest on other investments..... 37,521 6,667 -- 44,188 (3,413) 40,776
Dividends on equity securities.... 1,914 825 -- 2,739 -- 2,739
----------- ---------- ---------- ----------- ----------- -----------
Total interest and dividend
income................... 305,849 59,984 (556) 365,277 (3,413) 361,865
----------- ---------- ---------- ----------- ----------- -----------
Interest expense:
Interest on deposits.............. 108,209 24,860 957 (12) 134,026 -- 134,026
Interest on borrowed funds........ 26,686 2,872 (1,040)(13) 28,519 -- 28,519
----------- ---------- ---------- ----------- ----------- -----------
Total interest expense..... 134,895 27,732 (83) 162,544 -- 162,544
----------- ---------- ---------- ----------- ----------- -----------
Net interest income........ 170,954 32,252 (473) 202,733 (3,413) 199,321
Provision for loan losses........... 4,230 1,150 -- 5,380 -- 5,380
----------- ---------- ---------- ----------- ----------- -----------
Net interest income after
provision for loan
losses................... 166,724 31,102 (473) 197,353 (3,413) 193,941
----------- ---------- ---------- ----------- ----------- -----------
Noninterest income:
Mortgage banking services......... 10,849 1,025 (602)(14) 11,272 -- 11,272
Customer services................. 11,908 3,465 -- 15,373 -- 15,373
Trust and investment advisory
services........................ 5,850 200 -- 6,050 -- 6,050
Loan related services............. 1,907 199 -- 2,106 -- 2,106
Net securities gains.............. 116 979 -- 1,095 -- 1,095
Other noninterest income.......... 787 313 -- 1,100 -- 1,100
----------- ---------- ---------- ----------- ----------- -----------
31,417 6,181 (602) 36,996 -- 36,996
----------- ---------- ---------- ----------- ----------- -----------
Noninterest expenses:
Salaries and employee benefits.... 67,472 10,775 -- 78,247 -- 78,247
Occupancy......................... 10,574 1,951 3 (15) 12,528 -- 12,528
Data processing................... 8,924 1,052 -- 9,976 -- 9,976
Equipment......................... 6,844 1,909 -- 8,753 -- 8,753
Advertising and marketing......... 4,642 749 -- 5,391 -- 5,391
Deposit and other assessments..... 4,497 845 -- 5,342 -- 5,342
Collection and carrying costs of
nonperforming assets............ 2,595 397 -- 2,992 -- 2,992
Merger expenses................... 4,958 -- -- 4,958 -- 4,958
Other noninterest expenses........ 19,774 6,024 2,395 (16) 28,193 -- 28,193
----------- ---------- ---------- ----------- ----------- -----------
130,280 23,702 2,398 156,380 -- 156,380
----------- ---------- ---------- ----------- ----------- -----------
Income before income tax............ 67,861 13,581 (3,473) 77,969 (3,413) 74,556
Applicable income tax............... 23,375 5,582 (453)(17) 28,504 (1,160) 27,344
----------- ---------- ---------- ----------- ----------- -----------
Net income................. $ 44,486 $ 7,999 $ (3,020) $ 49,465 $ (2,253) $ 47,212
=========== ========== ========== =========== =========== ===========
Net income per share................ $ 1.80 $ 1.90 $ -- $ 1.64 $ -- $ 1.71
Average shares outstanding.......... 24,696,393 4,203,000 1,289,883 30,189,276 (2,600,000) 27,589,276
</TABLE>
53
<PAGE> 58
Notes to Pro Forma Combined Condensed Consolidated Financial Statements
(1) Reflects adjustment of Family's loan portfolio to estimated fair value.
(2) Reflects adjustment of Family's premises and equipment to estimated fair
value.
(3) Reflects the excess of the purchase price of Family over the fair value of
the net assets acquired (goodwill) after reflecting the adjustments
described in Notes 1-2 and 4-9.
(4) Reflects the estimated fair value of Family's mortgage servicing portfolio.
(5) Reflects adjustment related to the exercise of the Family Options referred
to in Note 10 and the tax effect of certain related purchase accounting
adjustments.
(6) Reflects adjustment of Family's certificates of deposit to fair value.
(7) Reflects adjustment of Family's FHLB advances to fair value.
(8) Reflects tax effect of certain purchase accounting adjustments.
(9) Reflects $4.96 million of estimated one-time reorganization and
restructuring costs related to the Merger. Such costs include estimated
investment banking and other professional fees, severance costs associated
with expected consolidations following the Merger, stock issuance costs and
miscellaneous other costs. The effect of the one-time charges has been
reflected in the pro forma consolidated balance sheet data but not in the
pro forma operations data because it is nonrecurring.
(10) Reflects elimination of certain Family shareholder equity accounts and
adjustment of paid-in capital and common stock to reflect market value of
the PHFG Common Stock to be issued in the Merger. The purchase price is
based on exchanging 1.26 shares of PHFG Common Stock for (i) each
outstanding share of Family Common Stock and (ii) each share of Family
Common Stock (x) issued upon exercise of outstanding Family Options between
March 31, 1996 and May 31, 1996 and (y) issuable upon exercise of
outstanding Family Options which are scheduled to expire in accordance with
their terms on or prior to December 31, 1996, in each case at the per share
closing price of the PHFG Common Stock ($19.75) on May 30, 1996, the last
business day preceding public announcement of the Agreement. Shares
issuable upon the exercise of Family Options which are not scheduled to
expire in accordance with their terms on or prior to December 31, 1996 are
not included in the number of outstanding shares of Family Common Stock on
the assumption that all such options will become equivalent options to
purchase PHFG Common Stock.
<TABLE>
The estimated total market value of the PHFG Common Stock to be issued in
connection with the Merger is calculated as follows:
<S> <C>
Number of shares of Family Common Stock outstanding on March 31, 1996........ 4,087,048
Incremental shares of Family Common Stock issued upon exercise of Family
Options between March 31, 1996 and May 31, 1996 and upon exercise of Family
Options which expire on or before December 31, 1996........................ 156,431
----------
Total assumed number of outstanding shares of Family Common Stock............ 4,243,479
Exchange Ratio............................................................... 1.26
----------
Total number of shares of PHFG Common Stock to be issued in the Merger....... 5,346,784
Market price per share of PHFG Common Stock on May 30, 1996.................. $ 19.75
----------
Total market value of PHFG Common Stock to be issued in the Merger
(in thousands)............................................................. $ 105,599
==========
</TABLE>
(11) Reflects accretion of the premium on loans and leases over a five-year
period.
(12) Reflects amortization of the premium on deposits over a two-year period.
(13) Reflects accretion of the discount on borrowings over a two-year period.
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<PAGE> 59
(14) Reflects amortization of mortgage servicing rights resulting from the
acquisition of Family over a seven-year period.
(15) Reflects amortization of adjustment to fair value of premises and equipment
over a 31.5 year period.
(16) Reflects amortization of goodwill (amortized over a 15-year period).
(17) Reflects the tax effect of the adjustments described in Notes 11-15.
55
<PAGE> 60
CERTAIN REGULATORY CONSIDERATIONS
Financial institutions and their holding companies are extensively
regulated under federal and state laws. As a result, the business, financial
condition and prospects of PHFG and Family and their respective banking
subsidiaries can be materially affected not only by management decisions and
general economic conditions, but also by applicable statutes and regulations and
other regulatory pronouncements and policies promulgated by regulatory agencies
with jurisdiction over them. The effect of such statutes, regulations and other
pronouncements and policies can be significant, cannot be predicted with a high
degree of certainty and can change over time. Moreover, such statutes,
regulations and other pronouncements and policies are intended to protect
depositors and the BIF and the Savings Association Insurance Fund ("SAIF")
administered by the FDIC, and not stockholders or holders of indebtedness which
is not insured by the FDIC.
PHFG is a registered bank holding company under the BHCA subject to
regulation and supervision by the FRB. As state-chartered banking institutions,
PHB and BNH are subject to regulation and supervision by the Bureau of Banking
of the State of Maine and the New Hampshire Bank Commissioner, respectively, as
well as by the FDIC. The BIF, and to a lesser extent the SAIF as a result of
acquisitions of savings institutions or branches thereof, insure the deposits of
PHFG's banking subsidiaries up to the maximum extent permitted by federal law.
Family is a registered savings and loan holding company under the HOLA
subject to regulation and supervision by the OTS. Family Bank is subject to
regulation and supervision by the OTS, as its chartering authority, and by the
FDIC. The BIF, and to a lesser extent the SAIF as a result of Family's
acquisition of a savings institution branch, insure Family Bank's deposits up to
the maximum extent permitted by federal law.
Subject to application to and approval of the OTS (see "The
Merger -- Regulatory Approvals"), as a result of the Merger PHFG will become a
savings and loan holding company under the HOLA subject to certain regulation
and supervision by the OTS (which will continue to be the primary federal
banking regulator of Family Bank). Such regulation and supervision of PHFG will
be in addition to that of the FRB as a result of PHFG's status as a bank holding
company under the BHCA. Set forth below is a brief description of the regulation
of savings and loan holding companies which also are bank holding companies and
which will be applicable to PHFG upon consummation of the Merger.
Registration and Reporting Requirements. Savings and loan holding
companies are required to register as such with the OTS within 90 days after
becoming a savings and loan holding company. Each savings and loan holding
company, including subsidiary savings and loan holding companies, is required to
file an annual report with the OTS and quarterly current reports detailing
changes from the annual filing. Currently, no fees are required in connection
with the filing of these reports.
Activities Limitations. In general, a savings and loan holding company
which holds only one savings institution subsidiary which meets a so-called
"qualified thrift lender test" set forth in the HOLA and regulations of the OTS
thereunder is not subject to activities limitations, whereas a savings and loan
holding company which holds more than one savings institution subsidiaries, or
only one savings institution subsidiary which does not meet the "qualified
thrift lender" test, is subject to activities limitations which are comparable
to, but not identical with, the activities limitations which are applicable to
all bank holding companies under the BHCA. Pursuant to OTS regulations, the
activities limitations which are applicable to a savings and loan holding
company are not applicable to a company which is treated as a bank holding
company under the BHCA or any of its subsidiaries.
Restrictions on Acquisitions. Except under limited circumstances, savings
and loan holding companies are prohibited from acquiring, without prior approval
of the Director of the OTS, (i) control of any other savings institution or
savings and loan holding company or substantially all the assets thereof or (ii)
more than 5% of the voting shares of a savings institution or holding company
thereof which is not a subsidiary. Except with the prior approval of the
Director of the OTS, no director or officer of a savings and loan holding
company or person owning or controlling by proxy or otherwise more than 25% of
such company's stock, may acquire control of any savings institution, other than
a subsidiary savings institution, or of any other savings and loan holding
company.
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<PAGE> 61
The Director of the OTS may approve acquisitions resulting in the formation
of a multiple savings and loan holding company which controls savings
institutions in more than one state only if (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home or
branch office located in the state of the institution to be acquired as of March
5, 1987, (ii) the acquiror is authorized to acquire control of the savings
institution pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by state-chartered savings institutions located in the state where the
acquiring entity is located (or by a holding company that controls such
state-chartered savings institutions).
Transactions with Affiliates. Transactions between a savings institution
and its affiliates (including its parent holding company) are subject to
substantially the same restrictions as are applicable to transactions between a
bank and its affiliates. In this regard, a savings institution subsidiary is
subject to the restrictions set forth in Sections 23A and 23B of the Federal
Reserve Act and the additional restrictions set forth in Section 11(a) of the
HOLA, as implemented in regulations of the OTS thereunder.
Examinations. Each savings and loan holding company and each subsidiary
thereof is subject to such examinations as the OTS may prescribe. The cost of
each examination (other than examinations of savings institutions) shall be
assessed against and paid by such holding company. The OTS shall, to the extent
feasible, use for these purposes reports filed with or examinations made by
other federal agencies or the appropriate state supervisory authority.
The above discussion of the regulation of financial institutions and their
holding companies is not intended to be a complete description of the regulation
and supervision of PHFG and Family and their respective banking subsidiaries and
is qualified in its entirety by reference to applicable statutes, regulations
and other regulatory pronouncements. Additional information relating to the
regulation of PHFG and Family is included in the documents incorporated by
reference herein. See "Incorporation of Certain Documents by Reference" and
"Available Information."
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<PAGE> 62
DESCRIPTION OF PHFG CAPITAL STOCK
PHFG is authorized to issue up to 100,000,000 shares of PHFG Common Stock
and up to 5,000,000 shares of preferred stock, par value $.01 per share ("PHFG
Preferred Stock"). The capital stock of PHFG does not represent or constitute a
deposit account and is not insured by the FDIC.
The following description of the PHFG capital stock does not purport to be
complete and is qualified in all respects by reference to the Articles of
Incorporation ("Articles") and Bylaws of PHFG, the PHFG Rights Agreement (as
defined below) and the MBCA.
PHFG COMMON STOCK
General. Each share of PHFG Common Stock has the same relative rights and
is identical in all respects with each other share of PHFG Common Stock. The
PHFG Common Stock is not subject to call for redemption and, upon receipt by
PHFG of the shares of Family Common Stock surrendered in exchange for PHFG
Common Stock, each share of PHFG Common Stock offered hereby will be fully paid
and non-assessable.
Voting Rights. Except as provided in any resolution or resolutions adopted
by the Board of Directors establishing any series of PHFG Preferred Stock, the
holders of PHFG Common Stock possess exclusive voting rights in PHFG. Each
holder of PHFG Common Stock is entitled to one vote for each share held on all
matters voted upon by shareholders, and shareholders are not permitted to
cumulate votes in elections of directors.
Dividends. Subject to the rights of the holders of any series of PHFG
Preferred Stock, the holders of the PHFG Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors of PHFG
out of funds legally available therefor.
Preemptive Rights. Holders of PHFG Common Stock do not have any preemptive
rights with respect to any shares which may be issued by PHFG in the future;
thus, PHFG may sell shares of PHFG Common Stock without first offering them to
the then holders of the PHFG Common Stock.
Liquidation. In the event of any liquidation, dissolution or winding up of
PHFG, the holders of the PHFG Common Stock would be entitled to receive, after
payment of all debts and liabilities of PHFG, all assets of PHFG available for
distribution, subject to the rights of the holders of any PHFG Preferred Stock
which may be issued with a priority in liquidation or dissolution over the
holders of the PHFG Common Stock.
PHFG PREFERRED STOCK
The Board of Directors of PHFG is authorized to issue PHFG Preferred Stock
and to fix and state voting powers, designations, preferences or other special
rights of such shares and the qualifications, limitations and restrictions
thereof. The PHFG Preferred Stock may be issued in distinctly designated series,
may be convertible into PHFG Common Stock and may rank prior to the PHFG Common
Stock as to dividend rights, liquidation preferences, or both.
The authorized but unissued shares of PHFG Preferred Stock (as well as the
authorized but unissued and unreserved shares of PHFG Common Stock) are
available for issuance in future mergers or acquisitions, in a future public
offering or private placement or for other general corporate purposes. Except as
otherwise required to approve the transaction in which the additional authorized
shares of PHFG Preferred Stock (as well as PHFG Common Stock) would be issued,
shareholder approval generally would not be required for the issuance of these
shares. Depending on the circumstances, however, shareholder approval may be
required pursuant to the requirements for continued listing of the PHFG Common
Stock on the Nasdaq Stock Market's National Market or the requirements of any
exchange on which the PHFG Common Stock may then be listed.
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<PAGE> 63
PHFG RIGHTS
Each share of PHFG Common Stock has attached to it one Preferred Stock
Purchase Right (a "PHFG Right") issued pursuant to a Preferred Stock Rights
Agreement (the "PHFG Rights Agreement") between PHFG and Mellon Securities Trust
Company, as the PHFG Rights Agent. Each PHFG Right entitles the registered
holder to purchase from PHFG a unit consisting of one one-hundredth of a share
(a "Unit") of Series A Junior Participating Preferred Stock, par value $.01 per
share, at a purchase price of $90.00 per Unit, subject to adjustment (the
"Purchase Price").
The PHFG Rights will not separate from the PHFG Common Stock, be
distributed and become exercisable until on a date ("Distribution Date") which
will occur upon the earlier of (i) 10 business days following a public
announcement that a person or group of affiliated or associated persons, other
than employee benefit plans of PHFG (an "Acquiring Person"), has acquired
beneficial ownership of 20% or more of the outstanding shares of PHFG Common
Stock (the "Stock Acquisition Date"), or (ii) 10 business days (or such later
date as may be determined by action of the Board of Directors of PHFG prior to
such time as any person becomes an Acquiring Person) following the commencement
of a tender offer or exchange offer that would result in a person or group
beneficially owning 25% or more of such outstanding shares of PHFG Common Stock.
Until the Distribution Date, the PHFG Rights will be evidenced by the PHFG
Common Stock certificates and will be transferred with and only with such PHFG
Common Stock certificates, and the surrender for transfer of any certificates
for PHFG Common Stock outstanding also will constitute the transfer of the PHFG
Rights associated with the PHFG Common Stock represented by such certificate.
The PHFG Rights are not exercisable until the Distribution Date and will expire
at the close of business on September 25, 1999, unless earlier redeemed by PHFG,
as described below.
Unless the PHFG Rights are earlier redeemed, in the event that at any time
following the Stock Acquisition Date (i) PHFG were to be the surviving
corporation in a merger or other business combination with an Acquiring Person
and the PHFG Common Stock remained outstanding and was not changed into or
exchanged for other securities or assets, (ii) an Acquiring Person engages in a
number of other self-dealing transactions specified in the PHFG Rights
Agreement, or (iii) any person, other than employee benefit plans of PHFG,
becomes the beneficial owner of 25% or more of the then-outstanding shares of
PHFG Common Stock, the PHFG Rights Agreement provides that proper provision
shall be made so that each holder of record of a PHFG Right, other than the
Acquiring Person, whose PHFG Rights will thereupon become null and void, and
certain of its transferees, will thereafter have the right to receive, upon
exercise and payment of the Purchase Price, PHFG Common Stock (or, in certain
circumstances, cash, property or other securities of PHFG) having a value equal
to two times the exercise price of the PHFG Right. In addition, unless the PHFG
Rights are earlier redeemed, in the event that at any time following the Stock
Acquisition Date, (i) PHFG is involved in a merger or other business combination
in which PHFG is not the surviving corporation or in which the PHFG Common Stock
is changed into or exchanged for other securities of any other person or cash or
any other property, or (ii) 50% or more of PHFG's assets or earning power of
PHFG and its subsidiaries taken as a whole is sold or transferred, the PHFG
Rights Agreement provides that proper provision shall be made so that each
holder of record of a PHFG Right (other than PHFG Rights which previously have
been voided as set forth above) will from and after such date have the right to
receive, upon exercise and payment of the Purchase Price, common stock of the
acquiring company having a value equal to two times the exercise price of the
PHFG Right. The events set forth in this paragraph are referred to in the PHFG
Rights Agreement as the "Triggering Events."
At any time after a person becomes an Acquiring Person, PHFG may exchange
all or part of the PHFG Rights (other than PHFG Rights which previously have
been voided as set forth above) for shares of PHFG Common Stock at an exchange
ratio of one share per PHFG Right, as such may be appropriately adjusted to
reflect any stock split or similar transaction.
At any time until 10 days following the Stock Acquisition Date, PHFG may
redeem the PHFG Rights in whole, but not in part, at a price of $.01 per PHFG
Right (the "Redemption Price"). Immediately upon the action of the PHFG Board
ordering redemption of the PHFG Rights, the PHFG Rights will terminate and the
only right of the holders of PHFG Rights will be to receive the Redemption
Price.
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<PAGE> 64
The PHFG Rights may have certain anti-takeover effects. The PHFG Rights
would cause substantial dilution to a person or group that acquires 20% or more
of the outstanding shares of PHFG Common Stock if a Triggering Event thereafter
occurs without the PHFG Rights having been redeemed. However, the PHFG Rights
should not interfere with any merger or other business combination approved by
the PHFG Board because the PHFG Rights are redeemable under certain
circumstances.
The complete terms of the PHFG Rights are set forth in the PHFG Rights
Agreement, which is incorporated by reference as an exhibit to the Registration
Statement. See "Available Information."
OTHER PROVISIONS
The Articles and Bylaws of PHFG contain a number of provisions which may be
deemed to have the effect of discouraging or delaying attempts to gain control
of PHFG, including provisions in the Articles: (i) classifying the PHFG Board
into three classes to serve for three years with one class being elected
annually; (ii) authorizing the PHFG Board to fix the size of the PHFG Board
between three and 15 directors; (iii) authorizing directors to fill vacancies in
the PHFG Board; (iv) increasing the vote for removal of directors by
shareholders; (v) increasing the amount of stock required to be held by
shareholders seeking to call a special meeting of shareholders; and (vi)
requiring an increased vote of shareholders to approve certain business
combinations unless certain price and procedural requirements are met or the
PHFG Board approves the business combination in the manner provided therein. The
provisions in the Bylaws of PHFG include specific conditions under which (i)
persons may be nominated for election as directors of PHFG at an annual meeting
of shareholders; and (ii) business may be transacted at an annual meeting of
shareholders.
In addition to the foregoing, in certain instances the issuance of
authorized but unissued shares of PHFG Common Stock or PHFG Preferred Stock may
have an anti-takeover effect by making it more difficult and/or expensive to
acquire PHFG. Sections 611-A and 910 of the MBCA also may have the same
anti-takeover effects. See "Comparison of the Rights of Shareholders -- State
Anti-takeover Statutes."
TRANSFER AGENT
The transfer agent and registrar for the PHFG Common Stock is ChaseMellon
Shareholder Services, New York, New York.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
PHFG is a Maine corporation subject to the provisions of the MBCA and
Family is a Massachusetts corporation subject to the provisions of the MBCL.
Upon consummation of the Merger, shareholders of Family will become shareholders
of PHFG and their rights as shareholders of PHFG will be governed by the
Articles and Bylaws of PHFG and the MBCA.
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE
DIFFERENCES AFFECTING THE RIGHTS OF FAMILY'S SHAREHOLDERS, BUT RATHER SUMMARIZES
THE MORE SIGNIFICANT DIFFERENCES AFFECTING THE RIGHTS OF SUCH SHAREHOLDERS AND
CERTAIN IMPORTANT SIMILARITIES; THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE ARTICLES OF ORGANIZATION AND BYLAWS OF FAMILY, THE ARTICLES AND
BYLAWS OF PHFG AND APPLICABLE LAWS AND REGULATIONS.
AUTHORIZED CAPITAL STOCK
Family. Family's Articles of Organization authorize the issuance of up to
20,000,000 shares of Family Common Stock, of which 4,215,211 shares were
outstanding as of the Record Date, and up to 10,000,000 shares of preferred
stock, $0.10 par value per share ("Family Preferred Stock"), of which no shares
are issued and outstanding. The Family Preferred Stock is issuable in series,
each series having such rights and preferences as the Family Board may fix and
determine by resolution.
PHFG. PHFG's Articles authorize the issuance of up to 100,000,000 shares
of PHFG Common Stock, of which 24,617,359 shares were outstanding as of the
Record Date, and up to 5,000,000 shares of PHFG
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<PAGE> 65
Preferred Stock, of which no shares are issued and outstanding. The PHFG
Preferred Stock is issuable in series, each series having such rights and
preferences as the PHFG Board may fix and determine by resolution.
ISSUANCE OF CAPITAL STOCK
Family. Pursuant to authority contained in the MBCL, Family's Bylaws
provide that the Family Board shall have the authority to issue or reserve for
issue from time to time the capital stock of Family which may be authorized from
time to time to such persons or organizations, for such consideration and on
such terms as the Family Board may determine, including without limitation the
granting of options, warrants of conversion or other rights to subscribe to such
capital stock. Neither the MBCL nor Family's Articles of Organization and Bylaws
require shareholder approval of any such actions. However, the Bylaws of the
NASD generally require corporations, such as Family, with securities which are
quoted on the Nasdaq Stock Market's National Market to obtain shareholder
approval of certain issuances of common stock and most stock compensation plans
for directors, officers and key employees of the corporation. Shareholder
approval of stock-related compensation plans also may be sought in certain
instances in order to qualify such plans for favorable federal income tax
treatment under current laws and regulations.
Holders of the capital stock of Family are not entitled to pre-emptive
rights with respect to any shares of the capital stock of Family which may be
issued.
PHFG. Under the MBCA, PHFG may issue shares of PHFG capital stock and
rights or options for the purchase of shares of capital stock of PHFG on such
terms and for such consideration as may be determined by the Board of Directors
of PHFG. Neither the MBCA nor PHFG's Articles and Bylaws require shareholder
approval of any such actions, except that pursuant to the MBCA such rights or
options to purchase PHFG Common Stock may be issued to directors, officers or
employees of PHFG or its subsidiaries only if the issuance or plan pursuant to
which they are issued is approved by the holders of a majority of the
outstanding PHFG Common Stock. Moreover, PHFG also is subject to the same
requirements of the Bylaws of the NASD as Family, and also may elect to seek
shareholder approval of stock-related compensation plans in certain instances in
order to qualify such plans for favorable federal income tax treatment under
current laws and regulations.
Holders of capital stock of PHFG are not entitled to pre-emptive rights
with respect to any shares of the capital stock of PHFG which may be issued.
VOTING RIGHTS
Family. Each share of Family Common Stock is entitled to one vote per
share on all matters properly presented at meetings of shareholders of Family.
Holders of Family Common Stock are not permitted to cumulate votes in elections
of directors.
PHFG. Each share of PHFG Common Stock is entitled to one vote per share on
all matters properly presented at meetings of shareholders of PHFG. Holders of
PHFG Common Stock are not permitted to cumulate votes in elections of directors.
For information about the effects of the Merger on the voting rights of
shareholders of Family and PHFG in connection with business combinations and
certain other circumstances, see "Mergers, Consolidations and Sales of Assets,"
"Business Combinations with Certain Persons" and "State Anti-takeover Statutes"
below.
CLASSIFICATION AND SIZE OF BOARD OF DIRECTORS
Family. The Articles of Organization and Bylaws of Family provide that the
number of directors of Family shall not be less than three nor more than 25. The
Bylaws of Family provide that the Board of Directors of Family may be increased
by up to two additional directors in any fiscal year by the shareholders at any
meeting or by vote of a majority of the directors then in office. Currently the
number of directors of Family is five.
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<PAGE> 66
Pursuant to Family's Articles of Organization and Bylaws, the Family Board
is divided into three classes as nearly equal in number as possible and
approximately one-third of the directors are elected annually to serve
three-year terms.
PHFG. The Articles of PHFG provide that the PHFG Board may increase or
decrease the number of directors of PHFG by resolution, and that the
shareholders of PHFG may increase or decrease the number of directors by the
affirmative vote of the holders of at least 67% of the shares entitled to vote
generally in an election of directors, provided in each case that the minimum
number of directors shall be three and the maximum number of directors shall be
15 and further provided that no decrease in the number of directors shall have
the effect of shortening the term of any incumbent director. Currently the
number of directors of PHFG is 12, which will be increased to 13 upon
consummation of the Merger. See "The Merger -- Interests of Certain Persons in
the Merger."
Pursuant to PHFG's Articles and Bylaws, the PHFG Board is divided into
three classes as nearly equal in number as possible and approximately one-third
of the directors are elected annually to serve three-year terms.
DIRECTOR VACANCIES AND REMOVAL OF DIRECTORS
Family. Any vacancy occurring in the Family Board as a result of
resignation, removal or death may be filled by vote of a majority of the
remaining directors, unless there is an "interested stockholder," in which case
such vacancy may only be filled by vote of a majority of the "continuing
directors" then in office. (The terms "interested stockholder" and "continuing
directors" have the meanings set forth in Family's Articles of Organization. See
"Business Combinations with Certain Persons" below.) A director elected to fill
such a vacancy shall be elected to serve for a term of office continuing until
the next election of directors by the shareholders. Any directorship to be
filled by reason of an increase in the authorized number of directors may be
filled by the Family Board for a term of office continuing until the next
election of directors by the shareholders.
Under Family's Articles of Organization, any director may be removed,
either with or without cause, by an affirmative vote of not less than (i) 80% of
the total votes eligible to be cast by shareholders at a duly constituted
meeting of shareholders called expressly for such purpose or (ii) 80% of the
members of the Family Board then in office, unless at the time of such removal
there shall be an "interested stockholder," in which case the affirmative vote
of not less than a majority of the "continuing directors" then in office shall
instead be required for removal by vote of the Family Board.
PHFG. Vacancies occurring in the PHFG Board by reason of an increase in
the number of directors may be filled by the PHFG Board, and any directors so
chosen shall hold office until the next election of directors by the
shareholders of PHFG. Any other vacancy in the PHFG Board, whether by reason of
death, resignation, removal or otherwise, may be filled by the remaining
directors of PHFG, or by a sole remaining director, and any directors so chosen
shall hold office until the next election of the class for which such directors
shall have been chosen and until their successors are elected and qualified.
Pursuant to the Articles of PHFG, directors of PHFG may be removed, with or
without cause, by the holders of two thirds of the votes entitled to vote for
directors at a meeting of shareholders called expressly for such purpose.
Directors of PHFG also can be removed by PHFG for cause in the manner specified
in the MBCA.
DIRECTOR DUTIES
Family. Under the MBCL, in determining what they reasonably believe to be
in the best interests of the corporation, directors may consider the interest of
the corporation's employees, suppliers, creditors and customers, the economy of
the state, region and nation, community and societal considerations and the
long-term and short-term interests of the corporation and its shareholders. The
Articles of Organization of Family contain a provision which provides for
similar authority.
PHFG. Under the MBCA, directors and officers may, in considering the best
interests of the corporation and of its shareholders, consider the effects of
any action upon employees, suppliers and customers
62
<PAGE> 67
of the corporation, communities in which offices or other establishments of the
corporation are located and all other pertinent factors.
DIRECTOR CONFLICT OF INTEREST TRANSACTIONS
Family. The Articles of Organization of Family provide that Family may
enter into contracts and otherwise transact business as vendor, purchaser or
otherwise with its directors, officers and shareholders and with corporations,
joint stock companies, trusts, firms and associations in which they are or may
be or become interested as directors, officers, shareholders, members, trustees,
beneficiaries or otherwise as freely as though such adverse interest did not
exist even though the vote, action or presence of such director, officer or
shareholder may be necessary to obligate Family upon such contract or
transaction. The Articles of Organization of Family further provide that no such
contract or transaction shall be avoided and no such director, officer or
shareholder shall be held liable to account to Family or to any creditor or
shareholder of Family for any profit or benefit realized by him through any such
contract or transaction by reason of such adverse interest or by reason of any
fiduciary relationship of such director, officer or shareholder to Family
arising out of such office or stock ownership, provided (in the case of
directors and officers but not in the case of any shareholder who is not a
director or officer of Family) that such contract or transaction was entered
into in good faith, and the nature of the interest of such director or officer,
though not necessarily the details or extent thereof, is known by or disclosed
to the directors.
PHFG. The MBCA generally provides that transactions involving a Maine
corporation and an interested director (or officer) of that corporation are not
void or voidable solely because of such director's (or officer's) interest if:
(i) the material facts are disclosed and noted in the minutes and a majority of
disinterested directors on the board of directors or a committee thereof
authorize, approve or ratify the transaction, (ii) the material facts are
disclosed and a majority of shares entitled to vote thereon authorize, approve
or ratify the transaction, inclusive of any shares owned by or voted under the
control of the benefited director, or (iii) the transaction was fair and
equitable to the corporation at the time it is authorized or approved and the
party asserting the fairness of the transaction establishes fairness.
EXCULPATION OF DIRECTORS
Family. Family's Articles of Organization provide that a director of
Family shall not be personally liable to Family or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to Family or its shareholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 61 or Section 62 of Chapter
156B of the MBCL (dealing with illegal distributions and certain loans,
respectively) or (iv) for any transaction from which the director derived an
improper personal benefit.
PHFG. The MBCA contains a provision which provides that a director of a
Maine corporation shall not be held personally liable for monetary damages for
failure to discharge any duty as a director unless the director is found not to
have acted honestly or in the reasonable belief that the action was in or not
opposed to the best interests of the corporation or its shareholders.
SPECIAL MEETINGS OF SHAREHOLDERS
Family. Special meetings of shareholders of Family may be called by the
President or by the affirmative vote of a majority of the Family Board,
provided, however, that if there is an "interested stockholder," any such call
also shall require the affirmative vote of a majority of the "continuing
directors" then in office. In addition, a special meeting of shareholders of
Family shall be called by the clerk of Family upon written application of one or
more shareholders who hold at least 10% of the capital stock entitled to vote
thereat.
PHFG. Special meetings of shareholders of PHFG may be called by the
Chairman, the President or a majority of the PHFG Board and shall be called by
the Chairman, the President or the Clerk upon the written request of the holders
of not less than 50% of the issued and outstanding capital stock of PHFG
entitled to vote on the matter for which the meeting is called, voting together
as a single class, provided, however, that
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<PAGE> 68
special meetings of shareholders of PHFG also may be called by the Superior
Court of the State of Maine upon the petition of the holders of not less than
10% of the shares entitled to vote at the meeting.
SHAREHOLDER NOMINATIONS
Family. Family's Bylaws provide that nominations by shareholders for
election as a director must be made in writing and delivered or mailed to the
President of Family (i) not less than 60 days nor more than 90 days prior to the
date of the scheduled annual meeting, regardless of postponements, deferrals or
adjournments of the meeting to a later date, provided, however, that if less
than 70 days' notice or prior public disclosure of the date of the scheduled
annual meeting is given or made, notice by the shareholder to be timely must be
so delivered or received not later than the close of business on the 10th day
following the earlier of the day on which such notice of the date of the
scheduled annual meeting was mailed or the day on which such public disclosure
was made. A shareholder's notice shall set forth the information specified in
Family's Bylaws.
PHFG. PHFG's Bylaws provide that nominations by shareholders for election
as a director must be made in writing and delivered or mailed to the Clerk of
PHFG not later than (i) 90 days prior to the anniversary date of the immediately
preceding annual meeting, and (ii) with respect to an election to be held at a
special meeting of shareholders 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 shareholders. A shareholder's notice shall set forth the
information specified in PHFG's Bylaws.
SHAREHOLDER PROPOSALS
Family. Family's Bylaws provide that a proposal by shareholders for
submission to a vote of shareholders at an annual meeting must be delivered to,
or mailed and received at, the principal executive offices of Family not less
than 60 days nor more than 90 days prior to the scheduled annual meeting,
regardless of any postponements, deferrals or adjournments of that meeting to a
later date, provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the scheduled annual meeting is given or made, notice
by the shareholder to be timely must be so delivered or received not later than
the close of business on the tenth day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or the day on
which public disclosure was made. A shareholder's notice shall set forth as to
each matter the shareholder proposes to bring before the annual meeting the
information specified in Family's Bylaws.
PHFG. PHFG's Bylaws provide that a proposal by shareholders for submission
to a vote of shareholders at an annual meeting must be made in writing and
delivered or mailed to the Clerk of PHFG not less than 90 days prior to the
anniversary date of the immediately preceding annual meeting. A shareholder's
notice shall set forth as to each matter the shareholder proposes to bring
before the annual meeting the information specified in PHFG's Bylaws.
SHAREHOLDER ACTION WITHOUT A MEETING
Family. The Bylaws of Family provide that action by shareholders may be
taken only at a duly constituted meeting of shareholders. As a result,
shareholders of Family may not act without a meeting by written consent of some
or all of the shareholders.
PHFG. The Bylaws of PHFG provide that any action to be taken or which may
be taken at any annual or special meeting of shareholders may be taken if a
consent in writing, setting forth the actions so taken, is given by the holders
of all outstanding shares entitled to vote. Unanimous written consent is
obtainable, as a practical matter, only on matters on which there are only a
relatively few shareholders entitled to vote.
SHAREHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS
Family. Pursuant to the MBCL, Family's Articles of Organization, Bylaws,
records of all meetings of incorporators and shareholders and the stock and
transfer records shall be kept in Massachusetts for inspection by shareholders
at Family's principal office and/or at an office of its transfer agent, its
clerk or its resident
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<PAGE> 69
agent. Under the statute, Family may refuse to make such books and records
available for inspection if the purpose is to secure a list of stockholders or
other information for the purpose of selling such list or information or other
than in the interest of the shareholder relative to the affairs of Family, and
under Family's Bylaws Family may similarly refuse to permit such inspection,
except to the extent otherwise required by law, if there is reasonable ground
for belief by the Family Board that such inspection will for any reason be
adverse to the interests of Family.
PHFG. The Bylaws of PHFG provide that a list of shareholders shall be
available for inspection by any shareholder entitled to vote for a period of not
less than 10 days before and during each meeting of shareholders. The MBCA
provides that a shareholder of a Maine corporation such as PHFG who has been
such for at least six months or owns 10% or more of the corporation's
outstanding shares may, for any proper purpose, and subject to the provision, if
requested, of specified affidavits, inspect the corporation's books and records
of account, minutes of meetings and list or record of shareholders. The MBCA
authorizes a shareholder of a Maine corporation which refuses to permit an
authorized inspection to bring a legal action for an order directing the
corporation to permit such inspection and, if successful, to be awarded costs
and in certain circumstances specified punitive damages.
AMENDMENT OF GOVERNING INSTRUMENTS
Family. No amendment to Family's Articles of Organization may be made
unless it is approved by the shareholders of Family by not less than two thirds
of the total votes eligible to be cast or, in the case of the provisions dealing
with name, purpose and authorized capitalization of Family, a majority of the
total votes eligible to be cast, at a duly constituted meeting, provided that if
at any time within the 60-day period immediately preceding the meeting at which
the shareholder vote is taken there is an "interested stockholder," such
amendment also shall require the affirmative vote of a majority of the
"continuing directors" prior to approval by shareholders.
The Bylaws of Family generally may be amended by the shareholders or the
Family Board. Such action by the Family Board shall require the affirmative vote
of at least 80% of the directors then in office at a duly constituted meeting of
the Family Board, unless at the time of such action there shall be an
"interested stockholder," in which case such action also shall require the
affirmative vote of at least a majority of the "continuing directors" then in
office, at such meeting. Such action by the shareholders generally shall require
(i) the submission by the shareholders of written proposals for amending the
Bylaws at least 60 days prior to the meeting at which they are to be considered
and (ii) the affirmative vote of at least 80% of the total votes eligible to be
cast by shareholders at a duly constituted meeting of shareholders called
expressly for such purpose.
PHFG. No amendment to PHFG's Articles generally may be made unless it is
first proposed by the Board of Directors of PHFG and thereafter approved by the
holders of at least a majority of all outstanding shares entitled to vote
thereon, with the exception of certain sections thereof which can only be
amended by the holders of at least 75% of the shares of PHFG entitled to vote
generally in an election of directors, as specified therein. The sections in
PHFG's Articles requiring such a higher vote of shareholders for amendment
include those relating to the Board of Directors, special meetings of
shareholders, informal action by shareholders and amendment of the Articles and
Bylaws. In addition, the "fair price" provision included in the Articles of PHFG
may not be amended except in the manner set forth therein. See "Business
Combinations with Certain Persons" below.
The Board of Directors of PHFG has the exclusive power to adopt, amend or
repeal the Bylaws of PHFG.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
Family. The MBCL generally provides that an agreement of merger or
consolidation or a sale, lease or exchange of all or substantially all of the
property and assets of a corporation such as Family must be approved by the
holders of two thirds of the shares of each class of stock outstanding and
entitled to vote thereon, unless a corporation's articles of organization
designate a lower percentage (but not less than a majority). The Articles of
Organization and Bylaws of Family do not contain provisions which require a
specific lower or,
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<PAGE> 70
except as described under "Business Combinations with Certain Persons" below,
higher shareholder vote for such transactions.
PHFG. The MBCA generally requires the approval of the Board of Directors
of PHFG and the holders of at least a majority of the outstanding PHFG Common
Stock for mergers and consolidations in which PHFG is a participating
corporation and for sales of all or substantially all of PHFG's property and
assets.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Family. The Articles of Organization of Family contain a provision which
requires that mergers and certain other business combinations with an
"interested stockholder," as defined, be approved by the holders of at least 80%
of the capital stock of Family entitled to vote thereon at an annual meeting or
special meeting of the shareholders called for that purpose, unless certain
price and procedural requirements are met or the merger or other business
combination is approved or ratified by a majority of Family's "continuing
directors," as defined, in which case only such affirmative vote as is required
by law or otherwise shall be applicable. An "interested stockholder" for this
purpose generally includes any person, firm or entity which is the beneficial
owner of more than 10% of the voting stock of Family, and a "continuing
director" for this purpose generally is any director who was a director prior to
the time the "interested stockholder" became such and who is not an affiliate or
associate of an "interested stockholder."
PHFG. The Articles of PHFG contain a provision which requires that mergers
and certain other business combinations with a "related person," as defined, be
approved by the holders of not less than 80% of the outstanding voting stock of
PHFG and an "independent majority of stockholders," as defined, unless certain
price and procedural requirements are met or the Board of Directors, including a
majority of "continuing directors," as defined, approves the merger or other
business combination, in which case only such affirmative vote as is required by
law or otherwise shall be applicable. A "related person" for this purpose
generally includes any person, firm or entity which is the beneficial owner of
10% or more of the voting shares of PHFG, and a "continuing director" for this
purpose generally is any director who was a director prior to the time the
"related person" became such and who is not an affiliate or associate of a
"related person."
STATE ANTI-TAKEOVER STATUTES
Family. Under Chapter 110F of the Massachusetts General Laws, a
Massachusetts corporation such as Family is prohibited from engaging in certain
business combinations (defined by the statute to include certain mergers and
consolidations, dispositions of assets and issuances of securities, as well as
certain other transactions) with an interested shareholder (defined by the
statute to include holders of 5% or more of the outstanding stock of the
corporation) for a period of three years following the date that such
shareholder became an interested shareholder, except under certain
circumstances, which include prior approval by the board of directors of the
business combination or the transaction which resulted in the shareholder
becoming an interested shareholder, or subsequent approval of the business
combination by the board of directors and by a vote of at least two thirds of
the outstanding voting stock which is not owned by the interested shareholder.
The statute includes an exception to the prohibitions of the statute if, upon
consummation of the transaction which resulted in the shareholder becoming an
interested shareholder, the shareholder owned at least 90% of the voting stock
of the corporation.
Under Chapter 110D of the Massachusetts General Laws, any person
(hereinafter, the "acquiror") who makes a bona fide offer to acquire, or
acquires, shares of stock of a Massachusetts corporation that, when combined
with shares already owned, would increase the acquiror's ownership to at least
20%, 33.33% or a majority of the voting stock of such corporation, must obtain
the approval of a majority of shares held by all shareholders except the
acquiror and the officers and inside directors of the corporation in order to
vote the shares acquired. The statute permits a Massachusetts corporation to
elect not to be governed by its provisions by including in its articles of
organization or bylaws a provision pursuant to which the corporation "opts out"
of the statute. Family has not included such a provision in either its Articles
of Organization or Bylaws.
PHFG. Section 910 of the MBCA generally provides shareholders of a Maine
corporation which has a class of voting shares registered or traded on a
national securities exchange or registered under the Exchange
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<PAGE> 71
Act, such as PHFG, with the right to demand payment of an amount equal to the
fair value of each voting share in the corporation held by the shareholder from
a person or group of persons which become a "controlling person," which
generally is defined to mean an individual, firm or entity (or group thereof)
which has voting power over at least 25% of the outstanding voting shares of the
corporation. Such a demand must be submitted to the controlling person within 30
days after the controlling person provides required notice to the shareholders
of the acquisition or transactions which resulted in such person or group
becoming a controlling person. Section 910 could be interpreted to provide that
a person or group of persons could become a controlling person for purposes of
such section by soliciting and acquiring revocable proxies to vote at least 25%
of the voting shares of a corporation.
Section 611-A of the MBCA generally provides that a Maine corporation which
has a class of voting stock registered or traded on a national securities
exchange or under the Exchange Act may not engage in any business combination
for five years following an "interested stockholder's" "stock acquisition date"
unless the business combination is (i) approved by the corporation's board of
directors prior to that interested stockholder's stock acquisition date or (ii)
approved, subsequent to that interested stockholder's stock acquisition date, by
the board of directors of the Maine corporation and authorized by the holders of
a majority of the outstanding voting stock of the corporation not beneficially
owned by that interested stockholder or any affiliate or associate thereof or by
persons who are either directors or officers and also employees of the
corporation. An "interested stockholder" is defined to include any person, firm
or entity that is directly or indirectly the beneficial owner of 25% or more of
the outstanding voting stock of the corporation, other than by reason of a
revocable proxy given in response to a proxy solicitation conducted in
accordance with the Exchange Act which is not then reportable on a Schedule 13D
under the Exchange Act, and "stock acquisition date" is defined to mean the date
that any person, firm or entity first becomes an interested stockholder of that
corporation.
DISSENTERS' RIGHTS OF APPRAISAL
Family. Under the MBCL, a shareholder of a Massachusetts corporation such
as Family generally has the right to dissent from, and obtain payment of the
fair value of his shares in the event of, a statutory merger or consolidation,
an amendment to the articles of organization which adversely affects the rights
of shareholders or a sale, lease or exchange of all or substantially all of a
corporation's property and assets, subject in each case to specified procedural
requirements. Such appraisal rights are not available when the corporation is to
be the surviving corporation and no vote of its shareholders is required for the
merger. For a detailed description of the dissenters' rights of shareholders of
Family in connection with the Merger, see "The Merger -- Dissenters' Rights."
PHFG. Under the MBCA, a shareholder of a Maine corporation such as PHFG
generally has the right to dissent from a merger or consolidation in which the
corporation is participating or a sale of all or substantially all of the assets
of the corporation, subject in each case to specified procedural requirements.
Such appraisal rights are not available when the corporation is to be the
surviving corporation and no vote of its shareholders is required for the
merger. The MBCA also generally does not confer appraisal rights if the
corporation's stock is either (i) registered or traded on a national securities
exchange or (ii) registered with the SEC pursuant to Section 12(g) of the
Exchange Act, as is the PHFG Common Stock. See "Available Information."
Notwithstanding the foregoing, however, the MBCA provides that appraisal rights
generally will be permitted if shareholders of the corporation are required to
accept for their stock in any merger, consolidation or similar transaction
anything other than (i) shares of the surviving or new corporation resulting
from the transaction, or such shares plus cash in lieu of fractional shares, or
(ii) shares, or shares plus cash in lieu of fractional shares, of any other
corporation unless such shares are registered or traded on a national securities
exchange or held of record by not less than 2,000 shareholders, or any
combination of the foregoing.
SHAREHOLDER RIGHTS PLANS
Family. Family has not adopted a shareholder rights plan.
PHFG. PHFG has adopted a shareholder rights plan, as described under
"Description of PHFG Capital Stock -- PHFG Rights."
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CERTAIN BENEFICIAL OWNERS OF PHFG COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
The following table sets forth information as to the PHFG Common Stock
beneficially owned as of May 31, 1996 by (i) each director and executive officer
of PHFG and (ii) all directors and executive officers of PHFG as a group.
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF MAY 31, 1996(1)
--------------------------
NAME OF BENEFICIAL OWNER AMOUNT PERCENT
- ------------------------ ------- -------
<S> <C> <C>
Directors:
Robert P. Bahre............................................... 38,660(2) --%
Everett W. Gray............................................... 5,583(2) --
Andrew W. Greene.............................................. 3,179(2) --
Katherine M. Greenleaf........................................ 7,123(2) --
Dana S. Levenson.............................................. 5,262(2) --
Robert A. Marden.............................................. 8,864(2)(3) --
Malcolm W. Philbrook, Jr...................................... 47,282(2)(4) --
Pamela P. Plumb............................................... 9,281(2) --
William J. Ryan............................................... 146,841(5) --
Curtis M. Scribner............................................ 8,303(2) --
Paul R. Shea.................................................. 8,260 --
Davis P. Thurber.............................................. 334,902(6) 1.4
Executive Officers who are not Directors:
Henry G. Beyer................................................ 29,543(5) --
John W. Fridlington........................................... 43,711(5) --
Carol L. Mitchell............................................. 16,439 --
Peter J. Verrill.............................................. 64,881(5)(7) --
All directors and executive officers of PHFG as a group (16
persons)...................................................... 778,114 3.1%(8)
- ---------------
<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 PHFG 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 outstanding PHFG Common Stock.
(2) In the case of all indicated directors other than Mr. Marden, includes
options to purchase 1,000 shares granted under PHFG's 1995 Stock Option Plan
for Non-Employee Directors, and in the case of Mr. Marden includes
outstanding options to purchase 523 shares of PHFG Common Stock granted
pursuant to such plan (net of exercises).
(3) Includes 1,564 shares held by Mr. Marden's spouse, with whom beneficial
ownership of such shares is shared.
(4) 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.
(5) Includes shares over which an officer has voting power pursuant to PHFG's
Thrift Incentive Plan and Profit Sharing Employee Stock Ownership Plan (in
each case as of December 31, 1995), and options to
</TABLE>
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<PAGE> 73
<TABLE>
purchase shares of PHFG Common Stock pursuant to PHFG's 1987 Stock Option
and Stock Appreciation Rights Plan, as amended, which are exercisable within
60 days of May 31, 1996, as follows:
<CAPTION>
PROFIT SHARING CURRENTLY
THRIFT INCENTIVE EMPLOYEE STOCK EXERCISABLE
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
Carol L. Mitchell........................... 1,412 654 11,334
Peter J. Verrill............................ 17,451 2,062 40,569
- --------------
<FN>
(6) Includes 242,676 shares held by Mr. Thurber as trustee of the Davis P.
Thurber 1996 Revocable Trust, 10,000 shares held by Mr. Thurber's spouse and
an interest in 82,226 shares held by BNH as trustee under testamentary
trusts created under the wills of George F. Thurber and Muriel D. Thurber.
(7) 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.
(8) Includes an aggregate of 69,498 shares of PHFG Common Stock which are held
by the trusts established pursuant to the Thrift Incentive Plan (59,779
shares) and the Profit Sharing Employee Stock Ownership Plan (9,719 shares)
on behalf of executive officers of PHFG 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 May 31, 1996. Shares subject to such stock options are deemed to
be outstanding for the purpose of computing the percentage of PHFG Common
Stock beneficially owned by directors and executive officers of PHFG as a
group.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of May 31, 1996, there was no person or entity, including any "group" as
that term is used in Section 13(d)(3) of the Exchange Act, who or which was
known by PHFG to be the beneficial owner of 5% or more of the outstanding PHFG
Common Stock.
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<PAGE> 74
CERTAIN BENEFICIAL OWNERS OF FAMILY COMMON STOCK
<TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the Family Common Stock
beneficially owned as of May 31, 1996 by (i) each director and executive officer
of Family and (ii) all directors and executive officers of Family as a group.
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF MAY 31, 1996(1)
---------------------------
NAME OF BENEFICIAL OWNER AMOUNT PERCENT
- ------------------------ ------- -------
<S> <C> <C>
Directors:
Charles George, Jr............................................. 8,250(2) --%
David D. Hindle................................................ 50,230(2)(3)(4) 1.2
Elkin B. McCallum.............................................. 57,150(5) 1.4
Kenneth L. Paul................................................ 12,300(2)(6) --
John E. Veasey................................................. 125,462(2)(7) 3.0
Executive Officers who are not Directors:
George E. Fahey................................................ 47,142(2)(3)(8) 1.1
Bruce Fenn, III................................................ 39,381(2)(3) --
David J. LaFlamme.............................................. 36,839(2)(3) --
Ronald G. Trombley............................................. 44,990(2)(3)(9) 1.1
All directors and executive officers of Family as a group (nine
persons)....................................................... 421,744(2)(3) 9.8%
- -----------
<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 Family 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 outstanding Family Common Stock.
(2) Includes shares which directors and executive officers have the right to
acquire upon exercise of options which are exercisable within 60 days of May
31, 1996, as follows:
CURRENTLY
EXERCISABLE
OPTIONS
-----------
Charles George, Jr.............................................. 4,500
David D. Hindle................................................. 20,358
Kenneth L. Paul................................................. 4,500
John E. Veasey.................................................. 4,500
George E. Fahey................................................. 22,858
Bruce Fenn, III................................................. 28,250
David J. LaFlamme............................................... 3,657
Ronald G. Trombley.............................................. 22,608
All directors and executive officers as a group................. 111,231
</TABLE>
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<TABLE>
(3) Includes shares allocated to the accounts of executive officers of Family
under Family's Employee Stock Ownership Plan and Trust ("ESOP"), as well as
nonallocated shares under the ESOP which may be deemed to be beneficially
owned by the executive officers as a result of such person's ability to
direct the voting of those shares through the vote of shares allocated to
their accounts under the ESOP, as follows:
<CAPTION>
ESOP
-------------------------
ALLOCATED UNALLOCATED
--------- -----------
<S> <C> <C>
David D. Hindle..................................... 3,187 352
George E. Fahey..................................... 2,825 312
Bruce Fenn, III..................................... 1,131 125
David J. LaFlamme................................... 1,589 176
Ronald G. Trombley.................................. 2,755 304
All executive officers as a group................... 11,487 1,269
</TABLE>
(4) Includes 5,638 shares as to which voting and investment power is shared with
Mr. Hindle's wife, as well as 1,750 shares owned by Mr. Hindle's wife
individually.
(5) Beneficial ownership of the indicated shares is shared with Mr. McCallum's
wife.
(6) Includes 3,750 shares held by Mr. Paul as custodian for his sons. Mr. Paul
disclaims beneficial ownership of such shares.
(7) Includes 4,927 shares owned by Mr. Veasey's wife individually. Mr. Veasey
disclaims beneficial ownership of such shares.
(8) Includes 1,653 shares as to which voting and investment power is shared with
Mr. Fahey's wife, as well as 424 shares owned by Mr. Fahey's wife
individually.
(9) Includes 889 shares and 255 shares as to which voting and investment power
is shared with Mr. Trombley's wife and mother, respectively, as well as 399
shares owned by Mr. Trombley's wife individually.
<TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to Family Common Stock
beneficially owned by each person or entity, including any "group" as that term
is used in Section 13(d)(3) of the Exchange Act, who or which was known by
Family to be the beneficial owner of 5% or more of the outstanding Family Common
Stock as of May 31, 1996.
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF MAY 31, 1996(1)
NAME AND ADDRESS OF --------------------
BENEFICIAL OWNER AMOUNT PERCENT
---------------- ------ -------
<S> <C> <C>
First Manhattan Co.
437 Madison Avenue
New York, New York 10022............................................. 285,750(1) 6.8%
- ---------------
<FN>
(1) Based on a Schedule 13G filed under the Exchange Act on February 9, 1996.
</TABLE>
LEGAL OPINION
The validity of the PHFG Common Stock offered hereby will be passed upon
for PHFG by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C.
EXPERTS
The historical consolidated financial statements of PHFG as of December 31,
1995 and 1994, and for each of the years in the three-year period ended December
31, 1995 incorporated by reference herein and elsewhere in the Registration
Statement, have been incorporated by reference herein and elsewhere in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public
71
<PAGE> 76
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
refers to a change in method of accounting for mortgage servicing rights
effective January 1, 1995.
The supplemental consolidated financial statements of PHFG as of December
31, 1995 and 1994, and for each of the years in the three-year period ended
December 31, 1995 incorporated by reference herein and elsewhere in the
Registration Statement, have been incorporated by reference herein and elsewhere
in the Registration Statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP refers to a change in method of accounting for
mortgage servicing rights effective January 1, 1995.
The consolidated financial statements of Family included in Family's Annual
Report on Form 10-K for the year ended December 31, 1995 have been audited by
Wolf & Company, P.C., independent auditors, as set forth in their report thereon
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
Representatives of KPMG Peat Marwick LLP and Wolf & Company, P.C. are
expected to be present at the Special Meetings of PHFG and Family, respectively,
will have an opportunity to make a statement should they so desire and are
expected to be available to respond to appropriate questions.
PROPOSALS FOR THE 1997
ANNUAL MEETINGS
Any proposal which a shareholder of PHFG wishes to have included in the
proxy materials of PHFG relating to the next annual meeting of shareholders,
which is scheduled to be held in April 1997, must be received at the principal
executive offices of Peoples Heritage Financial Group, Inc., One Portland
Square, P.O. Box 9540, Portland, Maine 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 shareholders. It is urged that any shareholder proposals be sent
certified mail, return-receipt requested.
Any proposal which a shareholder of Family wishes to present at Family's
1997 annual meeting of shareholders, which absent prior consummation of the
Merger is scheduled to be held in April 1997, must be received at the principal
executive offices of Family Bancorp, P.O. Box 431, 153 Merrimack Street,
Haverhill, Massachusetts 01831, Attention: Clerk, no later than November 20,
1996 to be eligible for inclusion in Family's proxy statement and on the form of
proxy relating to such meeting. 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 shareholders. It is urged that any shareholder proposals be
sent certified mail, return-receipt requested.
72
<PAGE> 77
ANNEX I
AGREEMENT AND PLAN OF MERGER
AMONG
PEOPLES HERITAGE FINANCIAL GROUP, INC.,
PEOPLES HERITAGE MERGER CORP.
AND
FAMILY BANCORP
DATED AS OF MAY 30, 1996
<PAGE> 78
AGREEMENT AND PLAN OF MERGER
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS........................................................... 1
ARTICLE II THE MERGER............................................................ 5
2.1 The Merger............................................................ 5
2.2 Effective Time; Closing............................................... 5
2.3 Treatment of Capital Stock............................................ 6
2.4 Shareholder Rights; Stock Transfers................................... 6
2.5 Dissenting Shares..................................................... 6
2.6 Fractional Shares..................................................... 6
2.7 Exchange Procedures................................................... 6
2.8 Anti-Dilution Provisions.............................................. 7
2.9 Options............................................................... 7
2.10 Additional Actions.................................................... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................... 8
3.1 Capital Structure..................................................... 8
3.2 Organization, Standing and Authority of the Company................... 9
3.3 Ownership of the Company Subsidiaries................................. 9
3.4 Organization, Standing and Authority of the Company Subsidiaries...... 9
3.5 Authorized and Effective Agreement.................................... 9
3.6 Securities Documents and Regulatory Reports........................... 10
3.7 Financial Statements.................................................. 11
3.8 Material Adverse Change............................................... 11
3.9 Environmental Matters................................................. 11
3.10 Tax Matters........................................................... 12
3.11 Legal Proceedings..................................................... 12
3.12 Compliance with Laws.................................................. 13
3.13 Certain Information................................................... 13
3.14 Employee Benefit Plans................................................ 13
3.15 Certain Contracts..................................................... 14
3.16 Brokers and Finders................................................... 15
3.17 Insurance............................................................. 15
3.18 Properties............................................................ 15
3.19 Labor................................................................. 16
3.20 Required Vote; Inapplicability of Antitakeover Statutes............... 16
3.21 Ownership of Acquiror Common Stock.................................... 16
3.22 Disclosures........................................................... 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR........................ 16
4.1 Capital Structure..................................................... 16
4.2 Organization, Standing and Authority of the Acquiror.................. 17
4.3 Ownership of the Acquiror Subsidiaries................................ 17
4.4 Organization, Standing and Authority of the Acquiror Subsidiaries..... 17
4.5 Authorized and Effective Agreement.................................... 17
4.6 Securities Documents and Regulatory Reports........................... 19
4.7 Financial Statements.................................................. 19
4.8 Material Adverse Change............................................... 19
</TABLE>
i
<PAGE> 79
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.9 Environmental Matters................................................. 19
4.10 Tax Matters........................................................... 20
4.11 Legal Proceedings..................................................... 20
4.12 Compliance with Laws.................................................. 20
4.13 Certain Information................................................... 21
4.14 Employee Benefit Plans................................................ 21
4.15 Certain Contracts..................................................... 22
4.16 Brokers and Finders................................................... 22
4.17 Insurance............................................................. 22
4.18 Properties............................................................ 22
4.19 Labor................................................................. 23
4.20 Required Vote; Acquiror Rights Agreement.............................. 23
4.21 Ownership of Company Common Stock..................................... 23
4.22 Disclosures........................................................... 23
ARTICLE V COVENANTS............................................................. 24
5.1 Reasonable Best Efforts............................................... 24
5.2 Shareholder Meetings.................................................. 24
5.3 Regulatory Matters.................................................... 24
5.4 Investigation and Confidentiality..................................... 25
5.5 Press Releases........................................................ 25
5.6 Business of the Parties............................................... 26
5.7 Certain Actions....................................................... 28
5.8 Current Information................................................... 28
5.9 Indemnification; Insurance............................................ 29
5.10 Directors............................................................. 30
5.11 Benefit Plans and Arrangements........................................ 30
5.12 Branch Sale........................................................... 30
5.13 Certain Policies; Integration......................................... 31
5.14 Disclosure Supplements................................................ 31
5.15 Failure to Fulfill Conditions......................................... 31
ARTICLE VI CONDITIONS PRECEDENT.................................................. 31
6.1 Conditions Precedent -- The Acquiror, the Acquiror Sub and the
Company............................................................... 31
6.2 Conditions Precedent -- The Company................................... 32
6.3 Conditions Precedent -- The Acquiror and the Acquiror Sub............. 33
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT..................................... 33
7.1 Termination........................................................... 33
7.2 Effect of Termination................................................. 34
7.3 Survival of Representations, Warranties and Covenants................. 34
7.4 Waiver................................................................ 35
7.5 Amendment or Supplement............................................... 35
ARTICLE VIII MISCELLANEOUS......................................................... 35
8.1 Expenses.............................................................. 35
8.2 Entire Agreement...................................................... 35
8.3 No Assignment......................................................... 36
8.4 Notices............................................................... 36
</TABLE>
ii
<PAGE> 80
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
8.5 Alternative Structure................................................. 36
8.6 Interpretation........................................................ 37
8.7 Counterparts.......................................................... 37
8.8 Governing Law......................................................... 37
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Company Stockholder Agreement
Exhibit C Form of Acquiror Stock Option Agreement
Exhibit D Matters to be covered by Opinion of Counsel to the Acquiror
Exhibit E Matters to be covered by Opinion of Counsel to the Company
</TABLE>
iii
<PAGE> 81
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of May 30, 1996,
by and among Peoples Heritage Financial Group, Inc. (the "Acquiror"), a Maine
corporation, Peoples Heritage Merger Corp. (the "Acquiror Sub"), a Maine
corporation and a wholly-owned subsidiary of the Acquiror, and Family Bancorp
(the "Company"), a Massachusetts corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquiror and the Company have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions provided
for herein, including the merger of the Company with and into the Acquiror Sub,
subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into this Agreement, (i) the Company is concurrently entering into a Stock
Option Agreement with the Acquiror (the "Company Stock Option Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant to which the
Company is granting to the Acquiror the option to purchase shares of Company
Common Stock (as defined herein) under certain circumstances and (ii) certain
stockholders of the Company are concurrently entering into a Stockholder
Agreement with the Acquiror (the "Company Stockholder Agreement"), in
substantially the form attached hereto as Exhibit B, pursuant to which, among
other things, such stockholders agree to vote their shares of Company Common
Stock in favor of this Agreement and the transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Company's willingness to
enter into this Agreement, the Acquiror is concurrently entering into a Stock
Option Agreement with the Company (the "Acquiror Stock Option Agreement"), in
substantially the form attached hereto as Exhibit C, pursuant to which the
Acquiror is granting to the Company the option to purchase shares of Acquiror
Common Stock (as defined herein) under certain circumstances;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Common Stock" shall mean the common stock, par value $.01 per
share, of the Acquiror and, unless the context otherwise requires, related
Acquiror Rights.
"Acquiror Employee Plans" shall have the meaning set forth in Section
4.14(a) hereof.
"Acquiror Employee Stock Benefit Plans" shall mean the following employee
benefit plans of the Acquiror: 1986 Stock Option and Stock Appreciation Rights
Plan, 1986 Employee Stock Purchase Plan, Thrift Incentive Plan, Profit Sharing
Employee Stock Ownership Plan, Restricted Stock Plan for Non-Employee Directors,
1995 Stock Option Plan for Non-Employee Directors, 1996 Equity Incentive Plan
and Dividend Reinvestment Plan.
"Acquiror Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Acquiror as of December 31, 1995, 1994 and 1993 and the consolidated statements
of operations, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Acquiror for each of the three years ended December
31, 1995, 1994 and 1993 as filed by the Acquiror in its Securities Documents,
and (ii) the consolidated statements of financial condition of the
<PAGE> 82
Acquiror (including related notes and schedules, if any) and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of the Acquiror included in the Securities
Documents filed by the Acquiror with respect to the quarterly and annual periods
ended subsequent to December 31, 1995.
"Acquiror Maine Bank" shall mean Peoples Heritage Savings Bank, a
Maine-chartered savings bank and a wholly-owned subsidiary of the Acquiror.
"Acquiror National Bank" shall mean The First National Bank of Portsmouth,
a national bank and a wholly-owned subsidiary of the Acquiror, which is to be
merged with and into the Acquiror New Hampshire Bank on or about July 1, 1996.
"Acquiror New Hampshire Bank" shall mean Bank of New Hampshire, a New
Hampshire-chartered commercial bank and a wholly-owned subsidiary of the
Acquiror.
"Acquiror Preferred Stock" shall mean the shares of preferred stock, par
value $.01 per share, of the Acquiror.
"Acquiror Rights" shall mean the rights attached to shares of Common Stock
pursuant to the Acquiror Rights Agreement.
"Acquiror Rights Agreement" shall mean the Stockholder Rights Agreement,
dated as of September 12, 1989, between Acquiror and Mellon Securities Trust
Company, in its capacity as Rights Agent.
"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Bank" shall mean Family Bank, FSB, a federally-chartered savings bank and
a wholly-owned subsidiary of the Company.
"Bank Commissioner" shall mean the Bank Commissioner of the State of New
Hampshire.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Branch Sale" shall mean the sale of the branch office maintained by the
Bank in Seabrook, New Hampshire, and such other branch offices maintained by the
Bank in New Hampshire as may be determined by the Company and the Acquiror, to
the Acquiror New Hampshire Bank.
"Branch Sale Agreement" shall mean the Branch Sale Agreement between the
Bank and the Acquiror New Hampshire Bank to be executed as soon as practicable
after the parties' execution of this Agreement and which provides for the Branch
Sale.
"Central Fund" shall mean the Mutual Savings Central Fund, Inc.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $0.10 per
share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Company as of December 31, 1995, 1994 and 1993 and the consolidated statements
of operations, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Company for each of the three years ended December 31,
1995, 1994 and 1993 as filed by the Company in its Securities Documents, and
(ii) the consolidated statements of financial condition of the Company
(including related notes and schedules, if any) and the consolidated statements
of operations, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Company included in the Securities Documents filed by
the Company with respect to the quarterly and annual periods ended subsequent to
December 31, 1995.
2
<PAGE> 83
"Company Options" shall mean options to purchase shares of Company Common
Stock granted pursuant to the Company Stock Option Plans or as otherwise
Previously Disclosed.
"Company Option Plans" shall mean the following stock option plans of the
Company, as amended and as in effect as of the date hereof: 1995 Incentive and
Nonqualified Stock Option Plan, 1986 Incentive and Nonqualified Stock Option
Plan and 1986 Nonemployees Nonqualified Stock Option Plan.
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $0.10 per share, of the Company.
"Dissenting Shares" shall have the meaning set forth in Section 2.5 hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental Entity
or third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
sec. 9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. sec. 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. sec. 7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. sec. 1251,
et seq; the Toxic Substances Control Act, as amended, 15 U.S.C. sec. 9601, et
seq; the Emergency Planning and Community Right to Know Act, 42 U.S.C.
sec. 1101, et seq; the Safe Drinking Water Act, 42 U.S.C. sec. 300f, et seq; and
all comparable state and local laws, and (2) any common law (including without
limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3 hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger,
including the Proxy Statement which forms a part thereof, as amended and
supplemented.
"FRB" means the Board of Governors of the Federal Reserve System or any
successor thereto.
"Governmental Entity" shall mean any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
3
<PAGE> 84
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Massachusetts Board" shall mean the Massachusetts Board of Bank
Incorporation.
"Material Adverse Effect" shall mean, with respect to the Acquiror or the
Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and its
Subsidiaries taken as whole or the Company and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of either the
Company, on the one hand, or the Acquiror or the Acquiror Sub, on the other
hand, to consummate the transactions contemplated by this Agreement, provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in laws and regulations or interpretations thereof that are
generally applicable to the banking or savings industries (including without
limitation prospective changes which result in assessments which are intended to
recapitalize the SAIF), (b) changes in generally accepted accounting principles
that are generally applicable to the banking or savings industries, (c) expenses
incurred in connection with the transactions contemplated hereby or (d) actions
or omissions of a party (or any of its Subsidiaries) taken with the prior
informed written consent of the other party or parties in contemplation of the
transactions contemplated hereby, including without limitation any actions taken
by the Company pursuant to Section 5.13 hereof.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the Acquiror
Sub pursuant to the terms hereof.
"MBCA" shall mean the Maine Business Corporation Act, as amended.
"MBCL" shall mean the Massachusetts Business Corporation Law, as amended.
"MHPF" shall mean the Massachusetts Housing Partnership Fund.
"MRSA" shall mean the Maine Revised Statutes Annotated, as amended.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OCC" shall mean the Office of the Comptroller of the Currency of the U.S.
Department of the Treasury or any successor thereto.
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the date
hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.14 hereof.
"Proxy Statement" shall mean the prospectus/joint proxy statement contained
in the Form S-4, as amended or supplemented, and to be delivered to shareholders
of the Acquiror and the Company in connection with the solicitation of their
approval of this Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
4
<PAGE> 85
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set forth
in Rule 1-02 of Regulation S-X of the Commission.
"Superintendent" shall mean the Superintendent of the Bureau of Banking of
the State of Maine.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER
2.1 THE MERGER
(a) Subject to the terms and conditions of this Agreement, at the Effective
Time (as defined in Section 2.2 hereof), the Company shall be merged with and
into the Acquiror Sub (the "Merger") in accordance with the provisions of
Section 906 of the MBCA and Section 79 of the MBCL. The Acquiror Sub shall be
the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") of the Merger, and shall continue its corporate existence under
the laws of the State of Maine. The name of the Surviving Corporation shall
continue to be "Peoples Heritage Merger Corp." Upon consummation of the Merger,
the separate corporate existence of the Company shall terminate.
(b) From and after the Effective Time, the Merger shall have the effects
set forth in Section 905 of the MBCA and Section 80 of the MBCL.
(c) The Articles of Incorporation and Bylaws of the Acquiror Sub, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation, respectively, until
altered, amended or repealed in accordance with their terms and applicable law.
(d) The authorized capital stock of the Surviving Corporation shall be as
stated in the Articles of Incorporation of the Acquiror Sub immediately prior to
the Effective Time.
(e) The directors and officers of the Acquiror Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation and Bylaws
of the Surviving Corporation.
2.2 EFFECTIVE TIME; CLOSING
The Merger shall become effective upon the occurrence of the filing of
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Maine pursuant to Section 906(7) of the MBCA and the Secretary of State
of the Commonwealth of Massachusetts pursuant to Section 79(c) of the MBCL,
unless a later date and time is specified as the effective time in such Articles
of Merger (the "Effective Time"). A closing (the "Closing") shall take place
immediately prior to the Effective Time at 10:00 a.m., Eastern Time, on the
fifth business day following the satisfaction or waiver, to the extent permitted
hereunder, of the conditions to the consummation of the Merger specified in
Article VI of this Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the Closing), at the
principal executive offices of the Acquiror in Portland, Maine, or at such other
place, at such other time, or on such other date as the parties may mutually
agree upon, provided that, notwithstanding the foregoing, the parties hereby
agree to hold the Closing on the first day which is at least two business days
following the satisfaction or waiver, to the extent permitted hereunder, of the
conditions to consummation of the Merger specified in Article VI of this
Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing) if necessary for the
Effective Time to occur on or before December 31, 1996. At the Closing, there
shall be delivered to the Acquiror and the Company the opinions, certificates
and other documents required to be delivered under Article VI hereof.
5
<PAGE> 86
2.3 TREATMENT OF CAPITAL STOCK
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
(a) each share of Acquiror Common Stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding;
(b) each share of Acquiror Sub common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding; and
(c) subject to Sections 2.5 and 2.6 hereof, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held by the Acquiror or any of its Subsidiaries other
than in a fiduciary capacity that are beneficially owned by third parties
or as a result of debts previously contracted, which shall be cancelled and
retired) shall become and be converted into the right to receive 1.26
shares of Acquiror Common Stock (subject to possible adjustment as set
forth in Sections 2.8 and 7.1(f) hereof, the "Exchange Ratio").
2.4 SHAREHOLDER RIGHTS; STOCK TRANSFERS
Except as provided for in Section 2.5 hereof, at the Effective Time,
holders of Company Common Stock shall cease to be and shall have no rights as
shareholders of the Company, other than to receive the consideration provided
under this Article II. After the Effective Time, there shall be no transfers on
the stock transfers books of the Company or the Surviving Corporation of shares
of Company Common Stock.
2.5 DISSENTING SHARES
Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the MBCL and has not effectively withdrawn
or lost such right as of the Effective Time (the "Dissenting Shares") shall not
be converted into or represent a right to receive shares of Acquiror Common
Stock hereunder, and the holder thereof shall be entitled only to such rights as
are granted by the MBCL. The Company shall give the Acquiror prompt notice upon
receipt by the Company of any such written demands for payment of the fair value
of such shares of Company Common Stock and of withdrawals of such demands and
any other instruments provided pursuant to the MBCL (any shareholder duly making
such demand being hereinafter called a "Dissenting Shareholder"). If any
Dissenting Shareholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to such payment at any time, such holder's
shares of Company Common Stock shall be converted into the right to receive
Acquiror Common Stock in accordance with the applicable provisions of this
Agreement. Any payments made in respect of Dissenting Shares shall be made by
the Surviving Corporation.
2.6 FRACTIONAL SHARES
Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock shall be issued to holders of Company Common Stock. In
lieu thereof, each holder of shares of Company Common Stock entitled to a
fraction of a share of Acquiror Common Stock shall, at the time of surrender of
the certificate or certificates representing such holder's shares, receive an
amount of cash (without interest) equal to the product arrived at by multiplying
such fraction of a share of Acquiror Common Stock by the closing price of the
Acquiror Common Stock on the Nasdaq Stock Market's National Market on the
business day preceding the Effective Time, as reported in The Wall Street
Journal, or if not reported therein, in another authoritative source, rounded to
the nearest whole cent. No such holder shall be entitled to dividends, voting
rights or any other rights in respect of any fractional share interest.
2.7 EXCHANGE PROCEDURES
(a) At or after the Effective Time, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Company
Common Stock, upon surrender of the same to an agent, duly appointed by the
Acquiror ("Exchange Agent"), shall be entitled to receive in exchange therefor a
certificate
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or certificates representing the number of full shares of Acquiror Common Stock
into which the shares of Company Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been converted as provided
in Section 2.3(c) hereof. As promptly as practicable after the Effective Time
(and in no event later than the fifth business day following the Effective
Time), the Exchange Agent shall mail to each holder of record of an outstanding
certificate which immediately prior to the Effective Time evidenced shares of
Company Common Stock, and which is to be exchanged for Acquiror Common Stock as
provided in Section 2.3 hereof, a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to such
certificate shall pass, only upon delivery of such certificate to the Exchange
Agent) advising such holder of the terms of the exchange effected by the Merger
and of the procedure for surrendering to the Exchange Agent such certificate in
exchange for a certificate or certificates evidencing Acquiror Common Stock or
cash in lieu of any fractional share.
(b) No holder of a certificate theretofore representing shares of Company
Common Stock shall be entitled to receive any dividends in respect of the
Acquiror Common Stock into which such shares shall have been converted by virtue
of the Merger until the certificate representing such shares is surrendered in
exchange for a certificate or certificates representing shares of Acquiror
Common Stock. In the event that dividends are declared and paid by the Acquiror
in respect of Acquiror Common Stock after the Effective Time but prior to any
holder's surrender of certificates representing shares of Company Common Stock,
dividends payable to such holder in respect of shares of Acquiror Common Stock
not then issued shall accrue (without interest). Any such dividends shall be
paid (without interest) upon surrender of the certificates representing such
shares of Company Common Stock. The Acquiror shall be entitled, after the
Effective Time, to treat certificates representing shares of Company Common
Stock as evidencing ownership of the number of full shares of Acquiror Common
Stock into which the shares of Company Common Stock represented by such
certificates shall have been converted pursuant to this Agreement,
notwithstanding the failure on the part of the holder thereof to surrender such
certificates.
(c) The Acquiror shall not be obligated to deliver a certificate or
certificates representing shares of Acquiror Common Stock to which a holder of
Company Common Stock would otherwise be entitled as a result of the Merger until
such holder surrenders the certificate or certificates representing the shares
of Company Common Stock for exchange as provided in this Section 2.7, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond in an amount as may be reasonably required in each case by the Acquiror.
If any certificate evidencing shares of Acquiror Common Stock is to be issued in
a name other than that in which the certificate evidencing Company Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the certificate surrendered or
otherwise establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
2.8 ANTI-DILUTION PROVISIONS
If, between the date hereof and the Effective Time, the shares of Acquiror
Common Stock shall be changed into a different number or class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the Exchange Ratio shall be
adjusted accordingly.
2.9 OPTIONS
(a) At the Effective Time, each Company Option which is then outstanding,
whether or not exercisable, shall cease to represent a right to acquire shares
of Company Common Stock and shall be converted automatically into an option to
purchase shares of Acquiror Common Stock, and the Acquiror shall assume each
Company Option, in accordance with the terms of the applicable Company Stock
Option Plan and stock option or other agreement by which it is evidenced, except
that from and after the Effective Time, (i) the Acquiror and the Human Resources
Committee of its Board of Directors shall be substituted for the Company and the
committee of the Company's Board of Directors (including, if applicable, the
entire Board of
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Directors of the Company) administering such Company Stock Option Plan, (ii)
each Company Option assumed by the Acquiror may be exercised solely for shares
of Acquiror Common Stock, (iii) the number of shares of Acquiror Common Stock
subject to such Company Option shall be equal to the number of shares of Company
Common Stock subject to such Company Option immediately prior to the Effective
Time multiplied by the Exchange Ratio, provided that any fractional shares of
Acquiror Common Stock resulting from such multiplication shall be rounded down
to the nearest share, and (iv) the per share exercise price under each such
Company Option shall be adjusted by dividing the per share exercise price under
each such Company Option by the Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest cent. Notwithstanding clauses (iii) and
(iv) of the preceding sentence, each Company Option which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option within the meaning of Section 424(h) of the
Code. The Acquiror and the Company agree to take all necessary steps to effect
the foregoing provisions of this Section 2.9(a).
(b) As soon as practicable after the Effective Time, the Acquiror shall
deliver to each participant in each Company Stock Option Plan an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
subject to such Company Stock Option Plan shall continue in effect on the same
terms and conditions, including without limitation the duration thereof, subject
to the adjustments required by Section 2.9(a) hereof after giving effect to the
Merger. Within 30 days after the Effective Time, the Acquiror shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Acquiror
Common Stock subject to such options and shall use its reasonable efforts to
maintain the current status of the prospectus or prospectuses contained therein
for so long as such options remain outstanding.
2.10 ADDITIONAL ACTIONS
If, at any time after the Effective Time, the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, the Company and its
proper officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 CAPITAL STRUCTURE
The authorized capital stock of the Company consists of 20,000,000 shares
of Company Common Stock and 10,000,000 shares of Company Preferred Stock. As of
the date hereof, 4,188,617 shares of Company Common Stock are issued and
outstanding, 1,427,188 shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock and no shares of Company Preferred Stock
are issued and outstanding. All outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Company Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. Except for the
Company Stock Option Agreement and for Company Options to acquire not more than
233,606 shares of Company Common
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Stock as of the date hereof, a schedule of which has been Previously Disclosed,
there are no Rights authorized, issued or outstanding with respect to the
capital stock of the Company.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts with full corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The Company is
duly registered as a unitary savings and loan holding company under the HOLA and
the regulations of the OTS thereunder. The Company has heretofore delivered to
the Acquiror true and complete copies of the Articles of Organization and Bylaws
of the Company as in effect as of the date hereof.
3.3 OWNERSHIP OF THE COMPANY SUBSIDIARIES
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary and identified the Bank as its only Significant Subsidiary. Except
for (w) capital stock of the Company Subsidiaries, (x) securities and other
interests held in a fiduciary capacity and beneficially owned by third parties
or taken in consideration of debts previously contracted, (y) the Acquiror Stock
Option Agreement and (z) securities and other interests which are Previously
Disclosed, the Company does not own or have the right to acquire, directly or
indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, bank, savings association, partnership,
joint venture or other organization, other than investment securities
representing not more than 1% of any entity. The outstanding shares of capital
stock or other ownership interests of each Company Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are
directly owned by the Company free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind
whatsoever. No Rights are authorized, issued or outstanding with respect to the
capital stock or other ownership interests of the Company Subsidiaries and there
are no agreements, understandings or commitments relating to the right of the
Company to vote or to dispose of such capital stock or other ownership
interests.
3.4 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY SUBSIDIARIES
Each of the Company Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized. Each of the Company Subsidiaries (i) has
full power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and (ii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The deposit
accounts of the Bank are insured by the BIF or, in the case of certain deposits,
the SAIF to the maximum extent permitted by the FDIA, and the
Massachusetts-based deposits of the Bank are insured by the Depositors Insurance
Fund for amounts in excess of FDIC limits pursuant to an agreement which
terminates on July 31, 1996. The Bank has paid all deposit insurance premiums
and assessments required by the FDIA and Massachusetts law and the regulations
thereunder. The Company has heretofore delivered or made available to the
Acquiror true and complete copies of the Charter and Bylaws of the Bank as in
effect as of the date hereof.
3.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly
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authorized by all necessary corporate action in respect thereof on the part of
the Company, except for the approval of this Agreement by the Company's
shareholders. This Agreement has been duly and validly executed and delivered by
the Company and, assuming due authorization, execution and delivery by the
Acquiror and the Acquiror Sub, constitutes a legal, valid and binding obligation
of the Company which is enforceable against the Company in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Branch
Sale), nor compliance by the Company with any of the provisions hereof (i) does
or will conflict with or result in a breach of any provisions of the Articles of
Organization or Bylaws of the Company or the equivalent documents of any Company
Subsidiary, (ii) violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any lien, charge or encumbrance upon any property
or asset of the Company or a Company Subsidiary pursuant to, any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or a Company Subsidiary is a
party, or by which any of their respective properties or assets may be bound or
affected, or (iii) subject to receipt of all required governmental and
shareholder approvals, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or a Company Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the OTS, the FDIC, the
Massachusetts Board, the MHPF, the Central Fund, the Bank Commissioner and the
Superintendent, (ii) the filing and effectiveness of the Form S-4 with the
Commission, (iii) compliance with applicable state securities or "blue sky" laws
and the NASD Bylaws in connection with the issuance of Acquiror Common Stock
pursuant to this Agreement, (iv) the approval of this Agreement by the requisite
vote of the shareholders of the Company and the Acquiror, (v) the filing of
Articles of Merger with the Secretary of State of the State of Maine and the
Secretary of State of the Commonwealth of Massachusetts pursuant to the MBCA and
the MBCL, respectively, in connection with the Merger, and (vi) review of the
Merger by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals which are Previously Disclosed, no consents
or approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of the Company or the Bank in
connection with (i) the execution and delivery by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby and
(ii) the execution and delivery by the Bank of the Branch Sale Agreement and the
consummation by the Bank of the transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor the Bank is aware of any
reasons relating to the Company or the Bank (including without limitation
Community Reinvestment Act compliance) why all consents and approvals shall not
be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Branch
Sale Agreement and (ii) the continuation by the Acquiror after the Effective
Time of the business of each of the Acquiror and the Company as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which, in the reasonable opinion of the Company, could have a
Material Adverse Effect on the Acquiror or the Company or materially impair the
value of the Company and the Bank to the Acquiror.
3.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1993, the Company has timely filed with the Commission
and the NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities Laws
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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(b) Since January 1, 1993, each of the Company and the Bank has duly filed
with the OTS, the FDIC and any other applicable federal or state banking
authority, as the case may be, in correct form the reports required to be filed
under applicable laws and regulations and such reports were in all material
respects complete and accurate and in compliance with the requirements of
applicable laws and regulations. In connection with the most recent examinations
of the Company and the Bank by the OTS and the FDIC, neither the Company nor the
Bank was required to correct or change any action, procedure or proceeding which
the Company or the Bank believes has not been corrected or changed as required
as of the date hereof and which could have a Material Adverse Effect on the
Company.
3.7 FINANCIAL STATEMENTS
(a) The Company has previously delivered or made available to the Acquiror
accurate and complete copies of the Company Financial Statements which, in the
case of the consolidated statements of financial condition of the Company as of
December 31, 1995, 1994 and 1993 and the consolidated statements of operations,
shareholders' equity and cash flows for each of the three years ended December
31, 1995, 1994 and 1993, are accompanied by the audit reports of Wolf & Company,
P.C., independent public accountants with respect to the Company. The Company
Financial Statements referred to herein, as well as the Company Financial
Statements to be delivered pursuant to Section 5.8 hereof, fairly present or
will fairly present, as the case may be, the consolidated financial condition of
the Company as of the respective dates set forth therein, and the consolidated
results of operations, shareholders' equity and cash flows of the Company for
the respective periods or as of the respective dates set forth therein.
(b) Each of the Company Financial Statements referred to in Section 3.7(a)
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as stated therein. The audits of the Company and the Company Subsidiaries
have been conducted in all material respects in accordance with generally
accepted auditing standards. The books and records of the Company and the
Company Subsidiaries are being maintained in material compliance with applicable
legal and accounting requirements, and such books and records accurately reflect
in all material respects all dealings and transactions in respect of the
business, assets, liabilities and affairs of the Company and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Company as of March 31,
1996 (including related notes) and (ii) of liabilities incurred since March 31,
1996 in the ordinary course of business, neither the Company nor any Company
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.8 MATERIAL ADVERSE CHANGE
Since March 31, 1996 (i) the Company and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course (excluding the
incurrence of expenses in connection with this Agreement, and excluding the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen that, individually or in the aggregate, has had or is reasonably likely
to have a Material Adverse Effect on the Company.
3.9 ENVIRONMENTAL MATTERS
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a Material Adverse Effect on the Company. Neither the Company nor a Company
Subsidiary has received any communication alleging that the Company or a Company
Subsidiary is not in such compliance and, to the best knowledge of the Company,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties owned,
leased or operated by the Company or a Company Subsidiary has been or is in
violation of or liable under any Environmental Law,
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except any such violations or liabilities which would not singly or in the
aggregate have a Material Adverse Effect on the Company.
(c) To the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against the Company or a Company Subsidiary
or against any person or entity whose liability for any Environmental Claim the
Company or a Company Subsidiary has or may have retained or assumed either
contractually or by operation of law, except such which would not have a
Material Adverse Effect on the Company.
(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or a Company Subsidiary as of the date hereof.
3.10 TAX MATTERS
(a) The Company and its Subsidiaries have timely filed all federal, state
and local (and, if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns required by applicable law to
be filed by them (including, without limitation, estimated tax returns, income
tax returns, information returns and withholding and employment tax returns) and
have paid, or where payment is not required to have been made, have set up an
adequate reserve or accrual for the payment of, all material taxes required to
be paid in respect of the periods covered by such returns and, as of the
Effective Time, will have paid, or where payment is not required to have been
made, will have set up an adequate reserve or accrual for the payment of, all
material taxes for any subsequent periods ending on or prior to the Effective
Time. Neither the Company nor a Company Subsidiary will have any material
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and its Subsidiaries are complete and accurate in all
material respects. Neither the Company nor a Company Subsidiary is delinquent in
the payment of any tax, assessment or governmental charge or, except as
Previously Disclosed, has requested any extension of time within which to file
any tax returns in respect of any fiscal year or portion thereof which have not
since been filed. Except as Previously Disclosed, the federal, state and local
income tax returns of the Company and its Subsidiaries have been examined by the
applicable tax authorities (or are closed to examination due to the expiration
of the applicable statute of limitations) and no deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against the Company or a Company Subsidiary as a
result of such examinations or otherwise which have not been settled and paid.
There are currently no agreements in effect with respect to the Company or a
Company Subsidiary to extend the period of limitations for the assessment or
collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or a Company Subsidiary (nor does the Company
have any knowledge that the Internal Revenue Service has proposed any such
adjustment or change of accounting method) or (iii) has filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply.
3.11 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the Company or a Company Subsidiary or against any asset,
interest or right of the Company or a Company Subsidiary, or against any
officer, director or employee of any of them that in any such case, if decided
adversely, would have a Material Adverse Effect on the
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Company. Neither the Company nor a Company Subsidiary is a party to any order,
judgment or decree which has or could reasonably be expected to have a Material
Adverse Effect on the Company.
3.12 COMPLIANCE WITH LAWS
(a) Each of the Company and the Company Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor a Company Subsidiary is in violation of its
respective Articles of Organization, Charter or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (including, without
limitation, all banking (including without limitation all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect on the
Company; and neither the Company nor a Company Subsidiary has received any
notice or communication from any federal, state or local governmental authority
asserting that the Company or a Company Subsidiary is in violation of any of the
foregoing which could reasonably be expected to have a Material Adverse Effect
on the Company. Neither the Company nor a Company Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all savings associations or savings and loan holding companies
issued by governmental authorities), and neither of them has received any
written communication requesting that it enter into any of the foregoing.
3.13 CERTAIN INFORMATION
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 and any amendment thereto becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) the Proxy Statement, as of the date(s) such Proxy Statement is mailed to
shareholders of the Company and the Acquiror and up to and including the date(s)
of the meetings of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date. The Proxy
Statement mailed by the Company to its shareholders in connection with the
meeting of shareholders at which this Agreement will be considered by such
shareholders will comply as to form in all material respects with the Exchange
Act and the rules and regulations promulgated thereunder.
3.14 EMPLOYEE BENEFIT PLANS
(a) The Company has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Company or
any Company Subsidiary (the "Company Employee Plans"), whether written or oral,
and the Company has previously furnished or made available to the Acquiror
accurate and complete copies of the same together with (i) the most recent
actuarial and financial reports prepared with respect to any qualified plans,
(ii) the most recent annual reports
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filed with any governmental agency, and (iii) all rulings and determination
letters and any open requests for rulings or letters that pertain to any
qualified plan.
(b) None of the Company, any Company Subsidiary, any pension plan
maintained by either of them and qualified under Section 401 of the Code or, to
the best of the Company's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
any employees of the Company or a Company Subsidiary. To the best of the
Company's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary participates in or has incurred any liability under Section 4201 of
ERISA for a complete or partial withdrawal from a multi-employer plan (as such
term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "Company Pension
Plan") which is intended to qualify under Section 401 of the Code to the effect
that such plan is qualified under Section 401 of the Code and the trust
associated with such employee pension plan is tax exempt under Section 501 of
the Code. No such letter has been revoked or, to the best of the Company's
knowledge, is threatened to be revoked and the Company does not know of any
ground on which such revocation may be based. Neither the Company nor any
Company Subsidiary has any liability under any such plan that is not reflected
on the consolidated statement of financial condition of the Company at March 31,
1996 included in the Company Financial Statements, other than liabilities
incurred in the ordinary course of business in connection therewith subsequent
to the date thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Company Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on the Company.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Company Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Company
Pension Plan, and there is no "unfunded current liability" (as defined in
Section 412 of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee Plans have
been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof.
3.15 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Company nor a Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the Company or a Company Subsidiary (other than in the
case of the Bank deposits, FHLB advances, federal funds purchased and securities
sold under agreements to repurchase in the ordinary course of business) or the
guarantee by the Company or a Company Subsidiary of any obligation, other than
by the Bank in the ordinary course of its banking business, (ii) any agreement,
arrangement or commitment relating to the employment of a consultant or the
employment, election or retention in office of any present or
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former director, officer or employee of the Company or a Company Subsidiary,
(iii) any agreement, arrangement or understanding pursuant to which any payment
(whether of severance pay or otherwise) became or may become due to any
director, officer or employee of the Company or a Company Subsidiary upon
execution of this Agreement or upon or following consummation of the
transactions contemplated by this Agreement (either alone or in connection with
the occurrence of any additional acts or events); (iv) any agreement,
arrangement or understanding pursuant to which the Company or a Company
Subsidiary is obligated to indemnify any director, officer, employee or agent of
the Company or a Company Subsidiary; (v) any agreement, arrangement or
understanding to which the Company or a Company Subsidiary is a party or by
which any of the same is bound which limits the freedom of the Company or a
Company Subsidiary to compete in any line of business or with any person, (vi)
any assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order or
decree with or by the OTS, the FDIC or any other regulatory agency, or (vii) any
other agreement, arrangement or understanding which would be required to be
filed as an exhibit to the Company's Annual Report on Form 10-K under the
Exchange Act and which has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Company, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
3.16 BROKERS AND FINDERS
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
3.17 INSURANCE
Each of the Company and its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations. The Company has Previously Disclosed all
policies of insurance maintained by it or a Company Subsidiary as of the date
hereof and any claims thereunder in excess of $50,000 since January 1, 1994.
3.18 PROPERTIES
All real and personal property owned by the Company or its Subsidiaries or
presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on the
business of the Company and its Subsidiaries in the ordinary course of business
consistent with their past practices. The Company has good and marketable title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of the
material properties and assets, real and personal, reflected on the consolidated
statement of financial condition of the Company as of March 31, 1996 included in
the Company Financial Statements or acquired after such date, except (i) liens
for current taxes not yet due or payable, (ii) pledges to secure deposits and
other liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent and (iv) as reflected on the consolidated
statement of financial condition of the Company as of March 31, 1996 included in
the Company Financial Statements. All real and personal property which is
material to the Company's business on a consolidated basis and leased or
licensed by the Company or a Company Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and such leases will not terminate or lapse prior to the Effective Time.
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3.19 LABOR
No work stoppage involving the Company or a Company Subsidiary is pending
or, to the best knowledge of the Company, threatened. Neither the Company nor a
Company Subsidiary is involved in, or threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding involving the
employees of the Company or a Company Subsidiary which could have a Material
Adverse Effect on the Company. Employees of the Company and the Company
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and to
the best of the Company's knowledge, there have been no efforts to unionize or
organize any employees of the Company or any of the Company Subsidiaries during
the past five years.
3.20 REQUIRED VOTE; INAPPLICABILITY OF ANTITAKEOVER STATUTES
(a) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.21 hereof, the affirmative vote of the holders
of two thirds of the issued and outstanding shares of Company Common Stock is
necessary to approve this Agreement and the transactions contemplated hereby on
behalf of the Company.
(b) A majority of the Continuing Directors (as defined in Section 3G of the
Articles of Organization of the Company) has approved the Merger and this
Agreement such that the provisions of Section 3 of the Articles of Organization
of the Company is inapplicable to this Agreement and the transactions
contemplated hereby.
(c) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.21 hereof, no "fair price," "moratorium,"
"control share acquisition" or other form of antitakeover statute or regulation,
including without limitation Chapters 110D and 110F of the MBCL, is applicable
to this Agreement and the transactions contemplated hereby.
3.21 OWNERSHIP OF ACQUIROR COMMON STOCK
As of the date hereof, neither the Company nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Acquiror Common Stock which in
the aggregate represent 5% or more of the outstanding shares of Acquiror Common
Stock (other than shares held in a fiduciary capacity and beneficially owned by
third parties, shares taken in consideration of debts previously contracted or
in the case of the Company shares which may be acquired pursuant to the Acquiror
Stock Option Agreement).
3.22 DISCLOSURES
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company to
the Acquiror in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as follows:
4.1 CAPITAL STRUCTURE
The authorized capital stock of the Acquiror consists of 100,000,000 shares
of Acquiror Common Stock and 5,000,000 shares of Acquiror Preferred Stock. As of
April 30, 1996, there were 25,173,106 shares of
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Acquiror Common Stock issued and outstanding, 423,444 shares of Acquiror Common
Stock were held as treasury stock and not outstanding and there were no shares
of Acquiror Preferred Stock issued and outstanding. All outstanding shares of
Acquiror Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable, and none of the outstanding shares of Acquiror Common
Stock has been issued in violation of the preemptive rights of any person, firm
or entity. As of the date hereof, there are no Rights authorized, issued or
outstanding with respect to the capital stock of the Acquiror, except for (i)
shares of Acquiror Common Stock issuable pursuant to the Acquiror Employee Stock
Benefit Plans, (ii) shares of Acquiror Common Stock issuable pursuant to the
Acquiror Rights Agreement and (iii) by virtue of this Agreement and the Acquiror
Stock Option Agreement.
4.2 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR
The Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maine with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Acquiror. The Acquiror
is duly registered as a bank holding company under the BHCA and the regulations
of the FRB thereunder. The Acquiror has heretofore delivered to the Company true
and complete copies of the Articles of Incorporation and Bylaws of the Acquiror
as in effect as of the date hereof.
4.3 OWNERSHIP OF THE ACQUIROR SUBSIDIARIES
The Acquiror has Previously Disclosed each direct or indirect Acquiror
Subsidiary and identified Acquiror Maine Bank, Acquiror National Bank and
Acquiror New Hampshire Bank as its only Significant Subsidiaries as of the date
hereof. The outstanding shares of capital stock of each of the Acquiror
Subsidiaries which is a Significant Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable (except as otherwise provided
with respect to the capital stock of the Acquiror Maine Bank and the Acquiror
National Bank by the MRSA and the National Bank Act, respectively) and are
directly or indirectly owned by the Acquiror free and clear of all liens,
claims, encumbrances, charges, pledges, restrictions or rights of third parties
of any kind whatsoever. No Rights are authorized, issued or outstanding with
respect to the capital stock or other ownership interests of any Acquiror
Subsidiary which is a Significant Subsidiary and there are no agreements,
understandings or commitments relating to the right of the Acquiror to vote or
to dispose of said shares or other ownership interests.
4.4 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR SUBSIDIARIES
Each Acquiror Subsidiary which is a Significant Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
United States or the laws of the jurisdiction in which it is organized, as
applicable. Each of the Acquiror Subsidiaries which is a Significant Subsidiary
(i) has full power and authority to own or lease all of its properties and
assets and to carry on its business as now conducted, and (ii) is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of property or the conduct of its business
requires such qualification and where the failure to be so licensed, qualified
or in good standing would have a Material Adverse Effect on the Acquiror. The
deposit accounts of each Acquiror Subsidiary which is an insured depository
institution under the FDIA are insured by either the BIF or, in the case of
certain deposits, the SAIF to the maximum extent permitted by the FDIA, and each
such entity has paid all premiums and assessments required by the FDIA and the
regulations thereunder.
4.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Each of the Acquiror and the Acquiror Sub has all requisite corporate
power and authority to enter into this Agreement and (subject to receipt of all
necessary governmental approvals and the approval of the Acquiror's shareholders
of this Agreement) to perform all of its obligations under this Agreement. The
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execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of the Acquiror and
the Acquiror Sub, except for the approval of this Agreement by the Acquiror's
shareholders. This Agreement has been duly and validly executed and delivered by
the Acquiror and the Acquiror Sub and, assuming due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
the Acquiror and the Acquiror Sub which is enforceable against the Acquiror and
the Acquiror Sub in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Branch
Sale) nor compliance by the Acquiror and the Acquiror Sub with any of the
provisions hereof (i) does or will conflict with or result in a breach of any
provisions of the Articles of Incorporation or Bylaws of the Acquiror, Acquiror
Sub or any Acquiror Subsidiary which is a Significant Subsidiary, (ii) violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of the Acquiror, Acquiror
Sub or any Acquiror Subsidiary which is a Significant Subsidiary pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Acquiror, Acquiror Sub
or any Acquiror Subsidiary which is a Significant Subsidiary is a party, or by
which any of their respective properties or assets may be bound or affected, or
(iii) subject to receipt of all required governmental and shareholder approvals,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Acquiror, Acquiror Sub or any Acquiror Subsidiary which is a
Significant Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the OTS, the FDIC, the
Massachusetts Board, the MHPF, the Central Fund, the Bank Commissioner and the
Superintendent, (ii) the filing and effectiveness of the Form S-4 with the
Commission, (iii) compliance with applicable state securities or "blue sky" laws
and the NASD Bylaws in connection with the issuance of Acquiror Common Stock
pursuant to this Agreement, (iv) the approval of this Agreement by the requisite
vote of the shareholders of the Company and the Acquiror, (v) the filing of
Articles of Merger with the Secretary of State of the State of Maine and the
Secretary of State of the Commonwealth of Massachusetts pursuant to the MBCA and
the MBCL, respectively, in connection with the Merger and (vi) review of the
Merger by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals as are Previously Disclosed, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of the Acquiror, the Acquiror Sub or
Acquiror New Hampshire Bank in connection with (i) the execution and delivery by
the Acquiror and the Acquiror Sub of this Agreement and the consummation by the
Acquiror of the transactions contemplated hereby and (ii) the execution and
delivery by the Acquiror New Hampshire Bank of the Branch Sale Agreement and the
consummation by the Acquiror New Hampshire Bank of the transactions contemplated
thereby.
(d) As of the date hereof, the Acquiror is not aware of any reasons
relating to the Acquiror or any of its Subsidiaries (including without
limitation Community Reinvestment Act compliance) why all consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Branch
Sale Agreement and (ii) the continuation by the Acquiror after the Effective
Time of the business of each of the Acquiror and the Company as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which, in the reasonable opinion of the Acquiror, could have a
Material Adverse Effect on the Acquiror or the Company or materially impair the
value of the Company and the Bank to the Acquiror.
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4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1993, the Acquiror has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, the Acquiror, the Acquiror Sub and each Acquiror
Subsidiary which is an insured depository institution under the FDIA has duly
filed with the FRB, the OCC, the FDIC, the Bank Commissioner and the
Superintendent, as the case may be, in correct form the reports required to be
filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the requirements
of applicable laws and regulations. In connection with the most recent
examinations of the Acquiror or an Acquiror Subsidiary by the FRB, the OCC, the
FDIC, the Bank Commissioner or the Superintendent, neither the Acquiror nor any
Acquiror Subsidiary was required to correct or change any action, procedure or
proceeding which the Acquiror or the Acquiror Subsidiary believes has not been
corrected or changed as required as of the date hereof and which could have a
Material Adverse Effect on the Acquiror.
4.7 FINANCIAL STATEMENTS
(a) The Acquiror has previously delivered or made available to the Company
accurate and complete copies of the Acquiror Financial Statements which, in the
case of the consolidated statements of financial condition of the Acquiror as of
December 31, 1995, 1994 and 1993 and the consolidated statements of operations,
shareholders' equity and cash flows for each of the three years ended December
31, 1995, 1994 and 1993, are accompanied by the audit reports of KPMG Peat
Marwick LLP, independent public accountants with respect to the Acquiror. The
Acquiror Financial Statements referred to herein, as well as the Acquiror
Financial Statements to be delivered pursuant to Section 5.8 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of the Acquiror as of the respective dates set forth therein, and the
consolidated results of operations, shareholders' equity and cash flows of the
Acquiror for the respective periods or as of the respective dates set forth
therein.
(b) Each of the Acquiror Financial Statements referred to in Section 4.7(a)
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as stated therein. The audits of the Acquiror and the Acquiror
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Acquiror and
the Acquiror Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and all such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Acquiror and the
Acquiror Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Acquiror as of March
31, 1996 (including related notes) and (ii) of liabilities incurred since March
31, 1996 in the ordinary course of business, neither the Acquiror nor any
Acquiror Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise, material to the financial condition, results of operations or
business of the Acquiror on a consolidated basis.
4.8 MATERIAL ADVERSE CHANGE
Since March 31, 1996, no event has occurred or circumstance arisen that,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on the Acquiror.
4.9 ENVIRONMENTAL MATTERS
(a) To the best of the Acquiror's knowledge, the Acquiror and the Acquiror
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would
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not, singly or in the aggregate, have a Material Adverse Effect on the Acquiror.
Neither the Acquiror nor any Acquiror Subsidiary has received any communication
alleging that the Acquiror or any Acquiror Subsidiary is not in such compliance
and, to the best knowledge of the Acquiror, there are no present circumstances
that would prevent or interfere with the continuation of such compliance.
(b) To the best of the Acquiror's knowledge, none of the properties owned,
leased or operated by the Acquiror or the Acquiror Subsidiaries has been or is
in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
Material Adverse Effect on the Acquiror.
(c) To the best of the Acquiror's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against the Acquiror or any Acquiror
Subsidiary or against any person or entity whose liability for any Environmental
Claim the Acquiror or any Acquiror Subsidiary has or may have retained or
assumed either contractually or by operation of law, except such which would not
have a Material Adverse Effect on the Acquiror.
4.10 TAX MATTERS
The Acquiror and the Acquiror Subsidiaries, and each of their predecessors,
have timely filed all federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other tax
returns required by applicable law to be filed by them (including, without
limitation, estimated tax returns, income tax returns, information returns and
withholding and employment tax returns) and have paid, or where payment is not
required to have been made, have set up an adequate reserve or accrual for the
payment of, all material taxes required to be paid in respect of the periods
covered by such returns and, as of the Effective Time, will have paid, or where
payment is not required to have been made, will have set up an adequate reserve
or accrual for the payment of, all material taxes for any subsequent periods
ending on or prior to the Effective Time. Neither the Acquiror nor any of the
Acquiror Subsidiaries will have any material liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established. Except as
Previously Disclosed, as of the date hereof, no audit, examination or deficiency
or refund litigation with respect to any federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns filed by the Acquiror and the Acquiror
Subsidiaries is pending or, to the best of the Acquiror's knowledge, threatened.
4.11 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Acquiror
threatened against the Acquiror or any Acquiror Subsidiary or against any asset,
interest or right of the Acquiror or any Acquiror Subsidiary, or against any
officer, director or employee of any of them that in any such case, if decided
adversely, would have a Material Adverse Effect on the Acquiror. Neither the
Acquiror nor any of the Acquiror Subsidiaries is a party to any order, judgment
or decree which has or could reasonably be expected to have a Material Adverse
Effect on the Acquiror.
4.12 COMPLIANCE WITH LAWS
(a) Each of the Acquiror and each of the Acquiror Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a Material Adverse Effect on the
Acquiror; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Acquiror, no suspension or cancellation of any of the same is threatened.
(b) Neither the Acquiror nor any of the Acquiror Subsidiaries is in
violation of its respective Articles of Incorporation, Charter or other
chartering instrument or Bylaws, or of any applicable federal, state or local
law
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or ordinance or any order, rule or regulation of any federal, state, local or
other governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect on the
Acquiror; and neither the Acquiror nor any Acquiror Subsidiary has received any
notice or communication from any federal, state or local governmental authority
asserting that the Acquiror or any Acquiror Subsidiary is in violation of any of
the foregoing which could reasonably be expected to have a Material Adverse
Effect on the Acquiror. Neither the Acquiror nor any Acquiror Subsidiary is
subject to any regulatory or supervisory cease and desist order, agreement,
written directive, memorandum of understanding or written commitment (other than
those of general applicability to all banks, savings associations or holding
companies thereof, as applicable, issued by governmental authorities), and none
of them has received any written communication requesting that it enter into any
of the foregoing.
4.13 CERTAIN INFORMATION
None of the information relating to the Acquiror and the Acquiror
Subsidiaries to be included or incorporated by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the Proxy
Statement, as of the date(s) such Proxy Statement is mailed to shareholders of
the Acquiror and the Company and up to and including the date(s) of the meetings
of shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by the Acquiror to shareholders of the Company and the Acquiror in connection
with the meetings of shareholders at which this Agreement will be considered by
such shareholders will comply as to form in all material respects with the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder.
4.14 EMPLOYEE BENEFIT PLANS
(a) The Acquiror has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Acquiror or
any Acquiror Subsidiary (the "Acquiror Employee Plans"), whether written or
oral.
(b) None of the Acquiror, any Acquiror Subsidiary, any pension plan
maintained by any of them and qualified under Section 401 of the Code or, to the
best of the Acquiror's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
any employees of the Acquiror or any Acquiror Subsidiary. To the best of the
Acquiror's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) Neither the Acquiror nor any Acquiror Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Acquiror Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (an
"Acquiror Pension Plan") which is intended to qualify under Section 401 of the
Code to the effect that such plan is qualified under Section 401 of the Code and
the trust associated with such employee pension plan is tax exempt under Section
501 of the Code. No such letter has been revoked or, to the best of the
Acquiror's knowledge, is threatened to be revoked and the Acquiror does not know
of any ground on which
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such revocation may be based. Neither the Acquiror nor any Acquiror Subsidiary
has any liability under any such plan that is not reflected on the consolidated
statement of financial condition of the Acquiror at March 31, 1996 included in
the Acquiror Financial Statements, other than liabilities incurred in the
ordinary course of business in connection therewith subsequent to the date
thereof.
(e) To the best of the Acquiror's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Acquiror Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on the Acquiror.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Acquiror Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Acquiror
Pension Plan, and there is no "unfunded current liability" (as defined in
Section 412 of the Code) with respect to any Acquiror Pension Plan.
(g) To the best of the Acquiror's knowledge, the Acquiror Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
(h) There are no pending or, to the best knowledge of the Acquiror,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Acquiror Employee Plans or any trust related thereto or any
fiduciary thereof.
4.15 CERTAIN CONTRACTS
Neither the Acquiror nor any Acquiror Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Acquiror, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
4.16 BROKERS AND FINDERS
Except as Previously Disclosed, neither the Acquiror nor any Acquiror
Subsidiary, nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
4.17 INSURANCE
The Acquiror and each Acquiror Subsidiary is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations.
4.18 PROPERTIES
All real and personal property owned by the Acquiror or each Acquiror
Subsidiary which is a Significant Subsidiary or presently used by any of them in
its respective business is in an adequate condition (ordinary wear and tear
excepted) and is sufficient to carry on its business in the ordinary course of
business consistent with their past practices. The Acquiror has good and
marketable title free and clear of all liens, encumbrances, charges, defaults or
equities (other than equities of redemption under applicable foreclosure laws)
to all of the
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material properties and assets, real and personal, reflected on the consolidated
statement of financial condition of the Acquiror as of March 31, 1996 included
in the Acquiror Financial Statements or acquired after such date, except (i)
liens for current taxes not yet due or payable, (ii) pledges to secure deposits
and other liens incurred in the ordinary course of its banking business, (iii)
such imperfections of title, easements and encumbrances, if any, as are not
material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of the Acquiror as of March 31,
1996 included in the Acquiror Financial Statements. All real and personal
property which is material to the Acquiror's business on a consolidated basis
and leased or licensed by the Acquiror or an Acquiror Subsidiary is held
pursuant to leases or licenses which are valid and enforceable in accordance
with their respective terms and such leases will not terminate or lapse prior to
the Effective Time.
4.19 LABOR
No work stoppage involving the Acquiror or an Acquiror Subsidiary which is
a Significant Subsidiary is pending or, to the best knowledge of the Acquiror,
threatened. Neither the Acquiror nor any Acquiror Subsidiary is involved in, or
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding involving its employees which could have a Material
Adverse Effect on the Acquiror. Employees of the Acquiror and any Acquiror
Subsidiary are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and to
the best of the Acquiror's knowledge, there have been no efforts to unionize or
organize any employees of the Acquiror or any Acquiror Subsidiary during the
past five years.
4.20 REQUIRED VOTE; ACQUIROR RIGHTS AGREEMENT
(a) A majority of the total votes cast on the proposal by the holders of
the issued and outstanding shares of Acquiror Common Stock is necessary to
approve this Agreement and the transactions contemplated hereby on behalf of the
Acquiror.
(b) There is no Acquiring Person, and none of a Stock Acquisition Date, a
Distribution Date or a Triggering Event has occurred, in each case as such terms
are defined in the Acquiror Rights Agreement.
4.21 OWNERSHIP OF COMPANY COMMON STOCK.
As of the date hereof, neither the Acquiror nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Company Common Stock which in
the aggregate represent 5% or more of the outstanding shares of Company Common
Stock (other than shares held in a fiduciary capacity and beneficially owned by
third parties, shares taken in consideration of debts previously contracted or
in the case of the Acquiror shares which may be acquired pursuant to the Company
Stock Option Agreement).
4.22 DISCLOSURES
None of the representations and warranties of the Acquiror or any of the
written information or documents furnished or to be furnished by the Acquiror to
the Company in connection with or pursuant to this Agreement or the consummation
of the transactions contemplated hereby, when considered as a whole, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
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ARTICLE V
COVENANTS
5.1 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement, each of the Company,
the Acquiror and the Acquiror Sub shall use its reasonable best efforts in good
faith to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary or advisable under applicable laws and regulations so
as to permit consummation of the Merger (including, without limitation,
satisfaction of the conditions to consummation of the Merger specified in
Article VI of this Agreement) and the Branch Sale on or before December 31, 1996
or, in the event that requisite regulatory and other approvals have not yet been
obtained, as promptly as practicable thereafter, and to otherwise enable
consummation of the transactions contemplated hereby, and shall cooperate fully
with the other party or parties hereto to that end.
5.2 SHAREHOLDER MEETINGS
Each of the Acquiror and the Company shall take all action necessary to
properly call and convene a meeting of its shareholders as soon as practicable
after the date hereof to consider and vote upon this Agreement and the
transactions contemplated hereby. The Board of Directors of the Acquiror and the
Board of Directors of the Company will recommend that the shareholders of the
Acquiror and the Company, respectively, approve this Agreement and the
transactions contemplated hereby, provided that the Board of Directors of the
Acquiror and the Board of Directors of the Company may fail to make such
recommendation, or withdraw, modify or change any such recommendation, if such
Board of Directors, after having consulted with and considered the advice of
outside counsel, has determined that the making of such recommendation, or the
failure to withdraw, modify or change such recommendation, would constitute a
breach of the fiduciary duties of such directors under applicable law.
5.3 REGULATORY MATTERS
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the Acquiror and the Company shall use its reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing, and the Acquiror and the Company each shall thereafter
promptly mail the Proxy Statement to its respective shareholders. The Acquiror
also shall use its reasonable best efforts to obtain all necessary state
securities law or "blue sky" permits and approvals required to carry out the
issuance of Acquiror Common Stock pursuant to the Merger and all other
transactions contemplated by this Agreement, and the Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the Branch Sale). The
Acquiror and the Company shall have the right to review in advance, and to the
extent practicable each will consult with the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
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(c) The Acquiror and the Company shall, upon request, furnish each other
with all information concerning themselves, their respective Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the Form S-4 or
any other statement, filing, notice or application made by or on behalf of the
Acquiror, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger, the Branch Sale and the other
transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 INVESTIGATION AND CONFIDENTIALITY
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other party all books, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities of
it and its Subsidiaries, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of meetings of boards
of directors (and any committees thereof) and shareholders, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, loan files,
plans affecting employees, and any other business activities or prospects in
which the other party may have a reasonable interest, provided that such access
shall be reasonably related to the transactions contemplated hereby and, in the
reasonable opinion of the respective parties providing such access, not unduly
interfere with normal operations. Each party and its Subsidiaries shall make
their respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with the other party and its representatives, provided that such
access shall be reasonably related to the transactions contemplated hereby and
shall not unduly interfere with normal operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to the
party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for five years from the date the proposed transactions are abandoned but shall
not apply to (i) any information which (x) the party receiving the information
can establish by convincing evidence was already in its possession prior to the
disclosure thereof by the party furnishing the information; (y) was then
generally known to the public; or (z) became known to the public through no
fault of the party receiving the information; or (ii) disclosures pursuant to a
legal requirement or in accordance with an order of a court of competent
jurisdiction, provided that the party which is the subject of any such legal
requirement or order shall use its best efforts to give the other party at least
ten business days prior notice thereof.
5.5 PRESS RELEASES
The Acquiror and the Company shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
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5.6 BUSINESS OF THE PARTIES
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Acquiror, the Company and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. During such period, the Company also will use all
reasonable efforts to (x) preserve its business organization and that of the
Bank intact, (y) keep available to itself and the Acquiror the present services
of the employees of the Company and the Bank and (z) preserve for itself and the
Acquiror the goodwill of the customers of the Company and the Bank and others
with whom business relationships exist. Without limiting the generality of the
foregoing, except with the prior written consent of the Acquiror or as expressly
contemplated hereby, between the date hereof and the Effective Time, the Company
shall not, and shall cause each Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of the Company Common Stock, except for regular quarterly cash dividends at
a rate per share of Company Common Stock not in excess of $.12 per share,
which shall have the same record and payment dates as the record and
payment dates relating to dividends on the Acquiror Common Stock (as
Previously Disclosed by the Acquiror), it being the intention of the
parties that the shareholders of the Company receive dividends for any
particular calendar quarter on either the Company Common Stock or the
Acquiror Common Stock acquired in exchange therefor pursuant to the terms
of this Agreement but not both, provided, however, that if the Effective
Time does not occur prior to the record date for the first regular
quarterly dividend in 1997, the regular per share quarterly dividend on the
Company Common Stock for such quarter (and any subsequent quarterly
dividends prior to the Effective Time) may be increased to up to $.14 per
share, and further provided that nothing contained herein shall be deemed
to affect the ability of a Company Subsidiary to pay dividends on its
capital stock to the Company;
(ii) issue any shares of its capital stock, other than in the case of
the Company pursuant to the Company Stock Option Agreement and upon
exercise of the Company Options referred to in Section 3.1 hereof, or
issue, grant, modify or authorize any Rights, other than the Company Stock
Option Agreement; purchase any shares of Company Common Stock; or effect
any recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(iii) amend its Articles of Organization, Charter, Bylaws or similar
organizational documents; impose, or suffer the imposition, on any share of
stock or other ownership interest held by the Company in a Company
Subsidiary of any lien, charge or encumbrance or permit any such lien,
charge or encumbrance to exist; or waive or release any material right or
cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance to, or
provide any other new employee benefit or incentive to, any of its
directors, officers or employees, except (i) as may be required pursuant to
binding commitments existing on the date hereof and (ii) such as may be
granted in the ordinary course of business consistent with past practice,
including without limitation pursuant to the Company's Performance
Compensation Program, as Previously Disclosed by the Company pursuant to
Section 3.14(a) hereof;
(v) except as Previously Disclosed, enter into or, except as may be
required by law, modify any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, supplemental retirement, consulting, bonus, group insurance
or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect of any of
its directors, officers or employees; make any contributions to the
Company's defined benefit Pension Plan or 401(k) Plan not in the ordinary
course of business consistent with past practice; or make any contributions
to the Company's Employee Stock Ownership Plan, other than necessary to
enable such plan to make required payments on its indebtedness as of the
date hereof;
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(vi) enter into (w) any agreement, arrangement or commitment not made
in the ordinary course of business, (x) any agreement, indenture or other
instrument relating to the borrowing of money by the Company or a Company
Subsidiary or guarantee by the Company or any Company Subsidiary of any
such obligation, except in the case of the Bank for deposits, FHLB
advances, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business consistent with past
practice, (y) any agreement, arrangement or commitment relating to the
employment of an employee, or amend any such existing agreement,
arrangement or commitment, provided that the Company and the Bank may
employ an employee in the ordinary course of business if the employment of
such employee is terminable by the Company or the Bank at will without
liability, other than as required by law; or (z) any contract, agreement or
understanding with a labor union;
(vii) change its method of accounting in effect for the year ended
December 31, 1995, except as required by changes in laws or regulations or
generally accepted accounting principles, or change any of its methods of
reporting income and deductions for federal income tax purposes from those
employed in the preparation of its federal income tax return for the fiscal
year ended October 31, 1995, except as required by changes in laws or
regulations;
(viii) make any capital expenditures in excess of $50,000 individually
or $250,000 in the aggregate, other than pursuant to binding commitments
existing on the date hereof and other than expenditures necessary to
maintain existing assets in good repair;
(ix) file any applications or make any contract with respect to
branching or site location or relocation;
(x) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity;
(xi) enter into any futures contract, option contract, interest rate
caps, interest rate floors, interest rate exchange agreement or other
agreement for purposes of hedging the exposure of its interest-earning
assets and interest-bearing liabilities to changes in market rates of
interest (other than forward commitments to sell loans in the ordinary
course of business);
(xii) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights or
requiring the consent of any party to the transfer and assignment of any
such assets or rights;
(xiii) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code, provided, however, that nothing contained herein shall limit the
ability of the Company to exercise its rights under the Acquiror Stock
Option Agreement;
(xiv) take any action that would result in any of the representations
and warranties of the Company contained in this Agreement not to be true
and correct in any material respect at the Effective Time; or
(xv) agree to do any of the foregoing.
In addition to the foregoing, the Company agrees to terminate the existing
contract with Wausau providing for a check item processing system using imaging
technology in accordance with its terms and shall not, and shall cause each
Company Subsidiary not to, take any action to acquire or otherwise install or
implement any new check item processing system without the prior written consent
of the Acquiror.
(b) During the period from the date of this Agreement and continuing until
the Effective Time, the Acquiror shall continue to conduct its business and the
business of the Acquiror Subsidiaries which are Significant Subsidiaries in a
manner designed in its reasonable judgment to enhance the long-term value of the
Acquiror Common Stock and the business prospects of the Acquiror. Without
limiting the generality of the foregoing, except with the prior written consent
of the Company or as expressly contemplated hereby, between
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the date hereof and the Effective Time, the Acquiror shall not, and shall cause
each Acquiror Subsidiary which is a Significant Subsidiary not to:
(i) amend its Articles of Incorporation or Bylaws in a manner which
would adversely affect in any manner the terms of the Acquiror Common Stock
or the ability of the Acquiror to consummate the transactions contemplated
hereby;
(ii) make any acquisition or take any other action that individually
or in the aggregate could materially adversely affect the ability of the
Acquiror to consummate the transactions contemplated hereby in a reasonably
timely manner;
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends in an amount determined by the Board of Directors
in the ordinary course of business and consistent with past practice,
provided, however, that nothing contained herein shall be deemed to affect
the ability of (x) an Acquiror Subsidiary to pay dividends on its capital
stock to the Acquiror or (y) the Acquiror to repurchase shares of Acquiror
Common Stock (whether pursuant to an open market purchase program,
privately-negotiated transactions and/or a self-tender offer) to fund some
or all of the shares of Acquiror Common Stock to be issued pursuant to this
Agreement;
(iv) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code; provided, however, that nothing contained herein shall limit the
ability of the Acquiror to exercise its rights under the Company Stock
Option Agreement;
(v) take any action that would result in any of the representations
and warranties of the Acquiror contained in this Agreement not to be true
and correct in any material respect at the Effective Time; or
(vi) agree to do any of the foregoing.
5.7 CERTAIN ACTIONS
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, lease or purchase of all or a substantial portion
of the assets of, or any equity interest in, the Company or a Company Subsidiary
(other than with the Acquiror or an affiliate thereof), provided, however, that
the Board of Directors of the Company may furnish such information or
participate in such negotiations or discussions if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the failure to do the same would cause the members of such Board
of Directors to breach their fiduciary duties under applicable law. The Company
will promptly inform the Acquiror orally and in writing of any such request for
information or of any such negotiations or discussions, as well as instruct its
and its Subsidiaries' directors, officers, representatives and agents to refrain
from taking any action prohibited by this Section 5.7.
5.8 CURRENT INFORMATION
During the period from the date of this Agreement to the Effective Time,
each party shall, upon the request of the other party, cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of the other party regarding its financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more than
45 days after the end of each calendar quarter ending after the date of this
Agreement (other than the last quarter of each fiscal year ending December 31),
the Company and the Acquiror will deliver to the other party its quarterly
report on Form 10-Q under the Exchange Act, and, as soon as reasonably
available, but in no event more than 90 days after the end of each fiscal year,
the Company and the Acquiror will deliver to the other party its Annual Report
on Form 10-K. Within 25 days after the end of each month, the Company and the
Acquiror will deliver to the other party a consolidated balance sheet and a
consolidated statement of operations, without related notes, for such month
prepared in accordance with generally accepted accounting principles.
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5.9 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time through the sixth anniversary of the
Effective Time, the Acquiror (the "Indemnifying Party") shall indemnify and hold
harmless each present and former director, officer and employee of the Company
or a Company Subsidiary, in each case determined as of the Effective Time (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent to which such Indemnified Parties were entitled
under the Articles of Organization and Bylaws of the Company or in similar
organizational documents of a Company Subsidiary, in each case as in effect on
the date hereof, provided, however, that all rights to indemnification in
respect of any claim asserted or made within such period shall continue until
the final disposition of such claim. Without limiting the foregoing obligation,
the Acquiror also agrees that all limitations of liability existing in favor of
the Indemnified Parties in the Articles of Organization and Bylaws of the
Company or in similar organizational documents of a Company Subsidiary, in each
case as in effect on the date hereof, arising out of matters existing or
occurring at or prior to the Effective Time shall survive the Merger and shall
continue in full force and effect for a period of six years from the Effective
Time, provided, however, that all such rights in respect of any claim asserted
or made within such period shall continue until the final disposition of such
claim.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest), (ii) the Indemnified Parties will cooperate in the
defense of any such matter, (iii) the Indemnifying Party shall not be liable for
any settlement effected without its prior written consent and (iv) the
Indemnifying Party shall have no obligation hereunder in the event a federal
banking agency or a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of an Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) The Acquiror shall cause the Surviving Corporation to maintain the
Company's existing directors' and officers' liability insurance policy as of the
date hereof (or a policy providing coverage on substantially the same terms and
conditions) for acts or omissions occurring prior to the Effective Time by
persons who are currently covered by such insurance policy maintained by the
Company for a period of three years following the Effective Time.
(d) In the event that the Acquiror or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
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5.10 DIRECTORS
(a) The Acquiror agrees to take all action necessary to appoint or elect,
effective as of the Effective Time, one non-employee director of the Company as
of the date hereof who is designated by the Company and who both meets the
director qualification requirements set forth in the Acquiror's Bylaws and is
otherwise acceptable to the Acquiror as a director of the Acquiror. Such person
shall serve until the first annual meeting of shareholders of the Acquiror
following the Effective Time and until his successor is elected and qualified.
Subject to compliance with the director qualification requirements set forth in
the Acquiror's Bylaws, the Acquiror shall include such person on the list of
nominees for director presented by the Board of Directors of the Acquiror and
for which said Board shall solicit proxies at the first annual meeting of
shareholders of the Acquiror following the Effective Time, which person shall be
nominated for a three-year term.
(b) Following consummation of the Merger, the Board of Directors of the
Bank shall be comprised of the directors of the Bank immediately prior to the
Effective Time and such additional director or directors as may be designated by
the Acquiror. Directors of the Bank shall serve in their capacities as such in
accordance with the Charter and Bylaws of the Bank, as the same may be amended
from time to time.
5.11 BENEFIT PLANS AND ARRANGEMENTS
(a) As soon as administratively practicable after the Effective Time, the
Acquiror shall take all reasonable action so that employees of the Company and
its Subsidiaries shall be entitled to participate in the Acquiror Employee Plans
of general applicability, and until such time the Company Employee Plans shall
remain in effect, provided that no employee of the Company or a Company
Subsidiary who becomes an employee of the Acquiror and subject to the Acquiror's
medical insurance plans shall be excluded from coverage thereunder on the basis
of a preexisting condition that was not also excluded under the Company's
medical insurance plans, except to the extent such preexisting condition was
excluded from coverage under the Company's medical insurance plans, in which
case this Section 5.11(a) shall not require coverage for such preexisting
condition. For purposes of determining eligibility to participate in and the
vesting of benefits under the Acquiror Employee Plans, the Acquiror shall
recognize years of service with the Company and a Company Subsidiary prior to
the Effective Time.
(b) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of the Acquiror or an Acquiror Subsidiary
as of the Effective Time, provided that the Acquiror or an Acquiror Subsidiary
shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of the Company or
any Company Subsidiary a right to continuing employment with the Acquiror or an
Acquiror Subsidiary after the Effective Time. To the extent that the employment
of any employee of the Company or any Company Subsidiary (other than any
employee who is party to an employment agreement) is involuntarily terminated
following the Effective Time, such employee will be entitled to receive
severance payments in accordance with, and to the extent provided in, the
Acquiror's severance plan regarding the Merger, a copy of which the Company
acknowledges has been provided to it by the Acquiror. For purposes of
determining benefits under such severance plan, the Acquiror shall recognize
years of service with the Company and a Company Subsidiary prior to the
Effective Time.
(c) Following the Merger, the Acquiror shall, or shall cause the Surviving
Corporation and/or the Bank to, honor in accordance with their terms the
employment agreements, split-dollar insurance agreements, deferred fee and
compensation agreements and Supplemental Executive Retirement Plan which have
been Previously Disclosed by the Company to the Acquiror.
5.12 BRANCH SALE
The Acquiror and the Company shall take, and shall respectively cause the
Acquiror New Hampshire Bank and the Bank to take, all necessary and appropriate
actions, including causing the execution of the Branch Sale Agreement, to effect
the Branch Sale immediately after the Effective Time, or at such other time
thereafter as may be determined by the Acquiror in its sole discretion, in
accordance with the requirements of all applicable laws and regulations and the
terms of the Branch Sale Agreement. Notwithstanding the foregoing, the closing
of the Branch Sale shall not be a precondition to the closing of the Merger, and
the
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closing of the Merger shall not be delayed in order to facilitate a simultaneous
closing of the Merger and the Branch Sale.
5.13 CERTAIN POLICIES; INTEGRATION
(a) If requested by the Acquiror, on the business day immediately prior to
the Effective Time, the Company shall, consistent with generally accepted
accounting principles, establish or adjust accruals and reserves as may be
necessary to conform the Company's accounting and credit loss reserve practices
and methods to those of the Acquiror (as such practices and methods are to be
applied to the Company or its Subsidiaries from and after the Effective Time)
and reflect the Acquiror's plans with respect to the conduct of the Company's
business following the Merger and to provide for the costs and expenses relating
to the consummation by the Company of the transactions contemplated by this
Agreement; provided, however, that the Company shall not be required to take
such action (i) if such action is prohibited by applicable law or (ii) unless
the Acquiror informs the Company that it has no reason to believe that all
conditions to the Acquiror's obligations to consummate the transactions
contemplated by this Agreement set forth in Article VI hereof will not be
satisfied or waived. The establishment or adjustment of such accruals and
reserves shall not constitute a breach of any representation or warranty of the
Company contained in this Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its directors, officers and employees
to, cooperate with and assist the Company in the formulation of a plan of
integration for the Acquiror and the Company and their respective banking
subsidiaries.
5.14 DISCLOSURE SUPPLEMENTS
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in materials Previously Disclosed to the
other party or which is necessary to correct any information in such materials
which has been rendered materially inaccurate thereby; no such supplement or
amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.15 FAILURE TO FULFILL CONDITIONS
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated may
not be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party or parties. Each party will promptly inform the
other party or parties of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger or the Branch Sale by any
Governmental Entity or third party or which would otherwise prevent or
materially delay completion of the Merger or the Branch Sale.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT -- THE ACQUIROR, THE ACQUIROR SUB AND THE COMPANY
The respective obligations of the Acquiror, the Acquiror Sub and the
Company to effect the Merger shall be subject to satisfaction of the following
conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and consummation of the Merger shall have been duly and
validly taken by the Acquiror and the Company, including approval by the
requisite vote of the respective shareholders of the Acquiror and the Company of
this Agreement.
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(b) All approvals and consents from any Governmental Entity the approval or
consent of which is required for the consummation of the Merger shall have been
received and all statutory waiting periods in respect thereof shall have
expired; and the Acquiror and the Company shall have procured all other
approvals, consents and waivers of each person (other than the Governmental
Entities referred to above) whose approval, consent or waiver is necessary to
the consummation of the Merger and the failure of which to obtain would have the
effects set forth in the following proviso clause; provided, however, that no
approval or consent referred to in this Section 6.1(b) shall be deemed to have
been received if it shall include any condition or requirement that,
individually or in the aggregate, would so materially reduce the economic or
business benefits of the transactions contemplated by this Agreement to the
Acquiror that had such condition or requirement been known the Acquiror, in its
reasonable judgment, would not have entered into this Agreement.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger.
(d) The Form S-4 shall have become effective under the Securities Act, and
the Acquiror shall have received all state securities laws or "blue sky" permits
and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Acquiror Common Stock in connection with the
Merger, and neither the Form S-4 nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the Commission or
any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection with the
Merger shall have been approved for listing on the Nasdaq Stock Market's
National Market.
(f) The Acquiror shall have received the written opinion of Elias, Matz,
Tiernan & Herrick L.L.P. to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code, and the Company
shall have received the written opinion of Foley, Hoag & Eliot LLP to such
effect and to the effect that (i) except for cash received in lieu of fractional
share interests, holders of Company Common Stock who receive Acquiror Common
Stock in the Merger will not recognize income, gain or loss for federal income
tax purposes, (ii) the basis of such Acquiror Common Stock will equal the basis
of the Company Common Stock for which it is exchanged, and (iii) the holding
period of such Acquiror Common Stock will include the holding period of the
Company Common Stock for which it is exchanged, assuming that such stock is a
capital asset in the hands of the holder thereof at the Effective Time. Each
such opinion shall be based on such written representations from the Acquiror,
the Company and others as such counsel shall reasonably request as to factual
matters.
6.2 CONDITIONS PRECEDENT -- THE COMPANY
The obligations of the Company to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Acquiror as set forth in
Article IV hereof shall be true and correct as of the date of this Agreement and
as of the Effective Time as though made on and as of the Effective Time (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.2(a) shall be
deemed to have been satisfied even if such representations or warranties are not
true and correct unless the failure of any of the representations or warranties
to be so true and correct would have, individually or in the aggregate, a
Material Adverse Effect on the Acquiror.
(b) The Acquiror shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
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(c) The Acquiror shall have delivered to the Company a certificate, dated
the date of the Closing and signed by its Chairman and President and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.2(a) and 6.2(b) have been satisfied.
(d) The Company shall have received the written opinion of Elias, Matz,
Tiernan & Herrick L.L.P., dated the date of the Closing, that addresses the
matters set forth in Exhibit D hereto.
(e) The Acquiror and the Acquiror Sub shall have furnished the Company with
such certificates of its respective officers or others and such other documents
to evidence fulfillment of the conditions set forth in Sections 6.1 and 6.2 as
such conditions relate to the Acquiror and the Acquiror Sub as the Company may
reasonably request.
6.3 CONDITIONS PRECEDENT -- THE ACQUIROR AND THE ACQUIROR SUB
The obligations of the Acquiror and the Acquiror Sub to effect the Merger
shall be subject to satisfaction of the following conditions at or prior to the
Effective Time unless waived by the Acquiror or the Acquiror Sub pursuant to
Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in Article
III hereof shall be true and correct as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time (or on the
date when made in the case of any representation and warranty which specifically
relates to an earlier date), provided, however, that notwithstanding anything
herein to the contrary, this Section 6.3(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and correct
unless the failure of any of the representations or warranties to be so true and
correct would have, individually or in the aggregate, a Material Adverse Effect
on the Company.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to the Acquiror a certificate, dated
the date of the Closing and signed by its President and by its Chief Financial
Officer, to the effect that the conditions set forth in Sections 6.3(a) and
6.3(b) have been satisfied.
(d) The Acquiror shall have received the written opinion of Foley, Hoag &
Eliot LLP, dated the date of the Closing, that addresses the matters set forth
in Exhibit E hereto.
(e) Dissenting Shares shall constitute not more than 10.0% of the
outstanding shares of Company Common Stock immediately prior to the Effective
Time.
(f) The Acquiror shall have received a letter to it from the independent
certified public accountants for the Company, dated (i) the date on which the
Form S-4 shall become effective and (ii) the date of the Closing, in form and
substance customary for "comfort" letters delivered by independent accountants
in accordance with Statement of Financial Accounting Standards No. 72 or any
successor thereto.
(g) The Company shall have furnished the Acquiror with such certificates of
its officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to the
Company as the Acquiror may reasonably request.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual consent in
writing of the parties hereto;
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(b) at any time on or prior to the Effective Time, by the Acquiror or the
Acquiror Sub in writing if the Company has, or by the Company in writing if the
Acquiror or the Acquiror Sub has, in any material respect, breached (i) any
material covenant or undertaking contained herein or (ii) any representation or
warranty contained herein, in any case if such breach would have a Material
Adverse Effect on the party and has not been cured by the earlier of 30 days
after the date on which written notice of such breach is given to the party
committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the applications
for prior approval referred to in Section 5.3 hereof are denied or are approved
in a manner which does not satisfy the requirements of Section 6.1(b) hereof,
and the time period for appeals and requests for reconsideration has run;
(d) at any time, by any party hereto in writing, if the shareholders of the
Acquiror or the Company do not approve this Agreement after a vote taken thereon
at a meeting duly called for such purpose (or at any adjournment thereof),
unless the failure of such occurrence shall be due to the failure of the party
seeking to terminate to perform or observe in any material respect its
agreements set forth herein to be performed or observed by such party at or
before the Effective Time;
(e) by either the Company or the Acquiror in writing if the Effective Time
has not occurred by the close of business on the first anniversary of the date
hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date (the Acquiror and the Acquiror Sub being treated as a
single entity for purposes of this Section 7.1(e)); and
(f) by the Company at any time during the five-day period following the
Pricing Period (as defined below) if the Average Closing Price (as defined
below) shall be less than $15.00, subject, however, to the following three
sentences. If the Company elects to exercise its termination right pursuant to
this Section 7.1(f), it shall give written notice to the Acquiror (provided that
such notice of election to terminate may be withdrawn at any time within the
aforementioned five-day period). During the five-day period commencing with its
receipt of such notice, the Acquiror shall have the option to increase the
consideration to be received by the holders of the Company Common Stock
hereunder by adjusting the Exchange Ratio to equal a number (calculated to the
nearest one-thousandth) obtained by dividing (a) $18.90 by (b) the Average
Closing Price. If the Acquiror so elects within such five-day period, it shall
give prompt written notice to the Company of such election and the revised
Exchange Ratio, whereupon no termination shall have occurred pursuant to this
Section 7.1(f) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified). For purposes
of this Section 7.1(f), (i) the term "Average Closing Price" means the average
of the daily closing prices of a share of Acquiror Common Stock, as reported by
the Nasdaq Stock Market's National Market (as reported in the Wall Street
Journal or, if not reported thereby, another authoritative source) during the
Pricing Period, (ii) "Pricing Period" means the period of ten consecutive
trading days following the Determination Date and (iii) the term "Determination
Date" means the earlier of (x) the date on which the last regulatory approval
required to consummate the Merger is obtained, and (y) December 1, 1996.
7.2 EFFECT OF TERMINATION
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Section 5.4 and
Section 8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b), (d) or (e) shall
not relieve the breaching party from liability for willful breach of any
covenant, undertaking, representation or warranty giving rise to such
termination.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than
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covenants that by their terms are to be performed after the Effective Time
(including without limitation the
covenants set forth in Sections 5.9, 5.10 and 5.11 hereof), provided that the
covenant of the Acquiror contained in Section 5.6(b)(iv) hereof shall survive
and be applicable following the Effective Time, and further provided that no
such representations, warranties or covenants shall be deemed to be terminated
or extinguished so as to deprive the Acquiror, the Acquiror Sub or the Company
(or any director, officer or controlling person thereof) of any defense at law
or in equity which otherwise would be available against the claims of any
person, including, without limitation, any shareholder or former shareholder of
either the Acquiror or the Company.
7.4 WAIVER
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
by the shareholders of the Acquiror and the Company) extend the time for the
performance of any of the obligations or other acts of the other party hereto
and may waive (i) any inaccuracies of the other party in the representations or
warranties contained in this Agreement or any document delivered pursuant
hereto, (ii) compliance with any of the covenants, undertakings or agreements of
the other party, (iii) to the extent permitted by law, satisfaction of any of
the conditions precedent to its obligations contained herein or (iv) the
performance by the other party of any of its obligations set forth herein,
provided that any such waiver granted, or any amendment or supplement pursuant
to Section 7.5 hereof executed after shareholders of the Acquiror or the Company
have approved this Agreement shall not modify either the amount or form of the
consideration to be provided hereby to the holders of Company Common Stock upon
consummation of the Merger or otherwise materially adversely affect such
shareholders without the approval of the shareholders who would be so affected.
7.5 AMENDMENT OR SUPPLEMENT
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror, the Acquiror Sub and the Company, subject to the
proviso to Section 7.4 hereof. Any such amendment or supplement must be in
writing and authorized by or under the direction of their respective Boards of
Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel,
provided that (i) expenses of printing the Form S-4 and the registration fee to
be paid to the Commission in connection therewith shall be shared equally
between the Company and the Acquiror and (ii) notwithstanding anything to the
contrary contained in this Agreement, neither the Acquiror nor the Company shall
be released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
8.2 ENTIRE AGREEMENT
This Agreement contains the entire agreement among the parties with respect
to the transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto, written or oral, other than documents
referred to herein and therein. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and thereto and
their respective successors. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors, any rights, remedies, obligations or liabilities other
than as set forth in Sections 5.9, 5.10 and 5.11(b) and (c) hereof.
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8.3 NO ASSIGNMENT
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to the Acquiror or the Acquiror Sub:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to the Company:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
8.5 ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company set forth herein, provided that (i)
the federal income tax consequences of any transactions created by such
modification shall not be other than those set forth in Section 6.1(f) hereof,
(ii) consideration to be paid to the holders of the Company Common Stock is not
thereby changed in kind or reduced in amount as a result of such modification
and (iii) such modification will not materially delay or jeopardize receipt of
any required regulatory approvals or any other condition to the obligations of
the Acquiror and the Acquiror Sub set forth in Sections 6.1 and 6.3 hereof.
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8.6 INTERPRETATION
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maine applicable to agreements made and entirely to be
performed within such jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ PETER J. VERRILL By: /s/ WILLIAM J. RYAN
- ----------------------------------- ------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
PEOPLES HERITAGE MERGER CORP.
Attest:
/s/ PETER J. VERRILL By: /s/ WILLIAM J. RYAN
- ----------------------------------- ------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
FAMILY BANCORP
By: /s/ DAVID D. HINDLE
------------------------------------
Name: David D. Hindle
Title: President and Chief
Executive Officer
By: /s/ GEORGE E. FAHEY
------------------------------------
Name: George E. Fahey
Title: Executive Vice President,
Treasurer and Chief
Financial Officer
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EXHIBIT A
EXHIBIT B
EXHIBIT C
REFERENCE IS MADE TO ANNEXES II, III AND IV
OF THE PROSPECTUS/JOINT PROXY STATEMENT OF WHICH
THIS ANNEX I IS A PART FOR EXHIBITS A, B AND C
TO THE AGREEMENT, RESPECTIVELY.
<PAGE> 120
EXHIBIT D
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO THE COMPANY
PURSUANT TO SECTION 6.2(d) OF THE AGREEMENT]
(a) Each of the Acquiror, the Acquiror Sub and the Acquiror New Hampshire
Bank is duly incorporated, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and the Acquiror is duly registered as
a bank holding company under the BHCA.
(b) The authorized capital stock of the Acquiror consists of 100,000,000
shares of Acquiror Common Stock, of which were issued and outstanding of
record as of the date hereof, and 5,000,000 shares of Acquiror Preferred Stock,
none of which are issued and outstanding as of the date hereof. All of the
outstanding shares of Acquiror Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable, and the shareholders of the
Acquiror have no preemptive rights with respect to any shares of capital stock
of the Acquiror. All of the outstanding shares of capital stock of the Acquiror
Subsidiaries which are Significant Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable (except as otherwise provided
with respect to the capital stock of the Acquiror Maine Bank and the Acquiror
National Bank by the MRSA and the National Bank Act, respectively) and, to the
knowledge of such counsel, are directly or indirectly owned by the Acquiror free
and clear of all liens, claims, encumbrances, charges, restrictions or rights of
third parties of any kind whatsoever. To such counsel's knowledge, except (i)
for shares of Acquiror Common Stock issuable pursuant to the Acquiror Employee
Stock Benefit Plans, (ii) Rights issued by the Acquiror pursuant to the Acquiror
Rights Agreement and (iii) by virtue of the Agreement and the Acquiror Stock
Option Agreement, there were no Rights authorized, issued or outstanding with
respect to the capital stock of the Acquiror as of the date of the Agreement.
(c) The Agreement has been duly authorized, executed and delivered by the
Acquiror and the Acquiror Sub and, assuming due authorization, execution and
delivery by the Company, constitutes a valid and binding obligation of the
Acquiror and the Acquiror Sub enforceable in accordance with its terms, except
that the enforceability of the obligations of the Acquiror and the Acquiror Sub
may be limited by (i) bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors, (ii) equitable principles
limiting the right to obtain specific performance or other similar equitable
relief and (iii) considerations of public policy, and except that certain
remedies may not be available in the case of a nonmaterial breach of the
Agreement.
(d) The Branch Sale Agreement has been duly authorized, executed and
delivered by the Acquiror New Hampshire Bank and, assuming due authorization,
execution and delivery by the Bank, constitutes a valid and binding obligation
of the Acquiror New Hampshire Bank enforceable in accordance with its terms,
except that enforceability of the obligations of the Acquiror New Hampshire Bank
may be limited by (i) bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors, (ii) equitable principles
limiting the right to obtain specific performance or other similar equitable
relief and (iii) considerations of public policy, and except that certain
remedies may not be available in the case of a nonmaterial breach of the Branch
Sale Agreement.
(e) All corporate and shareholder actions required to be taken by the
Acquiror and the Acquiror Sub by law and their respective Articles of
Incorporation and Bylaws to authorize the execution and delivery of the
Agreement and consummation of the Merger have been taken, and all corporate and
shareholder actions required to be taken by the Acquiror New Hampshire Bank by
law and its Certificate of Incorporation and Bylaws to authorize the execution
and delivery of the Branch Sale Agreement and consummation of the Branch Sale
have been taken.
(f) All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by (i) the
Acquiror and the Acquiror Sub to permit the execution, delivery and performance
of the Agreement and consummation of the Merger have been obtained and (ii) the
Acquiror New Hampshire Bank to permit the execution, delivery and performance of
the Branch Sale Agreement and consummation of the Branch Sale have been
obtained.
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(g) The shares of Acquiror Common Stock to be issued pursuant to the terms
of the Agreement have been duly authorized by all necessary corporate action on
the part of the Acquiror and, when issued in accordance with the terms of the
Agreement, will be validly issued, fully paid and nonassessable and not in
violation of the preemptive rights of any person.
(h) Each Company Option outstanding and in effect immediately preceding
consummation of the Merger shall have become an option to purchase shares of
Acquiror Common Stock on the terms provided in Section 2.9 of the Agreement.
(i) To such counsel's knowledge, and except as Previously Disclosed or as
disclosed in the Acquiror's Securities Documents, there are no material legal or
governmental proceedings pending to which the Acquiror or any Acquiror
Subsidiary is a party or to which any property of the Acquiror or any Acquiror
Subsidiary is subject and no such proceedings are threatened by governmental
authorities or by others.
Such counsel also shall state that it has no reason to believe that the
information relating to the Acquiror or an Acquiror Subsidiary contained or
incorporated by reference in (i) the Form S-4, at the time the Form S-4 and any
amendment thereto became effective under the Securities Act, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the Proxy Statement, as of the
date(s) such Proxy Statement was mailed to shareholders of the Company and the
Acquiror and up to and including the date(s) of the meetings of shareholders to
which such Proxy Statement relates, contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon (i) certificates of
governmental officials and, as to matters of fact, certificates of officers of
the Acquiror or any Acquiror Subsidiary and (ii) New Hampshire counsel
reasonably satisfactory to the Company with respect to matters of New Hampshire
law. The opinion of such counsel need refer only to matters of Maine, New
Hampshire and federal law, and may add other qualifications and explanations of
the basis of their opinion as may be reasonably acceptable to the Company.
Note: The receipt of an opinion covering the matters set forth above
relating to the Branch Sale and the Branch Sale Agreement shall not be a
condition to the Company's obligation to consummate the Merger.
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EXHIBIT E
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO THE ACQUIROR
PURSUANT TO SECTION 6.3(d) OF THE AGREEMENT]
(a) Each of the Company and the Bank is duly incorporated and validly
existing under the laws of the Commonwealth of Massachusetts and the United
States, respectively, and the Company is duly registered as a savings and loan
holding company under the HOLA.
(b) The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock, of which shares are issued and
outstanding of record as of the date hereof, and 10,000,000 shares of Company
Preferred Stock, of which no shares are issued and outstanding as of the date
hereof. All of the outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, and the
shareholders of the Company have no preemptive rights with respect to any shares
of capital stock of the Company. All of the outstanding shares of capital stock
of the Bank have been duly authorized and validly issued, are fully paid and
nonassessable, and, to the knowledge of such counsel, are directly or indirectly
owned by the Company free and clear of all liens, claims, encumbrances, charges,
restrictions or rights of third parties of any kind whatsoever. To such
counsel's knowledge, except for the Company Stock Option Agreement and
outstanding Company Options to purchase shares of Company Common Stock as
of the date hereof, there are no Rights authorized, issued or outstanding with
respect to the capital stock of the Company or a Company Subsidiary.
(c) The Agreement has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery by the Acquiror
and the Acquiror Sub, constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except that the enforceability of the
obligations of the Company may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors,
(ii) equitable principles limiting the right to obtain specific performance or
other similar equitable relief and (iii) considerations of public policy, and
except that certain remedies may not be available in the case of a nonmaterial
breach of the Agreement.
(d) The Branch Sale Agreement has been duly authorized, executed and
delivered by the Bank and, assuming due authorization, execution and delivery by
the Acquiror New Hampshire Bank, constitutes a valid and binding obligation of
the Bank enforceable in accordance with its terms, except that enforceability of
the obligations of the Bank may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors,
(ii) equitable principles limiting the right to obtain specific performance or
other similar equitable relief and (iii) considerations of public policy, and
except that certain remedies may not be available in the case of a nonmaterial
breach of the Branch Sale Agreement.
(e) All corporate and shareholder actions required to be taken by the
Company by law and the Articles of Organization and Bylaws of the Company to
authorize the execution and delivery of the Agreement and consummation of the
Merger have been taken, and all corporate and shareholder actions required to be
taken by the Bank by law and its Charter and Bylaws to authorize the execution
and delivery of the Branch Sale Agreement and consummation of the Branch Sale
have been taken.
(f) All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by (i) the
Company to permit the execution, delivery and performance of the Agreement and
consummation of the Merger have been obtained and (ii) the Bank to permit the
execution, delivery and performance of the Branch Sale Agreement and
consummation of the Branch Sale have been obtained.
(g) To such counsel's knowledge, and except as Previously Disclosed or as
disclosed in the Company's Securities Documents, there are no material legal or
governmental proceedings pending to which the Company or a Company Subsidiary is
a party or to which any property of the Company or a Company Subsidiary is
subject and no such proceedings are threatened by governmental authorities or by
others.
Such counsel also shall state that it has no reason to believe that the
information relating to the Company or a Company Subsidiary contained or
incorporated by reference in (i) the Form S-4, at the time the Form
<PAGE> 123
S-4 and any amendment thereto became effective under the Securities Act,
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (ii) the Proxy Statement, as of
the date(s) such Proxy Statement was mailed to shareholders of the Company and
the Acquiror and up to and including the date(s) of the meetings of shareholders
to which such Proxy Statement relates, contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials, certificates or opinions of other counsel to the Company
or a Company Subsidiary reasonably satisfactory to the Acquiror and, as to
matters of fact, certificates of officers of the Company or a Company
Subsidiary. The opinion of such counsel need refer only to matters of
Massachusetts and federal law and may add other qualifications and explanations
of the basis of their opinion as may be reasonably acceptable to the Acquiror.
Note: The receipt of an opinion covering the matters set forth above
relating to the Branch Sale and the Branch Sale Agreement shall not be a
condition to the Acquiror's obligation to consummate the Merger.
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ANNEX II
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 30, 1996 (the "Agreement"), by and
between Family Bancorp, a Massachusetts corporation ("Issuer"), and Peoples
Heritage Financial Group, Inc., a Maine corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer, Grantee and Peoples Heritage Merger Corp. ("PHMC"), a
wholly-owned subsidiary of Grantee, have entered into an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into PHMC (the "Merger"), with PHMC as the
surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan
and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the Plan
and this Agreement, Grantee has agreed to grant an option to Issuer on terms and
conditions which are substantially identical to those of the Option and this
Agreement with respect to approximately 6% of the common stock of Grantee;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 832,000 shares (as adjusted as set forth herein) (the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of Common Stock, par value $0.10 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $20.50, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Holder may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (A) the Effective Time of the Merger,
(B) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default
Termination"), (C) 12 months after the termination of the Plan by Grantee
pursuant to a Default Termination, and (D) 12 months after termination of the
Plan (other than pursuant to a Default Termination) following the occurrence of
a Purchase Event or a Preliminary Purchase Event; and provided, further, that
any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable laws, including without limitation the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), and the Home Owners' Loan Act,
as amended ("HOLA"). The term "Holder" shall mean the holder or holders of the
Option from time to time, and which is initially Grantee. The rights set forth
in Section 8 hereof shall terminate when the right to exercise the Option
terminates (other than as a result of a complete exercise of the Option) as set
forth above.
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(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 15% or more of the consolidated
assets of Issuer and its subsidiaries, or (C) the issuance, sale or
other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 15% or more
of the voting power of Issuer or any of its subsidiaries (any of the
foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such term is defined
in Section 13(d)(3) of the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of,
25% or more of the then outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the
Securities Act with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon consummation
of such offer, such person would own or control 10% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred
to herein as a "Tender Offer" and an "Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Plan at the meeting of such stockholders held for the purpose of
voting on the Plan, (B) such meeting shall not have been held or shall
have been canceled prior to termination of the Plan or (C) Issuer's
Board of Directors shall have withdrawn or modified in a manner adverse
to Grantee the recommendation of Issuer's Board of Directors with
respect to the Plan, in each case after it shall have been publicly
announced that any person (other than Grantee or any subsidiary of
Grantee) shall have (x) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction, (y) commenced a Tender
Offer or filed a registration statement under the Securities Act with
respect to an Exchange Offer, or (z) filed an application (or given
notice), whether in draft or final form, under the BHC Act, the HOLA,
the Bank Merger Act, as amended, or the Change in Bank Control Act of
1978, as amended, for approval to engage in an Acquisition Transaction;
or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such cure
is promptly effected without jeopardizing consummation of the Merger
pursuant to the terms of the Plan) after (x) a bona fide proposal is
made by any person (other than Grantee or any subsidiary of Grantee) to
Issuer or its stockholders to engage in an Acquisition Transaction, (y)
any person (other than Grantee or any subsidiary of Grantee) states its
intention to Issuer or its stockholders to make a proposal to engage in
an Acquisition Transaction if the Plan terminates or (z) any person
(other than Grantee or any subsidiary of Grantee) shall have filed an
application or notice with any Governmental Entity to engage in an
Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Holder
to exercise the Option.
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(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise, and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), the Office of Thrift Supervision ("OTS")
or any other Governmental Entity is required in connection with such purchase,
Issuer shall cooperate with Grantee in the filing of the required notice or
application for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and any mandatory
waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to Issuer at the address of Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MAY 30, 1996.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Issuer Common Stock shall not then be actually delivered to
Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option
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may be exercised, cooperating fully with Holder in preparing such applications
or notices and providing such information to such Governmental Entity as it may
require) in order to permit Holder to exercise the Option and Issuer duly and
effectively to issue shares of Issuer Common Stock pursuant hereto, and (iv)
promptly to take all action provided herein to protect the rights of Holder
against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Agreement or Bylaws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(c) Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance upon exercise
of the Option that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the
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then outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of Issuer or any other person or cash or
any other property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii) to sell
or otherwise transfer all or substantially all of its assets to any person,
other than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Holder, of any of (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option, provided
that, if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to Holder. Substitute Option Issuer also shall enter into an
agreement with Holder in substantially the same form as this Agreement, which
shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of Substitute Option
per share of Substitute Common Stock (the "Substitute Option Price") shall then
be equal to the Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries
taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per share
of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (y) the
highest closing price for shares of Issuer Common Stock within the
six-month period immediately preceding the consolidation, merger or sale in
question and (z) in the event of a sale of all or substantially all of
Issuer's assets or deposits, an amount equal to (i) the sum of the price
paid in such sale for such assets (and/or deposits) and the current market
value of the remaining assets of Issuer, as determined by a nationally-
recognized investment banking firm selected by Holder, divided by (ii) the
number of shares of Issuer Common Stock outstanding at such time. In the
event that a Tender Offer or an Exchange Offer is made for Issuer Common
Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or
other property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally-recognized investment banking firm
selected by Holder.
(4) "Average Price" shall mean the average closing price of a share of
Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average
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Price shall be computed with respect to a share of common stock issued by
Issuer, the person merging into Issuer or by any company which controls
such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section 7
are given full force and effect (including, without limitation, any action that
may be necessary so that the holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute Common Stock are restricted securities, as defined in
Rule 144 under the Securities Act or any successor provision) than other shares
of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of Holder
at any time commencing upon the first occurrence of a Repurchase Event (as
defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by
the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Federal Reserve Board, the OTS or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time
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that portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such approval). If the Federal Reserve Board, the OTS or any other
Governmental Entity disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice of such fact to
Holder. If the Federal Reserve Board, the OTS or any other Governmental Entity
prohibits the repurchase in part but not in whole, then Holder shall have the
right (i) to revoke the repurchase request or (ii) to the extent permitted by
the Federal Reserve Board, the OTS or other Governmental Entity, determine
whether the repurchase should apply to the Option and/or Option Shares and to
what extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable at
the Request Date less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the preceding
sentence within five business days of receipt of notice of disapproval of the
repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's rights
under this Section 8 shall terminate on the date of termination of the Option
pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded, as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally-recognized investment banking firm selected
by Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), Section 7(b)(ii)
or Section 7(b)(iii) shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions of
Section 9(c), if requested by any Holder, as expeditiously as possible prepare
and file a registration statement under the Securities Act if such registration
is necessary in order to permit the sale or other disposition of any or all
shares of Issuer Common Stock or other securities that have been acquired by or
are issuable to Holder upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by Holder in such request,
including without limitation a "shelf" registration statement under Rule 415
under the Securities Act or any successor provision, and Issuer shall use its
best efforts to qualify such shares or other securities for sale under any
applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten
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public offering of such Issuer Common Stock, Issuer will promptly give written
notice to Holder of its intention to do so and, upon the written request of
Holder given within 30 days after receipt of any such notice (which request
shall specify the number of shares of Issuer Common Stock intended to be
included in such underwritten public offering by Holder), Issuer will cause all
such shares for which a Holder shall have requested participation in such
registration to be so registered and included in such underwritten public
offering; provided, however, that Issuer may elect to not cause any such shares
to be so registered (i) if the underwriters in good faith object for valid
business reasons, or (ii) in the case of a registration solely to implement an
employee benefit plan or a registration filed on Form S-4 under the Securities
Act or any successor form; provided, further, however, that such election
pursuant to clause (i) may only be made one time. If some but not all the shares
of Issuer Common Stock with respect to which Issuer shall have received requests
for registration pursuant to this Section 9(b) shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among Holders permitted to register their shares of Issuer Common
Stock in connection with such registration pro rata in the proportion that the
number of shares requested to be registered by each such Holder bears to the
total number of shares requested to be registered by all such Holders then
desiring to have Issuer Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 9(a) to
become effective and to obtain all consents or waivers of other parties which
are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase
Event;
(ii) on more than one occasion during any calendar year and on more
than two occasions in total;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under the
Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the
Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares, provided, however, that Issuer shall not
be required to consent to general jurisdiction or to qualify to do business in
any state where it is not otherwise required to so consent to such jurisdiction
or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses, accounting
expenses, legal expenses and printing expenses incurred by it) in connection
with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained
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in any registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such indemnified party expressly
for use therein, and Issuer and each officer, director and controlling person of
Issuer shall be indemnified by such Holder, or by such underwriter, as the case
may be, for all such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement that was included by Issuer in any such
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by such Holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such party to be indemnified as a
result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling Holders and the
underwriters in connection with the statement or omissions which results in such
expenses, losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party as a result of
the expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
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(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third Party Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h)) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Option does not permit Holder to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as provided in
Sections 3 and 8 (as adjusted pursuant to
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Section 7), it is the express intention of Issuer to allow Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Maine without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to Issuer:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
(g) Counterparts. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
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(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
Attest: FAMILY BANCORP
/s/ GEORGE E. FAHEY By: /s/ DAVID D. HINDLE
- ------------------------------------ ---------------------------------
Name: George E. Fahey Name: David D. Hindle
Title: Executive Vice President, Title: President and Chief
Treasurer and Chief Financial Executive Officer
Officer
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ PETER J. VERRILL By: /s/ WILLIAM J. RYAN
- ------------------------------------ ---------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President and
Chief Operating Officer Chief Executive Officer
and Chief Financial Officer
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ANNEX III
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 30, 1996 (the "Agreement"), by and
between Peoples Heritage Financial Group, Inc., a Maine corporation ("Issuer"),
and Family Bancorp, a Massachusetts corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee, Issuer and Peoples Heritage Merger Corp. ("PHMC"), a
wholly-owned subsidiary of Issuer, have entered into an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Plan"), providing for, among other
things, the merger of Grantee with and into PHMC (the "Merger"), with PHMC as
the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan
and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the Plan
and this Agreement, Grantee has agreed to grant an option to Issuer on terms and
conditions which are substantially identical to those of the Option and this
Agreement with respect to approximately 19.9% of the common stock of Grantee;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 1,500,000 shares (as adjusted as set forth herein) (the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of Common Stock, par value $0.01 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $19.75, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 6.0% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option. Each Option Share issued upon exercise of the
Option shall be accompanied by Acquiror Rights as provided in the Acquiror
Rights Agreement.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Holder may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (A) the Effective Time of the Merger,
(B) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default
Termination"), (C) 12 months after the termination of the Plan by Grantee
pursuant to a Default Termination, and (D) 12 months after termination of the
Plan (other than pursuant to a Default Termination) following the occurrence of
a Purchase Event or a Preliminary Purchase Event; and provided, further, that
any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable laws, including without limitation the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), and the Home Owners' Loan Act,
as amended ("HOLA"). The term
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"Holder" shall mean the holder or holders of the Option from time to time, and
which is initially Grantee. The rights set forth in Section 8 hereof shall
terminate when the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction involving Issuer or any
of its subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its subsidiaries representing in
either case 15% or more of the consolidated assets of Issuer and its
subsidiaries, or (C) the issuance, sale or other disposition of (including
by way of merger, consolidation, share exchange or any similar transaction)
securities representing 15% or more of the voting power of Issuer or any of
its subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 25% or more of
the then outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer"
and an "Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Plan at the meeting of such stockholders held for the purpose of voting
on the Plan, (B) such meeting shall not have been held or shall have been
canceled prior to termination of the Plan or (C) Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with respect to the Plan,
in each case after it shall have been publicly announced that any person
(other than Grantee or any subsidiary of Grantee) shall have (x) made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction, (y) commenced a Tender Offer or filed a registration statement
under the Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under the
BHC Act, the HOLA, the Bank Merger Act, as amended, or the Change in Bank
Control Act of 1978, as amended, for approval to engage in an Acquisition
Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would entitle
Grantee to terminate the Plan under Section 7.1(b) thereof (without regard
to the cure period provided for therein unless such cure is promptly
effected without jeopardizing consummation of the Merger pursuant to the
terms of the Plan) after (x) a bona fide proposal is made by any person
(other than Grantee or any subsidiary of Grantee) to Issuer or its
stockholders to engage in an Acquisition Transaction, (y) any person (other
than Grantee or any subsidiary of Grantee) states its intention to Issuer
or its stockholders to make a proposal to engage in an Acquisition
Transaction if the Plan terminates or (z) any person (other than Grantee or
any subsidiary of Grantee) shall have filed an application or notice with
any Governmental Entity to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
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(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Holder
to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise, and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), the Office of Thrift Supervision ("OTS")
or any other Governmental Entity is required in connection with such purchase,
Issuer shall cooperate with Grantee in the filing of the required notice or
application for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and any mandatory
waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to Issuer at the address of Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MAY 30, 1996.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Issuer Common Stock shall not then be actually delivered to
Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid
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or seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer,
(iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Agreement or Bylaws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(c) Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance upon exercise
of the Option that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 6.0% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
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(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or one
of its subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Holder, of any of (x) the Acquiring Corporation (as
hereinafter defined), (y) any person that controls the Acquiring Corporation or
(z) in the case of a merger described in clause (ii), Issuer (such person being
referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option, provided
that, if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to Holder. Substitute Option Issuer also shall enter into an
agreement with Holder in substantially the same form as this Agreement, which
shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of Substitute Option
per share of Substitute Common Stock (the "Substitute Option Price") shall then
be equal to the Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries
taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per share
of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (y) the
highest closing price for shares of Issuer Common Stock within the
six-month period immediately preceding the consolidation, merger or sale in
question and (z) in the event of a sale of all or substantially all of
Issuer's assets or deposits, an amount equal to (i) the sum of the price
paid in such sale for such assets (and/or deposits) and the current market
value of the remaining assets of Issuer, as determined by a nationally-
recognized investment banking firm selected by Holder, divided by (ii) the
number of shares of Issuer Common Stock outstanding at such time. In the
event that a Tender Offer or an Exchange Offer is made for Issuer Common
Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or
other property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally-recognized investment banking firm
selected by Holder.
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(4) "Average Price" shall mean the average closing price of a share of
Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by Issuer, the person merging into Issuer
or by any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 6.0% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 6.0% of the aggregate of the shares of Substitute Common Stock but
for the limitation in the first sentence of this Section 7(f), Substitute Option
Issuer shall make a cash payment to Holder equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in the first
sentence of this Section 7(f) over (ii) the value of the Substitute Option after
giving effect to the limitation in the first sentence of this Section 7(f). This
difference in value shall be determined by a nationally-recognized investment
banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section 7
are given full force and effect (including, without limitation, any action that
may be necessary so that the holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute Common Stock are restricted securities, as defined in
Rule 144 under the Securities Act or any successor provision) than other shares
of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of Holder
at any time commencing upon the first occurrence of a Repurchase Event (as
defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by
the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever.
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Notwithstanding the foregoing, to the extent that prior notification to or
approval of the Federal Reserve Board, the OTS or any other Governmental Entity
is required in connection with the payment of all or any portion of the Section
8 Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If the Federal
Reserve Board, the OTS or any other Governmental Entity disapproves of any part
of Issuer's proposed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Holder. If the Federal Reserve Board, the
OTS or any other Governmental Entity prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by the Federal Reserve Board, the OTS or other
Governmental Entity, determine whether the repurchase should apply to the Option
and/or Option Shares and to what extent to each, and Holder shall thereupon have
the right to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Holder shall notify Issuer of its
determination under the preceding sentence within five business days of receipt
of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's rights
under this Section 8 shall terminate on the date of termination of the Option
pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded, as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally-recognized investment banking firm selected
by Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), Section 7(b)(ii)
or Section 7(b)(iii) shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions of
Section 9(c), if requested by any Holder, as expeditiously as possible prepare
and file a registration statement under the Securities Act if such registration
is necessary in order to permit the sale or other disposition of any or all
shares of Issuer Common Stock or other securities that have been acquired by or
are issuable to Holder upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by Holder in such request,
including without limitation a "shelf" registration statement under Rule 415
under the Securities Act or any
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successor provision, and Issuer shall use its best efforts to qualify such
shares or other securities for sale under any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) Conditions to Required Registration. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 9(a) to
become effective and to obtain all consents or waivers of other parties which
are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely affect
an offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase
Event;
(ii) on more than one occasion during any calendar year and on more
than two occasions in total;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under the
Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the
Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares, provided, however, that Issuer shall not
be required to consent to general jurisdiction or to qualify to do business in
any state where it is not otherwise required to so consent to such jurisdiction
or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses, accounting
expenses, legal expenses and printing expenses incurred by it) in connection
with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
8
<PAGE> 145
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Holder, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such Holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such party to be indemnified as a
result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling Holders and the
underwriters in connection with the statement or omissions which results in such
expenses, losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party as a result of
the expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
9
<PAGE> 146
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third Party Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h)) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or a
federal or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory
10
<PAGE> 147
agency determines that the Option does not permit Holder to acquire, or does not
require Issuer to repurchase, the full number of shares of Issuer Common Stock
as provided in Sections 3 and 8 (as adjusted pursuant to Section 7), it is the
express intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Maine without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
If to Issuer:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
(g) Counterparts. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the
11
<PAGE> 148
occurrence of a Purchase Event. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
12
<PAGE> 149
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ PETER J. VERRILL By: /s/ WILLIAM J. RYAN
- ------------------------------------- ------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
Attest: FAMILY BANCORP
/s/ GEORGE E. FAHEY By: /s/ DAVID D. HINDLE
- ------------------------------------- ------------------------------------
Name: George E. Fahey Name: David D. Hindle
Title: Executive Vice President, Title: President and Chief
Treasurer and Chief Financial Executive Officer
Officer
13
<PAGE> 150
ANNEX IV
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of May 30, 1996, by and among Peoples
Heritage Financial Group, Inc. (the "Acquiror"), a Maine corporation, and
certain stockholders of Family Bancorp (the "Company"), a Massachusetts
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror, Peoples Heritage Merger Corp. (the "Acquiror Sub")
and the Company have entered into an Agreement and Plan of Merger, dated as of
the date hereof (the "Agreement"), which is being executed simultaneously with
the execution of this Stockholder Agreement and provides for, among other
things, the merger of the Company with and into the Acquiror Sub (the "Merger");
and
WHEREAS, in order to induce the Acquiror to enter into the Agreement, each
of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacities as stockholders of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of Company Common Stock. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Company, par value $.10 per share
("Company Common Stock"), set forth opposite such Stockholder's name on Schedule
I hereto.
2. Agreements of the Stockholders. Each Stockholder covenants and agrees
that:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all shares
of Company Common Stock in which such stockholder has the right to vote
(whether owned as of the date hereof or hereafter acquired) in favor of the
Agreement and against any plan or proposal pursuant to which the Company is
to be acquired by or merged with, or pursuant to which the Company proposes
to sell all or substantially all of its assets and liabilities to, any
person entity or group (other than the Acquiror or any subsidiary thereof);
(b) except as otherwise expressly permitted hereby, such Stockholder
shall not, prior to the meeting of the Company's stockholders referred to
in Section 2(a) hereof or the earlier termination of the Agreement in
accordance with its terms, sell, pledge, transfer or otherwise dispose of
the Stockholder's shares of Company Common Stock; and
(c) such Stockholder shall not in his capacity as a stockholder of the
Company directly or indirectly encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or
group (other than the Acquiror or an affiliate thereof) concerning any
merger, sale of substantial assets or liabilities not in the ordinary
course of business, sale of shares of capital stock or similar transactions
involving the Company or any subsidiary of the Company (provided that
nothing herein shall be deemed to affect the ability of any Stockholder to
fulfill his duties as a director or officer of the Company).
Each Stockholder further agrees that the Company's transfer agent shall be
given an appropriate stop transfer order and shall not be required to register
any attempted transfer of shares of Company Common Stock, unless the transfer
has been effected in compliance with the terms of this letter agreement.
3. Successors and Assigns. A Stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Company Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before the
meeting of the Company's stockholders referred to in Section 2(a) hereof, such
Stockholder
<PAGE> 151
obtains the prior written consent of the Acquiror and that any acquiror of such
Company Common Stock agree in writing to be bound by the terms of this
Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. Notices. Notices may be provided to the Acquiror and the Stockholders
in the manner specified in Section 8.4 of the Agreement, with all notices to the
Stockholders being provided to them at the Company in the manner specified in
such section.
6. Governing Law. This Stockholder Agreement shall be governed by the laws
of the State of Maine without giving effect to the principles of conflicts of
laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. Headings and Gender. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender herein
shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
2
<PAGE> 152
IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and each of
the Stockholders have caused this Stockholder Agreement to be executed as of the
day and year first above written.
PEOPLES HERITAGE FINANCIAL
GROUP, INC.
By: /s/ WILLIAM J. RYAN
---------------------------------
Name: William J. Ryan
Title: Chairman, President and
Chief Executive Officer
COMPANY STOCKHOLDERS:
/s/ JOHN E. VEASEY
---------------------------------
John E. Veasey
/s/ ELKIN B. MCCALLUM
---------------------------------
Elkin B. McCallum
/s/ DAVID D. HINDLE
---------------------------------
David D. Hindle
/s/ GEORGE E. FAHEY
---------------------------------
George E. Fahey
/s/ RONALD G. TROMBLEY
---------------------------------
Ronald G. Trombley
/s/ BRUCE FENN, III
---------------------------------
Bruce Fenn, III
/s/ DAVID J. LAFLAMME
---------------------------------
David J. LaFlamme
/s/ KENNETH L. PAUL
---------------------------------
Kenneth L. Paul
/s/ CHARLES GEORGE, JR.
---------------------------------
Charles George, Jr.
3
<PAGE> 153
<TABLE>
SCHEDULE I
<CAPTION>
NUMBER OF SHARES OF
COMPANY COMMON STOCK
NAME OF STOCKHOLDER BENEFICIALLY OWNED
- ------------------- -------------------
<S> <C>
John E. Veasey............................................... 120,962
Elkin B. McCallum............................................ 57,150
David D. Hindle.............................................. 29,872
George E. Fahey.............................................. 24,284
Ronald G. Trombley........................................... 22,382
Bruce Fenn, III.............................................. 11,131
David J. LaFlamme............................................ 33,182
Kenneth L. Paul.............................................. 7,800
Charles George, Jr. ......................................... 3,750
</TABLE>
4
<PAGE> 154
ANNEX V
MCCONNELL, BUDD & DOWNES, INC.
365 SOUTH STREET
MORRISTOWN, NEW JERSEY 07960
201-538-78000
FAX: 201-538-0522
The Board of Directors
Family Bancorp
153 Merrimack Street
Haverhill, MA 01830
July 15, 1996
The Board of Directors:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Family Bancorp ("Family") of the consideration to be
paid to the shareholders of Family in connection with the proposed acquisition
of Family by Peoples Heritage Financial Group, Inc. ("PHFG") pursuant to the
Agreement and Plan of Merger (the "Agreement") (the "Merger"), dated as of May
30, 1996, among Family, PHFG and Peoples Heritage Merger Corp. ("PHMC"), a
wholly-owned subsidiary of PHFG. Under the terms of the Agreement, each share of
common stock, $0.10 par value per share, of Family (the "Family Common Stock")
outstanding immediately prior to the Merger (other than any dissenting shares
under Massachusetts law and certain shares held by PHFG) will be exchanged for
1.26 shares (the "Exchange Ratio") of common stock, $.01 par value per share, of
PHFG (the "PHFG Common Stock"), plus cash in lieu of any fractional share
interest. In addition, upon consummation of the Merger, each option to purchase
Family Common Stock which is outstanding at the effective time, whether or not
then exercisable, will be converted into options to purchase shares of PHFG
Common Stock in accordance with the provisions of the Agreement.
The reader is urged to carefully read the Agreement, which is reproduced in
its entirety elsewhere in the accompanying Prospectus/Joint Proxy Statement.
McConnell, Budd & Downes, Inc., as part of its investment banking business,
is engaged exclusively in the valuation of bank holding companies and banks,
thrift holding companies and thrifts and their securities in connection with
mergers and acquisitions, negotiated underwritings, private placements,
competitive bidding processes, market making as a NASD market maker, secondary
distributions of listed securities and valuations for corporate, estate and
other purposes. Our experience and familiarity with Family includes having
worked as a financial advisor to Family since July 1995 on a contractual basis
and specifically includes our participation in the process and negotiations
leading up to the proposed acquisition by PHFG. In the course of our role as
financial advisor to Family in connection with the Transaction we have received
fees for our services and will receive additional fees contingent on the
occurrence of certain defined events. We will receive a fee in connection with
the rendering of this opinion. In the ordinary course of our business, we may,
from time to time, trade the equity securities of Family in our capacity as a
NASD market maker, for our own account, for the accounts of our customers and
for the accounts of individual employees of McConnell, Budd & Downes, Inc.
Accordingly we may, from time to time, hold a long or short position in the
equity securities of Family.
In arriving at our opinion, we have reviewed the Agreement and
Prospectus/Joint Proxy Statement in substantially the form to be mailed to
Family and PHFG shareholders. We have also reviewed publicly available business,
financial and shareholder information relating to Family and its subsidiaries,
certain publicly available financial information relating to PHFG and certain
financial information relating to PHFG provided to Family by PHFG management. In
addition, we have reviewed certain other information, including
<PAGE> 155
The Board of Directors
July 15, 1996
internal reports and documents of Family and PHFG and certain management
prepared financial information provided to us by Family and PHFG. We have also
met with and had discussions with members of the senior management of Family and
PHFG to discuss their past and current business operations, current financial
condition and future prospects. In connection with the foregoing, we have
reviewed the annual reports to shareholders and annual reports on Form 10-K of
PHFG for the years ended December 31, 1993, 1994 and 1995. We have similarly
reviewed the annual reports to shareholders and annual reports on form 10-K of
Family for the years ended December 31, 1992, 1993, 1994 and 1995. In addition
we reviewed the unaudited reports to shareholders for both Family and PHFG for
the quarter ended 3-31-96. We have also reviewed and studied the historical
stock prices and trading volumes of the common stock of Family and PHFG as well
as the terms and conditions of 12 recent acquisition transactions, selected from
a larger universe of 27 transactions involving publicly traded New England
financial institutions conducting business in the northeast which we believe can
be compared to the proposed acquisition of Family by PHFG. We also considered
the current state of and future prospects for the economies of Maine, New
Hampshire and Massachusetts generally and the relevant market areas for PHFG and
Family in particular. We have also conducted such other studies, analyses and
investigations as we deemed appropriate under the circumstances surrounding the
proposed Merger.
In the course of our review and analysis we considered, among other things,
such topics as relative capitalization, capital adequacy, profitability,
availability of non-interest income, relative asset quality, adequacy of the
reserve for loan losses and the composition of the loan portfolio of each of
PHFG and Family. We also considered management's estimates of cost savings and
revenue enhancements which might result from a consolidation of PHFG and Family.
We also considered management's estimates of cost savings and revenue
enhancements which might result from a consolidation of PHFG and Family. We also
considered the advantages and disadvantages of a purchase accounting transaction
as contrasted with hypothetical pooling accounting transactions. In the conduct
of our review and analysis we have relied upon and assumed, without independent
verification, the accuracy and completeness of the financial information
provided to us by PHFG and Family and information which is otherwise publicly
obtainable. In reaching our opinion we have not assumed any responsibility for
the independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of either PHFG or Family, nor have
we obtained from any other source, any appraisals of the assets or liabilities
of either PHFG or Family. We have also relied on the management of Family as to
the reasonableness of various financial and operating forecasts, cost savings
estimates and of the assumptions on which they are based, which were provided to
us or otherwise approved for use in our analyses.
In the course of rendering this opinion, which is being rendered prior to
the receipt of of all required regulatory approvals necessary before
consummation of the Transactions, we have assumed that no conditions will be
imposed by any regulatory agency in connection with its approval of the
Transactions that will have a material adverse effect on the results of
operations, the financial condition or the prospects of PHFG following
consummation of the Transactions.
Based upon and subject to the foregoing, it is our opinion, that as of the
date of this letter, the Exchange Ratio is fair to the shareholders of Family
from a financial point of view.
Very truly yours,
McConnell, Budd & Downes, Inc.
By: /S/ DAVID A. BUDD
------------------------------------
Name: David A. Budd
Title: Managing Director
2
<PAGE> 156
ANNEX VI
KEEFE, BRUYETTE & WOODS, INC.
SPECIALISTS IN BANKING
TWO WORLD TRADE CENTER 85TH FLOOR NEW YORK, N.Y. 10048
Toll Free Telephone
1-800-966-1559 212-323-8300
July 15, 1996
Board of Directors
People's Heritage Financial Group, Inc.
One Portland Square
P.O. Box 9540
Portland, Maine 04112
Members of the Board:
You have requested our opinion as investment bankers as to the fairness
from a financial point of view to the shareholders of Peoples Heritage Financial
Group, Inc. ("PHFG") of the exchange ratio in the proposed merger (the "Merger")
of Family Bancorp ("Family") with and into Peoples Heritage Merger Corp.
("PHMC"), a newly-formed, wholly-owned subsidiary of PHFG, pursuant to the
Agreement and Plan of Merger, dated as of May 30, 1996, among PHFG, PHMC and
Family (the "Agreement"). Under the terms of the Agreement, each share of common
stock, $0.10 par value per share, of Family (the "Family Common Stock")
outstanding immediately prior to the Merger (other than any dissenting shares
under Massachusetts law and certain shares held by PHFG) will be exchanged for
1.26 shares (the "Exchange Ratio") of common stock, $.01 par value per share, of
PHFG (the "PHFG Common Stock"), plus cash in lieu of any fractional share
interest. It is our understanding that the Merger will be structured as a
purchase transaction under generally accepted accounting practices.
Keefe, Bruyette & Woods, Inc., as part of its investment banking business,
is continually engaged in the valuation of banking businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking companies, we have
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of our business as a broker-dealer, we may, from time to time,
purchase securities from, and sell securities to, Family and PHFG and as a
market maker in securities we may from time to time have a long or short
position in, and buy or sell, debt or equity securities of Family and PHFG for
our own account and for the accounts of our customers. To the extent we have any
such position as of the date of this opinion it has been disclosed to PHFG. We
have acted for the Board of Directors of PHFG in rendering this fairness opinion
and will receive a fee from PHFG for our services.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement on Form S-4, including the
Prospectus/Joint Proxy Statement relating to the meetings of shareholders of
PHFG and Family at which such shareholders will be asked to approve the
Agreement; Annual Report to Shareholders of PHFG and Annual Reports on Form 10-K
of PHFG and Family for the year ended December 31, 1995; certain interim reports
to shareholders and Quarterly Reports on Form 10-Q of PHFG and Family, and
certain internal financial analyses and forecasts for Family prepared by
management. In addition, we have compared certain financial and stock market
information for PHFG and Family with similar information for certain other
companies the securities of which are publicly traded,
<PAGE> 157
The Board of Directors
July 15, 1996
reviewed the financial terms of certain recent business combinations in the
banking industry and performed such other studies and analyses as we considered
appropriate.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of PHFG as to the reasonableness and achievability of
the financial and operating forecasts and projections (and the assumptions and
bases therefor) provided to us, and we have assumed that such forecasts and
projections reflect the best currently available estimates and judgments of PHFG
and that such forecasts and projections will be realized in the amounts and in
the time periods currently estimated by such management. We also have assumed
that the aggregate allowances for loan losses for PHFG and Family are adequate
to cover such losses. In rendering our opinion, we have not made or obtained any
evaluations or appraisals of the property of PHFG and Family, nor have we
examined any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of PHFG
and Family; (ii) the assets and liabilities of PHFG and Family; and (iii) the
nature and terms of certain other merger transactions involving banks and bank
holding companies and thrifts and thrift holding companies. We also have taken
into account our assessment of general economic, market and financial conditions
and our experience in other transactions, as well as our experience in
securities valuation and our knowledge of the banking industry generally. Our
opinion is necessarily based upon conditions as they exist and can be evaluated
on the date hereof and the information made available to us through the date
hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio in the Merger is fair, from a financial point of
view, to the holders of PHFG Common Stock.
Very truly yours,
/s/ KEEFE, BRUYETTE & WOODS, INC.
--------------------------------------
KEEFE, BRUYETTE & WOODS, INC.
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ANNEX VII
TEXT OF SECTIONS 85 THROUGH 98 OF CHAPTER 156B OF
THE MASSACHUSETTS BUSINESS CORPORATION LAW
[Section] 85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR
STOCK; EXCEPTION
A stockholder in any corporation organized under the laws of
Massachusetts which shall have duly voted to consolidate or merge with another
corporation or corporations under the provisions of sections seventy-eight or
seventy-nine who objects to such consolidation or merger may demand payment for
his stock from the resulting or surviving corporation and an appraisal in
accordance with the provisions of sections eight-six to ninety-eight, inclusive,
and such stockholder and the resulting or surviving corporation shall have the
rights and duties and follow the procedure set forth in those sections. This
section shall not apply to the holders of any shares of stock of a constituent
corporation surviving a merger if, as permitted by subsection (c) of section
seventy-eight, the merger did not require for its approval a vote of the
stockholders of the surviving corporation.
[Section] 86. SELECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which
any section of this chapter provides that a stockholder who objects to such
action shall have the right to demand payment for his shares and an appraisal
thereof, sections eight-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
[Section] 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF
MEETING; FORM
The notice of the meeting of stockholders at which the approval of
such proposed action is to be considered shall contain a statement of the rights
of objecting stockholders. The giving of such notice shall not be deemed to
create any rights in any stockholder receiving the same to demand payment for
his stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the
meeting and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not voted
in favor of such action has or may have the right to demand in writing from the
corporation (or, in the case of a consolidation or merger, the name of the
resulting or surviving corporation shall be inserted), within twenty days after
the date of mailing to him of notice in writing that the corporate action has
become effective, payment for his shares and an appraisal of the value thereof.
Such corporation and any such stockholder shall in such cases have the rights
and duties and shall follow the procedure set forth in sections 88 to 98,
inclusive, of chapter 156B of the General Laws of Massachusetts."
[Section] 88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the
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corporation of which he is a stockholder has become effective. The giving of
such notice shall not be deemed to create any rights in any stockholder
receiving the same to demand payment for his stock. The notice shall be sent by
registered or certified mail, addressed to the stockholder at his last known
address as it appears in the records of the corporation.
[Section] 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
[Section] 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section
eighty-nine the corporation upon which such demand is made and any such
objecting stockholder fail to agree as to the value of such stock, such
corporation or any such stockholder may within four months after the expiration
of such thirty-day period demand a determination of the value of the stock of
all such objecting stockholders by a bill in equity filed in the superior
court in the county where the corporation in which such objecting stockholder
held stock had or has its principal office in the commonwealth.
[Section] 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
[Section] 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT;
VALUATION DATE
After hearing the court shall enter a decree determining the fair
value of the stock of those stockholders who have become entitled to the
valuation of and payment for their shares, and shall order the corporation to
make payment of such value, together with interest, if any, as hereinafter
provided, to the stockholders entitled thereto upon the transfer by them to the
corporation of the certificates representing such stock if certificated or, if
uncertificated, upon receipt of an instruction transferring such stock to the
corporation. For this purpose, the value of the shares shall be determined as
of the day preceding the date of the vote approving the proposed corporate
action and shall be exclusive of any element of value arising from the
expectation or accomplishment of the proposed corporate action.
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[Section] 93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question
arising thereunder to a special master to hear the parties, make findings and
report the same to the court, all in accordance with the usual practice in
suits in equity in the superior court.
[Section] 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to
submit their certificates of stock to the corporation for the notation thereon
of the pendency of the bill and may order the corporation to note such pendency
in its records with respect to any uncertificated shares held by such
stockholder parties, and may on motion dismiss the bill as to any stockholder
who fails to comply with such order.
[Section] 95. COSTS; INTEREST
The cost of the bill, including the reasonable compensation and
expenses of any master appointed by the court, but exclusive of fees of
counsel or of experts retained by any party, shall be determined by the court
and taxed upon the partes to the bill, or any of them, in such manner as appears
to be equitable, except that all costs of giving notice to stockholders as
provided in this chapter shall be paid by the corporation. Interest shall be
paid upon any award from the date of the vote approving the proposed corporate
action, and the court may on application of any interested party determine the
amount of interest to be paid in the case of any stockholder.
[Section] 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided
in this chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the
resulting or surviving corporation, deliver to it a written
withdrawal of his objections to and an acceptance of such
corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
[Section] 97. STATUS OF SHARES PAID FOR
The shares of the corporation paid for by the corporation pursuant to
the provisions of this chapter shall have the status of treasury stock, or in
the case of a consolidation or merger the shares or the securities of the
resulting or surviving corporation into which the shares of such objecting
stockholder would have been converted had he not objected to such consolidation
or merger shall have the status of treasury stock or securities.
[Section] 98. EXCLUSIVE REMEDY; EXCEPTION
The enforcement by a stockholder of his right to receive payment for
his shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
3
