PEOPLES HERITAGE FINANCIAL GROUP INC, S-4/A, 1996-01-05

PEOPLES HERITAGE FINANCIAL GROUP INC
S-4/A, 1996-01-05
STATE COMMERCIAL BANKS

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As filed with the Securities and Exchange Commission on January 5, 1996
Registration No. 33- 64637

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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PRE-EFFECTIVE AMENDMENT NO. 1
TO

FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933

PEOPLES HERITAGE FINANCIAL GROUP, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Maine 6120 01-0437984
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(State or other juris- (Primary Standard (I.R.S. Employer
diction of incorporation Industrial Classification Identification No.)
or organization) Code No.)

P.O. Box 9540
One Portland Square
Portland, Maine 04112-9540
(207) 761-8500
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(Address, including zip code and telephone number, including area code,
of Registrant's principal executive offices)

William J. Ryan
Chairman, President and Chief Executive Officer
Peoples Heritage Financial Group, Inc.
P.O. Box 9540
One Portland Square
Portland, Maine 04112-9540
(207) 761-8500
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with a copy to:
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Gerard L. Hawkins, Esq. Gregory D. Landroche Craig M. Wasserman, Esq.
Elias, Matz, Tiernan & Herrick L.L.P. Executive Vice President and Wachtell, Lipton, Rosen & Katz
734 15th Street, N.W. Chief Financial Officer 51 West 52nd Street
Washington, D.C. 20005 Bank of New Hampshire Corporation New York, New York 10019
(202) 347-0300 300 Franklin Street (212) 403-1000
Manchester, New Hampshire 03101
(603) 695-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.

If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PEOPLES HERITAGE FINANCIAL GROUP, INC.

CROSS-REFERENCE SHEET

ITEM OF FORM S-4 LOCATION IN PROSPECTUS
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1. Forepart of Registration Facing Page; Cross Reference
Statement and Outside Front Cover Sheet; Outside Front Cover Page of
Page of Prospectus Prospectus/Proxy Statement

2. Inside Front and Outside Back Inside Front Cover Page of
Cover Pages of Prospectus Prospectus; Table of Contents;
Available Information;
Incorporation of Certain Documents
by Reference

3. Risk Factors, Ratio of Earnings Summary; Market for Common Stock
to Fixed Charges and Other and Dividends; Comparative Per
Information Share Data; Selected Pro Forma
Consolidated Financial Data

4. Terms of the Transaction Summary; The Merger; Description
of PHFG Capital Stock; Comparative
Rights of Shareholders

5. Pro Forma Financial Information Pro Forma Combined Consolidated
Financial Information

6. Material Contracts with the The Merger
Company Being Acquired

7. Additional Information Required Not Applicable
for Reoffering by Persons and
Parties Deemed to be Underwriters

8. Interests of Named Experts and Not Applicable
Counsel

9. Disclosure of Commission's Not Applicable
Position on Indemnification for
Securities Act Liabilities

10. Information with Respect to S-3 Incorporation of Certain Documents
Registrants by Reference; Summary

11. Incorporation of Certain Incorporation of Certain Documents
Information by Reference by Reference

12. Information with Respect to S-2 Not Applicable
or S-3 Registrants
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ITEM OF FORM S-4 LOCATION IN PROSPECTUS
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13. Incorporation of Certain Not Applicable
Information by Reference

14. Information with Respect to Not Applicable
Registrants Other than S-2 or S-3
Registrants

15. Information with Respect to S-3 Incorporation of Certain Documents
Companies by Reference; Summary

16. Information with Respect to S-2 Not Applicable
or S-3 Companies

17. Information with Respect to Not Applicable
Companies other than S-2 or S-3
Companies

18. Information if Proxies, Consents Summary; The Special Meetings; The
or Authorizations are to be Merger; Incorporation of Certain
Solicited Documents by Reference; Management
of PHFG after the Merger

19. Information if Proxies, Consents Not Applicable
or Authorizations are not to be
Solicited, or in an Exchange
Offer
</TABLE>

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PEOPLES HERITAGE FINANCIAL GROUP, INC.
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207) 761-8500

January __, 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
Feburary 27, 1996 at The Holiday Inn by the Bay, 88 Spring Street, 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 October 25,
1995 (the "Agreement"), by and among PHFG, First Coastal Banks, Inc. ("First
Coastal"), a wholly-owned subsidiary of PHFG, and Bank of New Hampshire
Corporation ("BNHC"), a New Hampshire corporation, pursuant to which, among
other things, First Coastal will be merged with and into BNHC (the "Merger").
If the Agreement is approved and the Merger is consummated, each outstanding
share of BNHC Common Stock will be converted into the right to receive two
shares of PHFG Common Stock, subject to possible adjustment under certain
circumstances.

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,

William J. Ryan
Chairman, President and
Chief Executive Officer

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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 February 27, 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 February 27, 1996 at The Holiday Inn by the Bay,
88 Spring Street, Portland, Maine for the following purpose:

To consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of October 25, 1995, by and among PHFG, First Coastal
Banks, Inc. ("First Coastal"), a wholly-owned subsidiary of PHFG, and Bank
of New Hampshire Corporation ("BNHC"), which provides, among other things,
for (i) the merger of First Coastal with and into BNHC and (ii) the
conversion of each share of common stock of BNHC outstanding immediately
prior to the Merger (other than any dissenting shares under New Hampshire
law and certain shares held by PHFG) into the right to receive two shares
of PHFG common stock, subject to possible adjustment under certain
circumstances.

Pursuant to the Bylaws of PHFG, the Board of Directors has fixed the close
of business on January 12, 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

William J. Ryan
Chairman, President and
Chief Executive Officer

Portland, Maine
January __, 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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BANK OF NEW HAMPSHIRE CORPORATION
300 FRANKLIN STREET
MANCHESTER, NEW HAMPSHIRE 03101
(603) 624-6600

January __, 1996

Dear Shareholder,

You are cordially invited to attend a Special Meeting of Shareholders of
Bank of New Hampshire Corporation ("BNHC") at 9 :00 a.m., Eastern Time, on
February 27, 1996 at _________________, Manchester, New Hampshire (the "Special
Meeting"). This is a very important meeting regarding your investment in BNHC.

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 October 25,
1995 (the "Agreement"), by and among Peoples Heritage Financial Group, Inc.
("PHFG"), a Maine corporation, First Coastal Banks, Inc. ("First Coastal"), a
New Hampshire corporation and a wholly-owned subsidiary of PHFG, and BNHC,
pursuant to which, among other things, First Coastal will be merged with and
into BNHC (the "Merger"). If the Agreement is approved and the Merger is
consummated, each outstanding share of BNHC Common Stock will be converted into
the right to receive two shares of PHFG Common Stock, subject to possible
adjustment under certain circumstances.

Your Board of Directors has determined the Merger to be fair to and in the
best interests of BNHC 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.

It is very important that your shares be represented at 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 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,

Davis P. Thurber
Chairman and President

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BANK OF NEW HAMPSHIRE CORPORATION
300 FRANKLIN STREET
MANCHESTER, NEW HAMPSHIRE 03101
(603) 624-6600

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on February 27, 1996

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Bank of New Hampshire Corporation ("BNHC") will be held at 9:00
a.m., Eastern Time, on February 27, 1996 at ________________, Manchester, New
Hampshire for the following purpose:

To consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of October 25, 1995, by and among Peoples Heritage
Financial Group, Inc. ("PHFG"), First Coastal Banks, Inc. ("First
Coastal"), a wholly-owned subsidiary of PHFG, and BNHC, which provides,
among other things, for (i) the merger of First Coastal with and into BNHC
and (ii) the conversion of each share of common stock of BNHC outstanding
immediately prior to the Merger (other than any dissenting shares under New
Hampshire law and certain shares held by PHFG) into the right to receive
two shares of PHFG common stock, subject to possible adjustment under
certain circumstances.

Pursuant to the Bylaws of BNHC, the Board of Directors has fixed the close
of business on January 12, 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 BNHC 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 Merger is approved and consummated, holders of BNHC's common stock
will have the right to dissent from the Merger and to obtain payment of the fair
value of their shares by complying with New Hampshire Revised Statutes Sections
293-A:13.01 et seq. A copy of Sections 293-A:13.01 et seq. is attached as Annex
VII to the accompanying Prospectus/Joint Proxy Statement.

THE BOARD OF DIRECTORS OF BNHC HAS DETERMINED THE MERGER TO BE FAIR TO AND
IN THE BEST INTERESTS OF BNHC AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.

By Order of the Board of Directors

Davis P. Thurber
Chairman and President

Manchester, New Hampshire
January __, 1996

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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.
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PROSPECTUS PROXY STATEMENT

PEOPLES HERITAGE FINANCIAL PEOPLES HERITAGE FINANCIAL
GROUP, INGROUP, INC.
-------------- and
Common Stock BANK OF NEW HAMPSHIRE
(Par Value $.01 Per Share) CORPORATION

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Special Meetings of Shareholders to be
held on February 27, 1996

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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 Bank of New
Hampshire Corporation ("BNHC") to be used at a special meeting of shareholders
of PHFG and BNHC, respectively, to be held on February 27, 1996 (the "PHFG
Special Meeting" and the "BNHC 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 October 25, 1995, by and
among PHFG, First Coastal Banks, Inc. ("First Coastal"), a wholly-owned
subsidiary of PHFG, and BNHC (the "Agreement"), which provides, among other
things, for the merger of First Coastal with and into BNHC (the "Merger").

Upon consummation of the Merger, each share of common stock of BNHC, no par
value with a stated value of $2.50 per share ("BNHC Common Stock") (other than
(i) any dissenting shares under New Hampshire 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 two shares of PHFG Common Stock (as hereinafter defined),
subject to possible adjustment under certain circumstances, 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 BNHC Common Stock upon consummation
of the Merger. Based on 4,064,165 shares of BNHC Common Stock outstanding on
the date hereof, a maximum of 8,128,330 shares of PHFG Common Stock will be
issuable upon consummation of the Merger.

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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/PROXY
STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus/Joint Proxy Statement is January __, 1996.

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AVAILABLE INFORMATION

Each of PHFG and BNHC 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 BNHC 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 BNHC Common Stock is quoted on the Nasdaq Stock
Market's National Market ("NASDAQ"). Consequently, reports, proxy statements
and other information relating to PHFG and BNHC also may be inspected at the
office of the National Association of Securities Dealers, Inc. 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
BNHC 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 BNHC ARE AVAILABLE WITHOUT CHARGE (OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR ORAL REQUEST FROM: BANK OF
NEW HAMPSHIRE CORPORATION, 300 FRANKLIN STREET, MANCHESTER, NEW HAMPSHIRE 03101,
ATTENTION: GREGORY D. LANDROCHE (TELEPHONE NUMBER (603) 695-3000). IN ORDER TO
ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
FEBRUARY 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 BNHC. 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 BNHC SINCE THE DATE HEREOF OR THAT THE

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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 BNHC (File No.
0-9517) 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,
1994; and

(2) PHFG's Quarterly Reports on Form 10-Q for the three months ended
March 31, 1995, June 30, 1995 and September 30, 1995; and

(3) PHFG's Current Reports on Form 8-K, dated February 28, 1995, July
5, 1995 and November 3, 1995; and

(4) BNHC's Annual Report on Form 10-K for the year ended December 31,
1994; and

(5) BNHC's Quarterly Reports on Form 10-Q for the three months ended
March 31, 1995, June 30, 1995 and September 30, 1995; and

(6) BNHC's Current Report on Form 8-K, dated November 3, 1995.

All documents and reports filed by PHFG and BNHC 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/ 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.

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TABLE OF CONTENTS

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Available Information . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference . . . . . . . . . . . 3
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Market for Common Stock and Dividends . . . . . . . . . . . . . . . . 15
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . 16
Selected Consolidated Financial Data of PHFG . . . . . . . . . . . . . 19
Selected Consolidated Financial Data of BNHC . . . . . . . . . . . . . 21
Selected Pro Forma Consolidated Financial Data . . . . . . . . . . . . 23
General Information . . . . . . . . . . . . . . . . . . . . . . . . . 25
The Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 25
Time and Place. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Matters to be Considered. . . . . . . . . . . . . . . . . . . . . . . 25
Shares Outstanding and Entitled to Vote; Record Date. . . . . . . . . 25
Votes Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Voting and Revocation of Proxies. . . . . . . . . . . . . . . . . . . 26
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . 27
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Background of the Merger. . . . . . . . . . . . . . . . . . . . . . . 28
Reasons for the Merger; Recommendations of the Boards of Directors. . 30
Opinions of Financial Advisors. . . . . . . . . . . . . . . . . . . . 33
Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . 44
Exchange of BNHC Common Stock Certificates. . . . . . . . . . . . . . 45
Conditions to the Merger. . . . . . . . . . . . . . . . . . . . . . . 46
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 47
Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . 49
No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Effective Time of the Merger; Termination and Amendment . . . . . . . 52
Interests of Certain Persons in the Merger. . . . . . . . . . . . . . 53
Certain Employee Matters. . . . . . . . . . . . . . . . . . . . . . . 56
Resale of PHFG Common Stock . . . . . . . . . . . . . . . . . . . . . 56
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . 57
Accounting Treatment of the Merger. . . . . . . . . . . . . . . . . . 58
Expenses of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 59
Stock Option Agreements . . . . . . . . . . . . . . . . . . . . . . . 59
Stockholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . 62
Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 63
Management of PHFG after the Merger . . . . . . . . . . . . . . . . . 66
Pro Forma Combined Consolidated Financial Information . . . . . . . . 67
Description of PHFG Capital Stock . . . . . . . . . . . . . . . . . . 76
PHFG Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 76
PHFG Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . 77
PHFG Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Other Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
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Comparison of the Rights of Shareholders . . . . . . . . . . . . . . . 80
Authorized Capital Stock. . . . . . . . . . . . . . . . . . . . . . . 80
Issuance of Capital Stock . . . . . . . . . . . . . . . . . . . . . . 80
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Dividends and Other Distributions . . . . . . . . . . . . . . . . . . 81
Classification and Size of Board of Directors . . . . . . . . . . . . 82
Director Vacancies and Removal of Directors . . . . . . . . . . . . . 83
Director Conflict of Interest Transactions. . . . . . . . . . . . . . 83
Exculpation of Directors and Officers . . . . . . . . . . . . . . . . 84
Special Meetings of Shareholders. . . . . . . . . . . . . . . . . . . 85
Shareholder Nominations . . . . . . . . . . . . . . . . . . . . . . . 85
Shareholder Proposals . . . . . . . . . . . . . . . . . . . . . . . . 86
Shareholder Action without a Meeting. . . . . . . . . . . . . . . . . 86
Shareholder's Right to Examine Books and Records. . . . . . . . . . . 87
Amendment of Governing Instruments. . . . . . . . . . . . . . . . . . 87
Mergers, Consolidations and Sales of Assets . . . . . . . . . . . . . 88
Business Combinations with Certain Persons and Acquisition of Shares. 89
Dissenters' Rights of Appraisal . . . . . . . . . . . . . . . . . . . 90
Shareholder Rights Plans. . . . . . . . . . . . . . . . . . . . . . . 91
Certain Beneficial Owners of PHFG Common Stock . . . . . . . . . . . . 92
Security Ownership of Management. . . . . . . . . . . . . . . . . . . 92
Security Ownership of Certain Beneficial Owners . . . . . . . . . . . 94
Certain Beneficial Owners of BNHC Common Stock . . . . . . . . . . . . 95
Security Ownership of Management. . . . . . . . . . . . . . . . . . . 95
Security Ownership of Certain Beneficial Owners . . . . . . . . . . . 96
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Proposals for the 1996 Annual Meetings . . . . . . . . . . . . . . . . 98
</TABLE>

Annexes:

Annex I - Agreement and Plan of Merger, dated as of October
25, 1995, by and among PHFG, First Coastal and BNHC

Annex II - Stock Option Agreement, dated as of October 25,
1995, between BNHC (as issuer) and PHFG (as
grantee)

Annex III Stock Option Agreement, dated as of October 25,
- 1995, between PHFG (as issuer) and BNHC (as
grantee)

Annex IV - Stockholder Agreement, dated as of October 25,
1995, between PHFG and certain stockholders of BNHC

Annex V - Opinion of Keefe, Bruyette & Woods, Inc.

Annex VI - Opinion of M.A. Schapiro & Co., Inc.

Annex VII - Sections 293-A:13.01 et seq. of the New Hampshire
Business Corporation Act

<PAGE>

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
February 27, 1996 at The Holiday Inn by the Bay, 88 Spring Street, Portland,
Maine, and the BNHC Special Meeting will be held at the same time and on the
same date at ____________, Manchester, New Hampshire. Only the holders of
record of outstanding shares of PHFG Stock and BNHC Stock at the close of
business on January 12, 1996 (the "Record Date") are entitled to notice of and
to vote at the PHFG Special Meeting and the BNHC Special Meeting, respectively.
On the Record Date, 16,947,740 shares of PHFG Common Stock and 4,064,165
shares of BNHC Common Stock were outstanding and entitled to be voted at the
PHFG Special Meeting and the BNHC Special Meeting, respectively.

At the Special Meetings, stockholders of PHFG and BNHC 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 a majority
of the outstanding shares of BNHC Common Stock, voting in person or by proxy, is
necessary to approve the Agreement on behalf of BNHC. Because approval of the
Agreement on behalf of BNHC 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 BNHC 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 the Record Date, the directors and executive officers of PHFG and
their affiliates in the aggregate beneficially owned 256,661 shares, or 1.5%,
of the outstanding PHFG Common Stock, excluding shares subject to options. See
"Certain Beneficial Owners of PHFG Common Stock." As of the Record Date, the
directors and executive officers of BNHC and their affiliates in the aggregate
beneficially owned 525,190 shares, or 12.9%, of

<PAGE>

the outstanding BNHC Common Stock. In connection with the execution of the
Agreement, PHFG and certain shareholders of BNHC entered into an agreement
pursuant to which, among other things, such shareholders agreed to vote their
shares of BNHC Common Stock (which amount to 10.9% of the shares of such stock
outstanding) in favor of the Agreement. See "Certain Beneficial Owners of BNHC
Stock" and "The Merger - Stockholder Agreement."

PARTIES TO THE MERGER

PHFG AND FIRST COASTAL. 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 76
offices located throughout the State of Maine and southeastern New Hampshire.
At September 30, 1995, PHFG had consolidated assets of $3.0 billion,
consolidated deposits of $2.3 billion and consolidated shareholders' equity of
$261.6 million. Based on total assets at September 30, 1995, PHFG is the
largest independent bank holding company headquartered in the State of Maine.

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 Savings Bank ("PHSB") and The First
National Bank of Portsmouth ("FNBP"). PHSB 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
September 30, 1995, PHSB had consolidated assets of $2.5 billion, consolidated
deposits of $1.9 billion and consolidated shareholder's equity of $184.3
million. FNBP is a national bank which operates 10 offices in the
Portsmouth/Dover/Rochester area of New Hampshire and five offices in the Mount
Washington Valley area of the State. At September 30, 1995, FNBP had
consolidated assets of $541.8 million, consolidated deposits of $453.8 million
and consolidated shareholder's equity of $39.3 million.

First Coastal is a New Hampshire corporation which is wholly-owned by PHFG.
First Coastal owns all of the capital stock of FNBP, thus making FNBP an
indirect wholly-owned subsidiary of PHFG.

Since January 1, 1995, PHFG has completed, or currently has pending, three
acquisitions that have been or will be accounted for under the purchase method
of accounting. See "Other Recent and Prospective 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.

<PAGE>

BNHC. BNHC is a New Hampshire-chartered bank holding company registered
under the BHCA. The principal asset of BNHC is all of the outstanding capital
stock of the Bank of New Hampshire ("BNH"). As used in this Prospectus/Joint
Proxy Statement, the term "BNHC" refers to such corporation and, where the
context requires, BNH.

BNHC conducts its business through 29 offices of BNH located throughout the
southern, central, seacoast and lakes region of New Hampshire, which areas
contain approximately 80% of the State's population. BNH is a full-service
commercial bank engaged in providing a wide variety of financial services to New
Hampshire individuals, businesses and governments, including commercial and real
estate lending; retail banking; consumer finance; mortgage origination, sales
and servicing; cash management; and trust and investment services. Through its
Trust and Investment Services Division, BNH administers estates, personal and
corporate trusts and provides fiduciary services to individuals, businesses and
governments. BNH also offers electronic banking services through a network of
twenty-three automatic teller machines. At September 30, 1995, BNHC had total
assets of $962.3 million, deposits of $835.5 million and shareholders' equity of
$82.8 million.

The principal executive offices of BNHC are located at 300 Franklin Street,
Manchester, New Hampshire, and its telephone number is (603) 695-3000.

THE MERGER AND THE BANK MERGER

In accordance with the terms of and subject to the conditions set forth in
the Agreement, First Coastal will be merged with and into BNHC, with BNHC as the
surviving corporation of the Merger. The Agreement provides that at the
effective time of the Merger, each outstanding share of BNHC Common Stock (other
than (i) any dissenting shares under New Hampshire 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 two shares of PHFG Common Stock (the "Exchange Ratio"), subject to
possible adjustment under certain circumstances. See "The Merger."

In connection with the execution of the Agreement, BNH and FNBP entered
into an Agreement and Plan of Merger, dated as of October 25, 1995 (the "Bank
Agreement"). The Bank Agreement sets forth the terms and conditions, which
include consummation of the Merger, pursuant to which FNBP will merge with and
into BNH substantially concurrently with the Merger (the "Bank Merger").

RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF PHFG AND BNHC

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

<PAGE>

the Merger. ACCORDINGLY, THE PHFG BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF PHFG VOTE "FOR" APPROVAL OF THE AGREEMENT.

BNHC. The Board of Directors of BNHC (the "BNHC Board") has determined the
Merger to be fair to and in the best interests of BNHC and its shareholders and
has unanimously approved the Agreement and the transactions contemplated
thereby, including the Merger. ACCORDINGLY, THE BNHC 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

Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette"), BNHC's financial advisor,
has delivered to the Board of Directors of BNHC (the "BNHC Board") its oral
opinion of October 25, 1995, and its written opinion dated 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 BNHC Common Stock. M.A. Schapiro & Co., Inc. ("M.A. Schapiro"),
PHFG's financial advisor, has delivered to the Board of Directors of PHFG (the
"PHFG Board") its oral opinion of October 24, 1995, and its written opinion
dated the date of this Prospectus/Joint Proxy Statement, each to the effect
that, as of the date of such opinions, the 8,128,330 shares of PHFG Common Stock
to be issued by PHFG in connection with the Merger (the "Aggregate
Consideration") 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 Keefe Bruyette and M.A. Schapiro, see "The Merger - Opinions of
Financial Advisors." Shareholders are urged to read in their entirety the
opinions of Keefe Bruyette and M.A. Schapiro, 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 and the Bank Merger by all applicable
federal and state regulatory authorities, including the Board of Governors of
the Federal Reserve System ("FRB"), the Federal Deposit Insurance Corporation
("FDIC"), the Comptroller of the Currency ("OCC"), the Superintendent of the
Bureau of Banking of the State of Maine ("Superintendent") and the Bank
Commissioner of the State of New Hampshire ("Bank Commissioner"). Applications
have been filed with such regulatory authorities for approval of the Merger and
the Bank 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."

<PAGE>

CONDITIONS TO THE MERGER

The obligations of PHFG, First Coastal and BNHC 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
BNHC; (ii) all necessary regulatory approvals pertaining to the Merger and the
Bank Merger without restrictions or conditions which would materially impair the
value of BNHC 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 or the Bank 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;
(vi) the independent public accountants of each of PHFG and BNHC shall have
issued letters in connection with the consummation of the Merger to the effect
that the Merger shall be accounted for as a pooling of interests under generally
accepted accounting principles; and (vii) opinions of its respective counsel
with respect to certain income tax considerations under the Internal Revenue
Code of 1986, as amended (the "Code"), shall have been received by each of PHFG
and BNHC. In addition, the obligation of each of PHFG and BNHC 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 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. See "The Merger - Conditions to the Merger." Substantially all of the
conditions to consummation of the Merger and the Bank 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 BNHC
shall change the amount or form of the consideration which BNHC's shareholders
are entitled to receive in the Merger. If the Merger is not consummated on or
before October 25, 1996, PHFG and First Coastal or BNHC may terminate the
Agreement.

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 New Hampshire, unless a different
date and time is specified as the effective time in such articles of merger.
The effective time of the Merger (the "Effective Time") shall be as set forth in
such articles of merger, which will be filed only after the receipt of all
requisite regulatory approvals of the Merger and the Bank Merger, approval of
the Agreement by the requisite votes of the shareholders of PHFG and BNHC and
the satisfaction or waiver of all other conditions to the Merger and the Bank
Merger set forth in the Agreement. In addition, the Agreement may be
terminated, either before or after approval by shareholders of PHFG or BNHC,
under certain circumstances. See "The Merger - Effective Time of the Merger;
Termination and Amendment."

<PAGE>

PRICE-BASED TERMINATION; POSSIBLE ADJUSTMENT OF EXCHANGE RATIO

Under the Agreement, if the average closing price of PHFG Common Stock for
the 20-day period ending on the date FRB approval is received is less than
$16.00 per share, BNHC will have the option to terminate the Agreement unless
PHFG subsequently agrees to increase the Exchange Ratio in a manner specified in
the Agreement. See "The Merger - Effective Time of the Merger; Termination and
Amendment."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

BNHC has received an opinion from Wachtell, Lipton, Rosen & Katz to the
effect that, assuming the Merger is consummated, a BNHC shareholder who receives
shares of PHFG Common Stock in exchange for shares of BNHC Common Stock upon
consummation of the Merger will recognize no gain or loss as a result of the
Merger, the income tax basis of the PHFG Common Stock received will equal the
income tax basis of the BNHC Common Stock surrendered and, provided that the
surrendered BNHC Common Stock was held as a capital asset on the date of the
Merger, the holding period of the PHFG Common Stock received will include the
holding period of the BNHC Common Stock surrendered. Consummation of the Merger
is conditioned upon there being delivered opinions of counsel dated as of the
closing date of the Merger confirming the foregoing effects and that the Merger
qualifies as a tax-free reorganization under Section 368(a) of the Code. See
"The Merger - Certain Federal Income Tax Consequences."

EACH 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.

ACCOUNTING TREATMENT OF THE MERGER

It is intended that the Merger qualify as a pooling of interests for
accounting and financial reporting purposes. It is a condition to the
obligations of PHFG and BNHC to consummate the Merger that their respective
independent public accountants issue a letter dated as of the closing date of
the Merger to the effect that the Merger qualifies as a pooling of interests
under generally accepted accounting principles. See "The Merger - Accounting
Treatment of the Merger."

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Pursuant to the Agreement, PHFG agreed (i) to take such action as is
necessary to cause Davis P. Thurber, Chairman and President of BNHC, and Paul R.
Shea, Senior Executive Vice President of BNHC, to be elected as directors of
PHFG as of the Effective Time and to nominate such persons for re-election as
directors of PHFG upon expiration of their initial terms as directors of PHFG;
(ii) to cause BNHC and BNH to elect Mr. Shea as President and Chief Executive
Officer of such entities until the earlier of his retirement and the date he
attains age 65; (iii) to assume and satisfy, or to cause BNHC to assume and

<PAGE>

satisfy, BNHC's obligations under (x) the Amended and Restated Agreement as to
Future Employment between BNHC and each of Mr. Thurber, Mr. Shea and Gregory D.
Landroche and (y) BNHC's Executive Excess Benefit Plan with respect to such
persons; and (iv) to continue rights to indemnification and liability insurance
for directors and officers of BNHC and BNH for specified periods. The aggregate
amount of the lump sum severance payments due to Messrs. Thurber, Shea and
Landroche pursuant to the employment agreements referred to in clause (iii)(x)
in the preceding sentence is $1.065 million, $849,000 and $576,000,
respectively, and the aggregate amount of the lump sum payments due to such
persons in satisfaction of the supplemental retirement benefits required by such
employment agreements is estimated to be $156,000, $183,000 and $48,000,
respectively, assuming the Merger had occurred on or about December 31, 1995.
Other than as set forth above, no director or executive officer of BNHC has any
direct or indirect material interest in the Merger, except insofar as ownership
of BNHC 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 BNHC
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 BNHC is a New Hampshire corporation subject to the
provisions of the New Hampshire Business Corporation Act ("NHBCA"). Upon
consummation of the Merger, shareholders of BNHC 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 BNHC. 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 BNHC under
applicable federal securities

<PAGE>

laws. In addition, "affiliates" of PHFG and BNHC will be subject to certain
restrictions on resale of PHFG Common Stock in order to ensure that the Merger
will be accounted for as a pooling of interests under generally accepted
accounting principles. See "The Merger - Resale of PHFG Common Stock."

STOCK OPTION AGREEMENTS

As an inducement and a condition to PHFG's entering into the Agreement,
PHFG and BNHC also entered into a Stock Option Agreement, dated as of October
25, 1995 (the "BNHC Option Agreement"), pursuant to which BNHC granted PHFG an
option (the "BNHC 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
BNHC), to purchase up to 808,767 shares of BNHC Common Stock, representing 19.9%
of the outstanding shares of BNHC Common Stock, at a price of $33.50 per share,
subject to adjustment in certain circumstances and termination within certain
periods. As an inducement and a condition to BNHC's entering into the
Agreement, PHFG and BNHC also entered into a Stock Option Agreement, dated as of
October 25, 1995 (the "PHFG Option Agreement," and together with the BNHC Option
Agreement, the "Stock Option Agreements"), pursuant to which PHFG granted BNHC
an option (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 BNHC), to purchase up to 1,674,894 shares of PHFG Common Stock, representing
approximately 9.9% 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 BNHC Option Agreement and the PHFG 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 October 25, 1995, with three shareholders of
BNHC solely in their capacities as such. 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 BNHC Common Stock in
favor of the Agreement. See "The Merger - Stockholder Agreement."

DISSENTERS' RIGHTS

Pursuant to Sections 293-A:13.01 et seq. of the NHBCA, holders of BNHC
Common Stock who (i) file with BNHC prior to the vote on the Agreement at the
BNHC Special

<PAGE>

Meeting a written notice of intention to demand payment for their shares if the
Merger is effected and (ii) do not vote in favor of the Agreement will be
entitled to be paid the fair value of their shares as agreed upon with BNHC, or
if the fair value remains unsettled, as determined by a New Hampshire court,
provided that the Merger is consummated and such shareholders properly comply
with certain statutory procedures. Fair value of dissenting shares means the
value immediately before the Effective Time, excluding any change in value in
anticipation of the Merger if such exclusion is not inequitable (which amount
may be more, less or the same as the consideration to be provided pursuant to
the Agreement). The written notice required to be delivered to BNHC by a
dissenting shareholder is in addition to and separate from any proxy or vote
against the Merger. The further 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 293-A:13.01 et
seq. of the NHBCA, a copy of which is attached as Annex VII to this
Prospectus/Joint Proxy Statement. Failure to take any 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 AND PROSPECTIVE ACQUISITIONS OF PHFG

FNBP and Shawmut Bank NH, a wholly-owned subsidiary of Shawmut National
Corporation ("Shawmut"), have entered into a Purchase and Assumption Agreement,
dated as of September 29, 1995 and amended as of October 31, 1995, which sets
forth the terms and conditions under which Shawmut Bank NH would sell and FNBP
would purchase five branch offices of Shawmut Bank NH (the "Branch Acquisition")
which are located in central and southern New Hampshire and which are being
divested by Shawmut Bank NH in connection with the proposed merger of Fleet
Financial Group, Inc. ("Fleet") and Shawmut. Pursuant to the Purchase and
Assumption Agreement, FNBP would acquire various assets related to the branches
and approximately $200 million, $45 million and $5 million of single-family
residential mortgage loans, commercial real estate and business loans and
consumer loans, respectively, and assume the deposits at the branches, which
amounted to approximately $173 million at September 30, 1995. Consummation of
the Branch Acquisition, which will be accounted for under the purchase method,
is subject to the receipt of all required regulatory approvals, the merger of
Fleet and Shawmut and other customary conditions.

On July 1, 1995, Bankcore, Inc. ("Bankcore"), the New Hampshire-based
holding company for North Conway Bank, was merged into First Coastal 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. The acquisition of Bankcore was treated as a purchase
for accounting purposes.

<PAGE>

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 PHSB. The purchase resulted in the transfer of $17.1 million of
loans to PHFG and its assumption of $46.1 million of deposits.

The purchase acquisitions noted above are collectively referred to herein
as the "Purchase Acquisitions."

MARKET FOR COMMON STOCK AND DIVIDENDS

Each of the PHFG Common Stock and the BNHC Common Stock is traded in the
over the counter market on NASDAQ under the symbol "PHBK" and "BNHC,"
respectively. As of the Record Date, there were 16,947,740 shares of PHFG
Common Stock outstanding, which were held by approximately 4,700 shareholders
of record, and there were 4,064,165 shares of BNHC Common Stock outstanding,
which were held by approximately 1,400 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.

The following table sets forth during the periods indicated the high and
low prices of the PHFG Common Stock and the BNHC Common Stock as reported on
NASDAQ and the dividends declared per share of PHFG Common Stock and BNHC Common
Stock.

PHFG BNHC
-------------------------------------- --------------------------------------
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 $21.625 $ .00 $43.75 $42.75 $ .00
(through
January 2, 1996)

1995
-----------------
First Quarter 14.00 11.75 .11 26.75 21.50 .15

Second Quarter 16.75 12.375 .13 26.75 24.75 .15

Third Quarter 20.50 15.25 .13 34.75 25.25 .18

Fourth Quarter 22.875 18.25 .15 43.625 29.50 .18

1994
-----------------
First Quarter 12.50 10.125 .00 18.50 16.75 .08

Second Quarter 14.00 10.125 .06 28.25 16.75 .10

Third Quarter 15.00 12.25 .08 29.00 25.25 .10

Fourth Quarter 15.125 10.375 .10 27.00 18.25 .125
</TABLE>

<PAGE>

Set forth below is information regarding the price per share of PHFG Common
Stock and BNHC Common Stock on October 25, 1995, the last trading day preceding
public announcement of the Agreement following the close of business on that
date. The historical prices are as reported on NASDAQ.

Historical Market
Value Per Share
-------------------------

Equivalent Market Value
Date PHFG BNHC Per Share of BNHC(1)
------------------------ --------- --------- -----------------------
<S> <C> <C> <C>
October 25, 1995 $20.75 $34.25 $41.50
</TABLE>

- -----------------
(1) Equivalent market value per share of BNHC Common Stock represents the
historical market value per share of PHFG Common Stock multiplied by the
Exchange Ratio.

Shareholders are advised to obtain current market quotations for the PHFG
Common Stock and the BNHC Common Stock. Because the consideration to be
provided to shareholders of BNHC in connection with the Merger is based on a
fixed number of shares of PHFG Common Stock, shareholders of BNHC are not
assured of receiving a specific market value of PHFG Common Stock (and thus a
specific market value for their shares of BNHC 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.

COMPARATIVE PER SHARE DATA

The following table sets forth certain historical per share, pro forma
combined per share and pro forma equivalent per share information with respect
to the PHFG Common Stock and the BNHC Common Stock at the dates and for the
periods indicated, giving effect to (i) the Merger using the pooling of
interests method of accounting and (ii) the Purchase Acquisitions using the
purchase method of accounting. Pro forma financial information for the
acquisition of Bankcore and the Branch Acquisition assumes such acquisitions
were consummated on January 1, 1994 and reflects information from such date to
the consummation date (July 1, 1995) in the case of the acquisition of Bankcore
and to September 30, 1995 in the case of the Branch Acquisition. Pro forma
financial information with respect to the Merger assumes that the Merger was
consummated as of the beginning

<PAGE>

of each of the periods indicated. 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 BNHC, including the related notes, included elsewhere
herein and incorporated herein by reference, as well as 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 and the Purchase Acquisitions or the actual
results that would have been achieved had these transactions been consummated
prior to the periods indicated.

PHFG Common Stock BNHC Common Stock
------------------------- -------------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------

<S> <C> <C> <C> <C>
Income (loss) per share
before cumulative effect of a
change in accounting
principle(1):

Nine months ended September 30, 1995 $1.49 $1.50 $2.35 $3.00

Year ended December 31, 1994 1.52 1.48 2.12 2.96

Year ended December 31, 1993 0.97 0.95 1.80 1.90

Year ended December 31, 1992 (1.18) (0.42) 1.28 (0.84)

Dividends declared per share(2):

Nine months ended September 30, 1995 0.370 0.370 0.480 0.740

Year ended December 31, 1994 0.240 0.240 0.405 0.480

Year ended December 31, 1993 0.000 0.000 0.080 0.000

Year ended December 31, 1992 0.000 0.000 0.000 0.000

Book value per share(3):

September 30, 1995 15.46 13.56 20.38 27.12

December 31, 1994 13.72 12.90 18.50 25.80

December 31, 1993 13.17 11.60 16.78 23.20

December 31, 1992 12.05 10.73 14.96 21.46
</TABLE>

<PAGE>

- ------------------------

(1) The pro forma combined income (loss) before cumulative effect of a
change in accounting principle per share of PHFG Common Stock is based upon the
combined historical income (loss) before cumulative effect of a change in
accounting principle for PHFG and BNHC, divided by the pro forma combined
average number of shares of PHFG Common Stock outstanding. The pro forma
equivalent income (loss) before cumulative effect of a change in accounting
principle per share of BNHC Common Stock represents the pro forma combined
income (loss) before cumulative effect of a change in accounting principle per
share of PHFG Common Stock multiplied by the Exchange Ratio.

(2) The pro forma combined dividends declared per share of PHFG Common Stock
assumes no change in the historical cash dividends paid on the PHFG Common
Stock . The pro forma equivalent dividends declared per share of BNHC Common
Stock represents the PHFG pro forma combined dividend rates multiplied by the
Exchange Ratio. The current annualized dividend rate per share of PHFG Common
Stock, based upon the most recent quarterly dividend rate of $.15 per share
payable on November 10, 1995, would be $.60. On a pro forma equivalent basis
per share of BNHC Common Stock, such current annualized PHFG dividend per share
of BNHC Common Stock would be $1.20, based on the Exchange Ratio.

(3) The pro forma combined book value per share of PHFG Common Stock is based
upon the historical total shareholder's equity for PHFG and BNHC, divided by the
pro forma combined period-end shares of PHFG Common Stock outstanding. The pro
forma equivalent book value per share of BNHC Common Stock represents the pro
forma combined book value per share of PHFG Common Stock multiplied by the
Exchange Ratio.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA OF PHFG
(Dollars in Thousands, Except Per Share Data)

The following selected historical consolidated financial data for the five
years ended December 31, 1994 is derived in part from the audited consolidated
financial statements of PHFG. The historical consolidated financial data for
the nine months ended September 30, 1995 and 1994 is derived from unaudited
consolidated financial statements. 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 nine
months ended September 30, 1995 are not necessarily indicative of the results
that may be expected for any other interim period or the entire year ending
December 31, 1995. 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 PHFG, including the
related notes, incorporated herein by reference. See "Available Information"
and "Incorporation of Certain Documents by Reference."

December 31,
September 30, ----------------------------------------------------------------------
BALANCE SHEET DATA: 1995 1994 1993 1992 1991 1990
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets $3,073,213 $2,783,182 $2,640,269 $2,546,754 $2,735,272 $2,921,001
Debt and equity securities, net(1) 508,093 429,003 459,075 372,509 369,231 480,225
Total loans, net(2) 2,173,676 2,047,794 1,858,086 1,817,258 1,976,258 2,069,996
Deposits 2,330,965 2,063,767 2,074,491 2,079,624 2,292,766 2,347,097
Borrowings 414,912 461,387 324,669 248,777 253,766 346,525
Shareholders' equity 261,594 229,265 219,111 199,317 171,478 192,612
Nonperforming assets(3) 46,940 53,007 90,626 150,088 206,554 159,463
Allowance for loan losses 48,834 50,484 52,804 54,604 67,956 62,854
Book value per share 15.46 13.72 13.17 12.05 18.25 20.62
</TABLE>

<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
--------------------- ------------------------------------------------------------
OPERATIONS DATA: 1995 1994 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income $173,731 $142,946 $196,396 $181,033 $199,690 $256,567 $305,934
Interest expense 81,553 63,874 87,274 89,435 119,147 174,736 216,349
-------- -------- -------- -------- -------- -------- -------
Net interest income 92,178 79,072 109,122 91,598 80,543 81,831 89,585
Provision for loan losses 1,800 1,752 1,857 9,779 25,225 58,938 122,888
Net interest income (loss) -------- -------- -------- -------- -------- -------- -------
after provision for loan
losses 90,378 77,320 107,265 81,819 55,318 22,893 (33,303)
-------- -------- -------- -------- -------- -------- -------
Net securities gains (losses) (106) 354 (419) 1,001 2,851 (1,603) (2,982)
Net gains on sales of
consumer loans -- 33 33 2,576 -- -- --
Other noninterest income 15,911 14,533 18,904 16,127 17,599 14,244 14,103
Noninterest expense 69,124 67,406 90,758 87,743 86,920 78,482 71,177
-------- -------- -------- -------- -------- -------- ------
Income (loss) before income
tax expense (benefit) 37,059 24,834 35,025 13,780 (11,152) (42,948) (93,449)
Income tax expense (benefit) 12,536 6,578 9,588 (2,339)(4) 53 (14,586) (32,452)
-------- -------- -------- -------- -------- -------- -------
Net income (loss) $ 24,523 $ 18,256 $ 25,437 $ 16,119 $(11,205) $(28,362) $(60,997)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Net income (loss) per share $1.49 $1.09 $1.52 $0.97 $(1.18) $(3.02) $(6.58)
Dividends per share $0.37 $0.14 $0.24 $0.00 $0.00 $0.06 $0.60
</TABLE>

<PAGE>

At or For the
Nine Months Ended At or For the Year Ended December 31,
September 30, -------------------------------------------------------------
OTHER DATA(5): 1995 1994 1994 1993 1992 1991 1990
-------- -------- -------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets 1.14% 0.92% 0.95% 0.63% (0.43)% (1.01)% (1.98)%
Return on average equity(6) 13.58 10.98 11.35 7.83 (6.80) (16.11) (25.82)
Average equity to average
assets (6) 8.53 8.41 8.48 8.08 6.41 6.22 7.67
Interest rate spread(7) 4.09 3.95 4.01 3.60 3.13 2.89 2.56
Net interest margin(7) 4.64 4.33 4.41 3.93 3.36 3.21 3.14
Tier I leverage capital ratio
at end of period 8.07 8.06 8.06 7.59 6.93 5.26 5.75
Dividend payout ratio 24.81 12.46 15.55 0.00 0.00 (1.95) (9.08)
Nonperforming loans as a percent
of total loans at end of period(3) 1.74 2.09 2.01 3.22 4.76 6.84 5.56
Nonperforming assets as a percent
of total assets at end of period(3) 1.55 2.08 1.90 3.43 5.89 7.55 5.46
Allowance for loan losses as a
percent of nonperforming loans
at end of period 126.11 124.47 119.41 85.95 61.26 48.57 52.98
Full service banking offices 76 73 67 70 72 75 73
</TABLE>

- -------------------------
(1) All securities were classified as available for sale at September 30, 1995
and December 31, 1994 and 1993.

(2) Does not include loans held for sale.

(3) Nonperforming assets consist of nonperforming loans, other real estate
owned, in-substance foreclosures 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) 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.

(6) Average equity excludes the effect of unrealized gains or losses on
securities available for sale.

(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.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA OF BNHC
(Dollars in Thousands, Except Per Share Data)

The following selected historical consolidated financial data for the five
years ended December 31, 1994 is derived in part from the audited consolidated
financial statements of BNHC. The historical consolidated financial data for
the nine months ended September 30, 1995 and 1994 is derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which BNHC considers necessary for a fair presentation of the financial position
and the results of operations for these periods. Operating results for the nine
months ended September 30, 1995 are not necessarily indicative of the results
that may be expected for any other interim period or the entire year ending
December 31, 1995. 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 BNHC, including the
related notes, incorporated herein by reference. See "Available Information"
and "Incorporation of Certain Documents by Reference."

<TABLE>
<CAPTION>
December 31,
September 30, --------------------------------------------------------------------
BALANCE SHEET DATA: 1995 1994 1993 1992 1991 1990
------------ -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets $962,327 $953,456 $976,719 $967,202 $1,015,061 $1,001,709
Debt and equity securities, net(1) 279,642 290,191 258,392 185,278 178,995 131,206
Total loans, net(2) 518,653 528,093 510,262 607,762 627,522 681,677
Deposits 835,502 825,856 865,335 868,925 905,600 864,867
Borrowings 33,464 43,960 35,266 39,247 54,703 76,968
Shareholders' equity 82,810 75,174 68,242 50,545 44,984 47,952
Nonperforming assets(3) 17,455 25,305 29,450 35,645 47,303 48,887
Allowance for loan losses 12,073 13,191 14,581 16,619 20,012 21,575
Book value per share 20.38 18.50 16.78 14.96 13.29 14.17
</TABLE>

<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
-------------------- ------------------------------------------------------------
OPERATIONS DATA: 1995 1994 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income $52,462 $44,471 $60,852 $62,719 $72,906 $86,749 $92,405
Interest expense 17,487 15,324 20,728 22,870 31,311 50,003 55,879
------- ------- ------- ------- ------- ------- -------
Net interest income 34,975 29,147 40,124 39,849 41,595 36,746 36,526
Provision for loan losses 1,350 1,132 1,580 4,200 6,800 12,542 37,334
------- ------- ------- -------- ------- ------- -------
Net interest income (loss)
after provision for loan
losses 33,625 28,015 38,544 35,649 34,795 24,204 (808)
------- ------- ------- ------- ------- ------- -------
Net securities gains (losses) (1) 165 165 182 8 3,123 --
Other noninterest income 7,638 7,121 9,523 9,642 9,148 7,066 6,959
Noninterest expense 26,815 26,639 35,547 35,943 38,171 38,128 37,878
------- ------- ------- ------- ------- ------- -------
Income (loss) before income
tax expense (benefit) and
cumulative effect of a change
in accounting principle 14,447 8,662 12,685 9,530 5,780 (3,735) (31,727)
Income tax expense (benefit) 4,909 2,718 4,074 3,138 1,457 (509) (12,213)
Cumulative effect on years
prior to 1992 of a change in
accounting principle(4) -- -- -- -- 1,100 -- --
------- ------- ------- ------- ------- ------- --------
Net income (loss) $9,538 $5,944 $8,611 $6,392 $5,423 $(3,226) $(19,514)
------- ------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- ------- --------
Net income (loss) per share $2.35 $1.46 $2.12 $1.80 $1.60 $(0.95) $(5.79)
Dividends per share $0.48 $0.28 $0.405 $0.08 $0.00 $0.00 $0.64
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
At or For the
Nine Months Ended
September 30, At or For the Year Ended December 31,
------------------- ----------------------------------------------------------------------
OTHER DATA(5): 1995 1994 1994 1993 1992 1991 1990
-------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets 1.36% 0.83% 0.90% 0.67% 0.55% (0.33)% (2.05)%
Return on average equity 16.25 11.28 12.08 11.27 11.43 (6.99) (30.76)
Average equity to average
assets 8.39 7.39 7.47 5.95 4.81 4.65 6.65
Interest rate spread(6) 4.84 4.02 4.16 4.22 4.24 3.56 3.41
Net interest margin(6) 5.44 4.47 4.61 4.62 4.65 4.13 4.29
Tier I leverage capital
ratio at end of period 8.62 7.52 7.68 6.78 5.00 4.23 4.65
Dividend payout ratio 20.46 19.15 19.10 4.44 0.00 0.00 (11.05)
Nonperforming loans as a
percent of total loans at
end of period(3) 1.79 3.03 2.58 3.06 3.17 3.81 3.89
Nonperforming assets as a
percent of total assets
at end of period(3) 1.81 2.79 2.65 3.02 3.69 4.66 4.88
Allowance for loan losses as
a percent of nonperforming
loans at end of period 127.14 81.03 94.32 90.81 83.98 81.10 78.86
Full service banking offices 29 29 29 28 28 28 28
</TABLE>

- ---------------------------

(1) All securities were classified as held for investment at the indicated
dates, except for $3.7 million and $3.6 million of equity securities which were
classified as available for sale at September 30, 1995 and December 31, 1994,
respectively.

(2) Does not include loans held for sale.

(4) Reflects the adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," effective January 1, 1992.

(5) 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.

(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.

<PAGE>

SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Data)

The following table sets forth selected unaudited consolidated pro forma
financial data of PHFG and BNHC at the dates and for the periods indicated,
giving effect to (i) the Merger using the pooling of interests method of
accounting and (ii) the Purchase Acquisitions using the purchase method of
accounting. Pro forma financial information for the acquisition of Bankcore and
the Branch Acquisition assumes such acquisitions were consummated on January 1,
1994 and reflects information from such date to the consummation date (July 1,
1995) in the case of the acquisition of Bankcore and to September 30, 1995 in
the case of the Branch Acquisition. Pro forma financial information with
respect to the Merger assumes that the Merger was consummated as of the
beginning of each of the periods indicated. 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 BNHC, including the related notes,
included elsewhere herein and which are incorporated by reference herein, and in
conjunction with the selected consolidated historical and 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 and the Purchase Acquisitions
or the actual results that would have been achieved had these transactions been
consummated prior to the periods indicated.

<TABLE>
<CAPTION>
December 31,
September 30, ----------------------------------------------------------------------
BALANCE SHEET DATA: 1995(1) 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets $4,232,111 $4,102,150 $3,616,988 $3,513,956 $3,750,333 $3,922,710
Debt and equity securities, net 754,414 733,612 717,467 557,787 548,226 611,431
Total loans, net(2) 2,938,427 2,895,389 2,368,348 2,425,020 2,603,780 2,751,673
Deposits 3,339,038 3,175,752 2,939,826 2,948,549 3,198,366 3,211,964
Borrowings 508,376 568,161 359,935 288,024 308,469 423,493
Shareholders' equity 339,628 320,317 287,353 249,862 216,462 240,564
Nonperforming assets(3) 64,395 86,735 120,076 185,733 253,857 208,350
Allowance for loan losses 65,498 70,070 67,385 71,223 87,968 84,429
Book value per share $13.56 $12.90 $11.60 $10.73 $13.21 $14.88
</TABLE>

<TABLE>
<CAPTION>
Nine Months Ended Year Ended December 31,
September 30, --------------------------------------------------------------------
OPERATIONS DATA: 1995 1994 1994 1993 1992 1991 1990
-------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income $244,957 $207,340 $284,302 $243,752 $272,596 $343,316 $398,339
Interest expense 111,356 92,219 125,478 112,305 150,458 224,739 272,288
-------- -------- -------- -------- -------- -------- --------
Net interest income 133,601 115,121 158,824 131,447 122,138 118,577 126,111
Provision for loan losses 3,259 2,534 3,483 13,979 32,025 71,480 160,222
-------- -------- -------- -------- -------- -------- --------
Net interest income (loss)
after provision for loan 130,342 112,587 115,341 117,468 90,113 47,097 (34,111)
losses
Net securities gains (losses) 376 355 (476) 1,183 2,859 1,520 (2,982)
Net gains on sales of
consumer loans 154 33 33 2,576 0 0 0
Other noninterest income 24,145 22,683 29,654 25,769 26,747 21,310 20,972
Noninterest expense 99,776 98,728 132,665 123,686 125,091 116,610 109,055
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income
tax expense (benefit) 55,240 36,930 51,888 23,310 (5,372) (46,683) (125,176)
Income tax expense (benefit) 18,405 10,438 15,114 799(4) 1,510 (15,095) (44,665)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
cumulative effect of
change in accounting
principle(5) $36,835 $26,492 $36,774 $22,511 $(6,882) $(31,588) $(80,511)
-------- -------- -------- -------- -------- -------- --------

Income (loss) per share before
cumulative effect of change in
accounting principle(5) $1.50 $1.07 $1.48 $0.95 $(0.42) $(1.95) $(5.03)
Dividends per share $0.37 $0.14 $0.24 $0.00 $0.00 $0.06 $0.60
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Nine Months Ended
September 30, At or For the Year Ended December 31,
------------------------- -----------------------------------------------------------------------
OTHER DATA(6): 1995 1994 1994 1993 1992 1991 1990
----------- ----------- ---------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets 1.19% 0.89% 0.92% 0.64% (0.16)% (0.83)% (2.00)%
Return on average equity(7) 14.77 11.24 11.37 8.66 (2.69) (14.22) (26.87)
Average equity to average
assets(7) 8.08 7.94 8.09 7.43 5.98 5.81 7.43
Interest rate spread(8) 4.24 3.80 3.74 3.76 3.42 3.05 2.76
Net interest margin(8) 4.75 4.21 4.18 4.11 3.72 3.44 3.41
Tier I leverage capital ratio
at end of period 7.30 7.01 7.40 7.63 7.00 5.73 6.04
Dividend payout ratio 21.89 13.05 15.39 1.44 0.00 (1.75) (9.55)
Nonperforming loans as a 1.61 2.13 2.09 3.18 4.36 6.11 5.15
percent of total loans at
end of period(3)
Nonperforming assets as a
percent of total assets
at end of period(3) 1.52 2.20 2.11 3.32 5.29 6.77 5.31
Allowance for loan losses as
a percent of nonperforming
loans at end of period 135.84 117.28 113.00 86.95 65.39 53.44 57.85
Full service banking offices 110 107 107 98 100 103 101
</TABLE>

- --------------------------

(1) The consolidated balance sheet data at September 30, 1995 reflects an
estimated $4.8 million, net of taxes, 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.

(4) Reflects PHFG's elimination of the valuation allowance relating to deferred
income tax assets of $6.5 million.

(5) Does not include the cumulative effect on years prior to 1992 of BNHC's
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.

24
<PAGE>

GENERAL INFORMATION

This Prospectus/Joint Proxy Statement is being furnished to the holders of
PHFG Common Stock and BNHC Common Stock in connection with the solicitation of
proxies by the Boards of Directors of PHFG and BNHC for use at the PHFG Special
Meeting and the BNHC 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 BNHC 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 BNHC has been supplied by BNHC.

This Prospectus/Joint Proxy Statement and the other documents enclosed
herewith are first being mailed to shareholders of PHFG and BNHC on or about
January __, 1996.

THE SPECIAL MEETINGS

TIME AND PLACE

The PHFG Special Meeting will be held at 9:00 a.m., Eastern Time, on
February 27, 1996 at The Holiday Inn by the Bay, 88 Spring Street, Portland,
Maine. The BNHC Special Meeting will be held at 9:00 a.m., Eastern Time, on
February 27, 1996, at the ________________, Manchester, New Hampshire.

MATTERS TO BE CONSIDERED

At the Special Meetings, shareholders of PHFG and BNHC 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 BNHC, respectively, no
other business may properly come before the PHFG Special Meeting and the BNHC
Special Meeting and any adjournment or adjournments thereof.

SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE

The close of business on January 12, 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 16,947,740 shares of PHFG Common Stock outstanding and
entitled to vote. Each share of PHFG Common

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Stock entitles the holder thereof to one vote at the PHFG Special Meeting on all
matters properly presented thereat.

The close of business on January 12, 1996 has been fixed by the BNHC
Board as the Record Date for the determination of holders of BNHC Common Stock
entitled to notice of and to vote at the BNHC Special Meeting and any
adjournment or adjournments thereof. At the close of business on the Record
Date, there were 4,064,165 shares of BNHC Common Stock outstanding and entitled
to vote. Each share of BNHC Common Stock entitles the holder thereof to one
vote at the BNHC 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 BNHC 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 BNHC 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 a majority of the outstanding shares of BNHC Common Stock,
voting in person or by proxy, is necessary to approve the Agreement on behalf of
BNHC.

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 BNHC
Special Meeting will be considered in determining the presence of a quorum at
the PHFG Special Meeting and the BNHC Special Meeting, respectively, but will
not be counted as a vote cast for the Agreement. As a result, abstentions and
broker "non-votes" will not have the same effect as a vote against 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 a
majority of the outstanding shares of BNHC Common Stock, abstentions and broker
"non-votes" will have the same effect as a vote against this proposal at the
BNHC Special Meeting.

VOTING AND REVOCATION OF PROXIES

Each copy of this Prospectus/Joint Proxy Statement mailed to holders of
PHFG Common Stock and BNHC Common Stock is accompanied by a form of proxy for
use at the PHFG Special Meeting or the BNHC 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 BNHC (in the case of a BNHC shareholder) at the address of PHFG
or BNHC set forth on its respective Notice of Special Meeting of Shareholders,
written notice of such revocation; (ii)

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executing a later-dated proxy; or (iii) attending the PHFG Special Meeting or
the BNHC 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 BNHC (and not revoked) by a holder of PHFG
Common Stock and BNHC 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. Proxies which are voted
against approval of the Agreement will not be voted in favor of any motion to
adjourn the PHFG Special Meeting or the BNHC Special Meeting, as applicable, to
solicit more votes in favor of 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 judgement with respect to such matters.

SOLICITATION OF PROXIES

Each of PHFG and BNHC 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 BNHC 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
BNHC, as the case may be, will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.

Each of PHFG and BNHC has retained Morrow & Co., a professional proxy
solicitation firm, to assist it in the solicitation of proxies. The fee
payable to such firm in connection with the Merger is $5,500 and $5,000 in the
case of PHFG and BNHC, respectively, plus in each case reimbursement for
reasonable out-of-pocket expenses.

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.

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GENERAL

In accordance with the terms of and subject to the conditions set forth in
the Agreement, First Coastal will be merged with and into BNHC, with BNHC as the
surviving corporation of the Merger. The Agreement provides that at the
Effective Time each outstanding share of BNHC Common Stock (other than (i) any
dissenting shares under the NHBCA 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
two shares of PHFG Common Stock, subject to possible adjustment under certain
circumstances, as discussed below.

In connection with the execution of the Agreement, BNH and FNBP entered
into the Bank Agreement, which sets forth the terms and conditions, which
include consummation of the Merger, pursuant to which FNBP will merge with and
into BNH substantially concurrently with the Merger.

Each of the PHFG Board and the BNHC 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 BNHC, respectively, and its
respective shareholders. ACCORDINGLY, THE BOARD OF DIRECTORS OF EACH OF PHFG
AND BNHC UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF PHFG AND BNHC,
RESPECTIVELY, VOTE "FOR" APPROVAL OF THE AGREEMENT.

BACKGROUND OF THE MERGER

Beginning in early 1994 and continuing through the fall of 1995, BNHC, with
the assistance of Keefe Bruyette, has periodically reviewed BNHC's strategic
business alternatives, devoting particular attention to the continuing
consolidation and increasing competition in the banking and financial services
industries in New England during this period. During this period, other bank
holding companies from time to time expressed general interest in engaging in a
strategic transaction with BNHC, and senior management of BNHC, with the
assistance of Keefe Bruyette, periodically engaged in preliminary discussions
with selected other bank holding companies concerning possible business
combinations. None of such discussions ever advanced beyond preliminary
discussions.

In recent years, PHFG has sought to increase long-term value for PHFG's
shareholders by, among other things, expanding its operations in New Hampshire.
These efforts resulted in the acquisition of Bankcore and the recent execution
of an agreement providing for the Branch Acquisition, and lead to PHFG's
exploration of a possible business combination with BNHC.

During the summer of 1995, a representative of PHFG indicated to BNHC's
financial advisor at Keefe Bruyette that PHFG was interested in meeting with
representatives of BNHC to discuss a possible transaction between the two
companies. As a result of this

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indication of interest, Messrs. Davis P. Thurber, Chairman and President of
BNHC, Paul R. Shea, Executive Vice President of BNHC, and William J. Ryan,
Chairman, President and Chief Executive Officer of PHFG, met on September 7,
1995 to discuss their companies, the competitive challenges faced by each,
consolidation in the banking industry and the rationale for a potential business
combination between PHFG and BNHC. Messrs. Thurber and Ryan continued their
discussions at a second meeting on October 2, 1995, at which they agreed that
the combination of PFHG and BNHC could significantly enhance shareholder value
and that the company resulting from the combination of PHFG and BNHC could have
a stronger competitive presence in the New Hampshire and Maine banking markets
than could either of PHFG or BNHC standing alone.

At the October 2 meeting, Mr. Ryan reaffirmed PHFG's interest in engaging
in a business combination with BNHC and offered to follow up with specific terms
for a merger transaction. On October 6, 1995, a preliminary proposal for a
merger transaction was communicated to BNHC's financial advisor at Keefe
Bruyette. Senior management of BNHC, upon review of PHFG's proposal with Keefe
Bruyette, determined to continue discussions with PHFG, and on October 16 the
parties entered into a customary confidentiality agreement providing for the
exchange of certain financial information between the parties. During the week
of October 16, senior management and financial and legal representatives of each
of BNHC 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 PHFG following the Merger and of BNHC and BNH as
subsidiaries of PHFG following the Merger. During this period the Exchange
Ratio was determined on the basis of arms-length-negotiation between the
parties.

On October 24, 1995, at a meeting of the PHFG Board, Messrs. Ryan and
Peter J. Verrill, Executive Vice President and Chief Financial Officer of
PHFG, reviewed with the PHFG Board the reasons for and the potential benefits
of the Merger; Carol L. Mitchell, Senior Vice President and General Counsel
of PHFG, reviewed the terms of the Agreement, the Stock Option Agreements and
the Stockholder Agreement and the transactions contemplated thereby; and
PHFG's financial advisor made a presentation regarding the financial terms of
the Agreement and the fairness, from a financial point of view, of the
Aggregate Consideration to holders of PHFG Common Stock. After a thorough
discussion and consideration of the factors discussed below under "The Merger
- -Reasons for the Merger; Recommendations of the Boards of Directors -PHFG,"
the PHFG Board unanimously approved the Agreement and the transactions
contemplated thereby, and authorized the execution of the Agreement, the
Stock Option Agreements and the Stockholder Agreements.

On October 25, 1995, at a meeting of the BNHC Board, Messrs. Thurber, Paul
R. Shea, Senior Executive Vice President of BNHC, and Gregory D. Landroche,
Chief Financial Officer of BNHC, reviewed with the BNHC Board the reasons for
and the potential benefits of the Merger; BNHC's legal advisors reviewed the
terms of the Agreement, the Stock Option Agreements and the Stockholder
Agreement and the transactions

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contemplated thereby; and BNHC's financial advisor made a presentation
regarding the financial terms of the Agreement and the fairness, from a
financial point of view, of the Exchange Ratio to holders of BNHC Common
Stock. After a thorough discussion and consideration of the factors
discussed below under "The Merger - Reasons for the Merger -Recommendations
of the Boards of Directors - BNHC," the BNHC Board unanimously approved the
Agreement and the transactions contemplated thereby, and authorized the
execution of the Agreement and the Stock Option Agreements.

The Agreement, the Stock Option Agreements and the Stockholder Agreement
were entered into on October 25, 1995.

REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS

BNHC. In reaching its determination to approve and adopt the Merger
Agreement and the transactions contemplated thereby, the BNHC Board considered a
number of factors, including, without limitation, the following:

(i) the BNHC Board's review of the operating environment, including,
but not limited to, the continued consolidation and increasing competition
in the banking and financial services industries in New England, the
prospect for further changes in these industries and the increasing
importance of access to financial resources to a bank's ability to
capitalize on opportunities in these industries;

(ii) the BNHC Board's review, with the assistance of management and
Keefe Bruyette, of the financial condition, results of operations, business
and overall prospects of PHFG, as well as management's best estimates of
BNHC's prospects;

(iii) the BNHC Board's assessment, based on management's discussions
with two other potential merger partners and on the analysis of and
presentation to the BNHC Board by Keefe Bruyette of BNHC's strategic
alternatives, including the fact that neither of the parties with whom
BNHC had held preliminary discussions during the prior 18 months had shown
any indication of an interest in pursuing a transaction in the value range
presented by the proposed Merger, that the Merger represented the most
attractive strategic alternative available to BNHC for enhancing
shareholder value (see "The Merger - Background of the Merger");

(iv) the financial presentation of Keefe Bruyette and the opinion of
Keefe Bruyette as to the fairness from a financial point of view of the
Exchange Ratio to BNHC and its shareholders (see "The Merger - Opinions of
Financial Advisors -BNHC");

(v) the anticipated cost savings and operating efficiencies available
to the combined institution from the Merger;

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(vi) the BNHC Board's belief that the terms of the Agreement are
attractive in that the agreement allows BNHC shareholders to become
shareholders in a combined institution with a strong competitive position
in the Maine and New Hampshire markets while permitting the continued
existence of BNH and the "Bank of New Hampshire" name in New Hampshire;

(vii) the BNHC Board's assessment that BNHC would be able to continue
its high level of personal service to the customers and the New Hampshire
communities that it serves through an affiliation with a community-based
institution;

(viii) the effect of the Merger on BNHC's other constituencies,
including its senior management and other employees and the communities
served by BNHC and BNH, including the BNHC Board's awareness and assessment
of the potential that the Merger could be expected to provide BNHC
employees, including senior management, with continued employment and other
benefits (see "The Merger - Interests of Certain Persons in the Merger");

(ix) the expectation that the Merger will generally be a tax-free
transaction to BNHC and its shareholders (see "The Merger - Certain Federal
Income Tax Consequences"); and

(x) the expectation that the Merger will qualify for pooling of
interests accounting treatment (see "The Merger - Accounting Treatment of
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 BNHC'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 BNHC and
its shareholders.

FOR THE REASONS DESCRIBED ABOVE, THE BNHC BOARD HAS DETERMINED THE MERGER
TO BE FAIR TO AND IN THE BEST INTERESTS OF BNHC AND ITS SHAREHOLDERS AND HAS
UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER. ACCORDINGLY, THE BNHC BOARD UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.

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
M.A. Schapiro, of the financial condition, results of operations, business
and overall prospects of BNHC;

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(ii) the fact that BNHC'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 statewide franchise in New Hampshire which is
comparable to its statewide franchise in Maine;

(iii) the enhanced ability of the combined entity to compete against
larger competitors;

(iv) the financial presentations of senior management and M.A.
Schapiro and the opinion of M.A. Schapiro as to the fairness of the
Aggregate Consideration 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 each of the Merger and the Bank Merger will
generally be a tax-free transaction to PHFG and its subsidiaries;

(vii) the expectation that the Merger will qualify for pooling of
interests accounting treatment (see "The Merger - Accounting Treatment of
the Merger");

(viii) the possibility that the acquisition of BNHC's commercial
banking franchise ultimately may result in a commercial bank valuation for
PHFG and, thus, enhance the market price of the PHFG Common Stock; and

(ix) the nature of, and likelihood of obtaining, the regulatory
approvals that would be required with respect to the Merger and the Bank
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 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.

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OPINIONS OF FINANCIAL ADVISORS

BNHC. In October 1992, BNHC retained Keefe Bruyette to provide certain
financial advisory and investment banking services to BNHC, including advisory
services and representation in connection with possible business combinations.
As part of its engagement, Keefe Bruyette agreed, if requested by BNHC, to
render an opinion with respect to the fairness from a financial point of view of
the consideration to be received by shareholders of BNHC in the Merger. Keefe
Bruyette was selected to act as BNHC's financial advisor 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 BNHC. In addition, 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.

On October 25, 1995, at the meeting at which the BNHC Board approved and
adopted the Agreement and the transactions contemplated thereby, Keefe Bruyette
rendered its oral opinion to the BNHC Board that, as of such date, the Exchange
Ratio was fair to the shareholders of BNHC from a financial point of view. That
opinion was updated as of the date of this Prospectus/Joint Proxy Statement. In
connection with its opinion dated the date of this Prospectus/Joint Proxy
Statement, Keefe Bruyette also confirmed the appropriateness of its reliance on
the analysis used to render its October 25, 1995 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 BNHC Board upon Keefe Bruyette
with respect to the investigations made or procedures followed by Keefe Bruyette
in rendering its opinions.

Keefe Bruyette's opinion is addressed to the Board of Directors of BNHC and
does not constitute a recommendation as to how any shareholder of BNHC 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 V AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS ARE
URGED TO READ THE OPINION IN ITS ENTIRETY. THE FOLLOW-

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ING 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
Reports to Shareholders and Annual Reports on Form 10-K of BNHC and PHFG for the
four years ended December 31, 1994, certain interim reports to shareholders and
Quarterly Reports on Form 10-Q of BNHC and PHFG and certain internal financial
analyses and forecasts prepared by BNHC management; (ii) held discussions with
members of senior management of BNHC and PHFG regarding the past and current
business operations, regulatory relationships, financial condition and future
prospects of the respective companies; (iii) compared certain financial and
stock market information for BNHC and PHFG 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 industry;
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 BNHC 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 BNHC and that such forecasts and
projections will be realized in the amounts and in the time periods currently
estimated by BNHC management. Keefe Bruyette also assumed that the aggregate
allowances for loan losses for BNHC and PHFG 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 BNHC or PHFG, 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 October 25, 1995
and does not purport to be a complete description of all analyses employed by
Keefe Bruyette.

(a) PEER GROUP ANALYSIS. Keefe Bruyette compared select profitability,
capital and asset quality data for BNHC and PHFG to such data for a select group
of peer banks, including BankNorth Group Inc., Chittenden Corporation, Vermont
Financial Services Corp. and Independent Bank Corporation (the "Peer Banks").
For comparison purposes, and because PHFG's primary subsidiary has a thrift
charter, Keefe Bruyette also analyzed a select group of peer thrifts, including
Center Financial Corporation, Webster Financial Corporation, CFX Corporation and
Eastern Bancorp, Inc. (the "Peer Thrifts"). Keefe Bruyette's analysis
indicated, among other things, for the third quarter of 1995, on an annualized
basis, return on assets of 1.45% and 1.23% for BNHC and PHFG, respectively,
compared with an average of 1.30% and .62% for the Peer Banks and Peer Thrifts,
respectively; return on equity of 16.87% and 14.60% for BNHC and PHFG,
respectively,

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compared with an average of 16.00% and 8.93% for the Peer Banks and Peer
Thrifts, respectively; an efficiency ratio of 60.27% and 60.89% for BNHC and
PHFG, respectively, compared with an average of 63.50% and 74.29% for the Peer
Banks and Peer Thrifts, respectively; as of September 30, 1995, equity as a
percentage of total assets of 8.61% and 8.43% for BNHC and PHFG, respectively,
compared to an average of 8.08% and 7.11% for the Peer Banks and Peer Thrifts,
respectively; nonperforming assets as a percentage of total loans plus other
real estate owned of 2.79% and 2.00% for BNHC and PHFG, respectively, compared
to an average of 1.41% and 2.81% for the Peer Banks and Peer Thrifts,
respectively; and, as of October 24, 1995, market price share of common stock as
a multiple of book value of 1.73x and 1.36x for BNHC and PHFG, respectively,
compared to an average of 1.54x and 1.12x for the Peer Banks and Peer Thrifts,
respectively. Such analysis also indicated a price-to-earnings ratio based on
projected 1996 earnings of 10.37x and 9.77x for BNHC and PHFG, respectively,
compared to an average of 9.44x and 10.41x for the Peer Banks and Peer Thrifts,
respectively; and a dividend yield of 2.04% and 2.48% for BNHC and PHFG,
respectively, compared to an average of 2.70% and 2.38% for the Peer Banks and
Peer Thrifts, respectively.

(b) CONTRIBUTION ANALYSIS. Keefe Bruyette analyzed the contribution of
each of PHFG and BNHC to the pro forma balance sheet and income statement of the
combined entity. This analysis indicated that as of September 30, 1995, BNHC
would make the following percentage contribution to the pro forma combined
entity with respect to the following items: assets: 24.1%, loans: 19.3%,
deposits: 26.4%, intangibles: 3.7%, total equity: 24.00%, total tangible equity:
26.9%, interest income: 23.2%, interest expense: 17.6%, net interest income:
27.6%, provision for loan losses: 42.9%, noninterest income: 32.6%, noninterest
expense: 28.0%, net income: 28.0%, nonperforming loans: 16.3%, other real estate
owned: 49%, nonperforming assets: 25.2%, and loan loss reserves: 19.9%.

(c) MERGER CONSIDERATION VALUATION ANALYSIS. Keefe Bruyette calculated the
consideration to be received pursuant to the Exchange Ratio as a multiple of
BNHC's earnings, book value, tangible book value and current market price of
BNHC Common Stock. This computation assumed a price per share of PHFG Common
Stock and BNHC Common Stock, respectively, of $21.00 and $35.25 (the respective
closing prices of such common stock on October 24, 1995) and an Exchange Ratio
of two shares of PHFG Common Stock for each share of BNHC Common Stock, and was
based on analysts' estimates of BNHC's 1996 and 1995 earnings per share. Based
on such assumptions, this analysis indicated BNHC shareholders would receive
shares of PHFG Common Stock worth $42 for each share of BNHC Common Stock held,
and that such amount would represent a multiple of 12.35 times estimated 1996
earnings, 13.13 times estimated 1995 earnings, 13.95 times earnings for the most
recently completed four quarters, 2.06 times book value per share, 2.10 times
tangible book value per share and 1.19 times the then-current market price for
shares of BNHC Common Stock. This analysis also indicated that BNHC
shareholders would receive a 66.7% dividend increase, based on PHFG's current
annual dividend rate of $.60 per share.

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<PAGE>

Keefe Bruyette also presented an analysis of the same ratios assuming a
range of potential prices per share of PHFG Common Stock. This analysis
indicated a ratio of Merger price to trailing four-quarters earnings ranging
from 12.6x to 14.0x, a price-to-1995-estimated-earnings ratio ranging from 11.9x
to 13.1x, a price-to-1996-estimated-earnings ratio ranging from 11.2x to 12.4x,
a price-to-book-value-per-share ratio ranging from 1.9x to 2.1x, and a price-to-
tangible-book-value-per-share ratio ranging from 1.9x to 2.1x, in each case
assuming PHFG Common Stock prices ranging from a low of $19 per share to a high
of $21 per share.

(d) SELECTED TRANSACTIONS ANALYSIS. Keefe Bruyette analyzed certain
information relating to 10 bank and thrift acquisitions in the New England
market announced since May 1994 (the "New England Acquisitions") and relating to
11 such acquisitions occurring in other parts of the United States (the
"National Acquisitions"). The New England Acquisitions analyzed were the Bank
of Boston Corporation acquisition of The Boston Bancorp, the Chittenden
Corporation acquisition of Flagship Bank & Trust Co., the ALBANK Financial
Corporation acquisition of Marble Financial Corporation, the Bank of New York
Company, Inc. acquisition of The Putnam Trust Company of Greenwich, the Fleet
Financial Group, Inc. acquisition of Shawmut National Corporation, the BayBanks,
Inc acquisition of NFS Financial Corp., the Bank of Ireland acquisition of Great
Bay Bankshares, Inc., the KeyCorp acquisition of Casco Northern Bank, N.A. and
BankVermont Corporation, the Citizens Financial Group, Inc. acquisition of
Quincy Savings Bank and the Fleet Financial Group, Inc. acquisition of NBB
Bancorp, Inc. The National Acquisitions analyzed were the Regions Financial
Corporation acquisition of the First National Bank of Gainsville, the Mercantile
Bancorporation Inc. acquisition of Hawkeye Bancorporation, the NationsBank
Corporation acquisition of Intercontinental Bank, the Union Planters Corporation
acquisition of Capital Bancorporation, Inc., the Meridian Bancorp, Inc.
acquisition of United Counties Bancorporation, the Norwest Corporation
acquisition of State National Bank of El Paso, the Comerica Incorporated
acquisition of Metrobank, the Mercantile Bancorporation Inc. acquisition of
TCBankshares Inc., the CCB Financial Corporation acquisition of Security Capital
Bancorp, the Boatmen's Bancshares, Inc. acquisition of Worthen Banking
Corporation and the First Virginia Banks, Inc. acquisition of Farmers National
Bancorp. Keefe Bruyette's analyses of these acquisitions indicated that (i)
among the New England Acquisitions, the consideration paid to the acquired
party's shareholders averaged 176% of book value per share (with a range of 119%
to 248%), 180% of tangible book value (with a range of 119% to 248%), and 11.75
times projected future earnings per share (with a range of 9.24x to 13.99x); and
(ii) that among the National Acquisitions, the consideration paid to the
acquired party's shareholders averaged 197% of book value per share (with a
range of 157% to 253%), 211% of tangible book value per share (with a range of
167% to 271%), and 13.84 times projected future earnings per share. Assuming an
exchange ratio of two shares of PHFG Common Stock for each share of BNHC Common
Stock, and a price per share of PHFG Common Stock of $21.00 (the closing price
of such stock on October 24, 1995), the consideration to be received by BNHC
shareholders in the Merger will be 206% of book value per share, 210% of
tangible book value per share and 12.35 times projected 1996 earnings for BNHC.

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(e) DISCOUNTED CASH FLOW ANALYSIS. Keefe Bruyette compared the present
value of future cash flows that would accrue to a holder of a share of BNHC
Common Stock assuming BNHC were to remain independent to the present value of
future cash flows that would accrue to a holder of two shares of PHFG Common
Stock assuming the Merger were to occur. This analysis assumed 8% annual
earnings per share growth, 10% annual dividend growth and a terminal multiple
value of 10 times forecasted earnings for the year 2000 for both companies, as
well as a discount rate of 12%. Based on such assumptions, Keefe Bruyette's
analysis indicated that the present value of a share of BNHC Common Stock would
be $27.12 compared with a present value of $36.56 for two shares of PHFG Common
Stock. Keefe Bruyette repeated the foregoing analysis under an alternative
scenario in which each entity is acquired in 2000 for a price equal to 13 times
2000 earnings per share. Such analysis indicated a present value for a share of
BNHC Common Stock of $34.15, compared with a present value of two shares of PHFG
Common Stock of $45.87. Keefe Bruyette also presented a table showing the
foregoing analysis with a range of discount rates from 10% to 15% and a range of
price-to-earnings multiples of 10x to 13x, resulting in a range of present
values for a share of BNHC Common Stock of $23.37 to $37.87. Keefe Bruyette
stated that the discounted cash flow analysis is a widely-used valuation
methodology but noted that it relies on numerous assumptions, including asset
and earnings growth rates, dividend payout rates, terminal values and discount
rates. The analysis did not purport to be indicative of the actual values or
expected values of BNHC Common Stock or PHFG Common Stock.

(f) MARKET REACTION TO SELECTED TRANSACTIONS. Keefe Bruyette analyzed the
impact on the stock price of the acquiror in three recent bank acquisitions,
Corestates' acquisition of Meridian announced October 10, 1995, UJB Financial's
acquisition of Summit announced September 11, 1995, and Fleet Financial Group
Inc.'s acquisition of Shawmut National Corporation announced February 21, 1995.
This analysis indicated that the acquiror's stock price fell 4.05%, 8.52% and
9.67% in the cases of Corestates, UJB and Fleet, respectively, on the first day
following announcement of the transaction; that the acquiror's stock price rose
.32%, in the case of Corestates, and fell 10.58% and 5.58%, in the cases of UJB
and Fleet, respectively, in the first 10 days following announcement of the
transaction; and that the acquiror's stock price had fallen .98% and 11.83%, in
the case of Corestates and UJB, respectively, and had risen 33.33%, in the case
of Fleet, from the date of the announcement of each respective transaction
through October 24, 1995.

(g) OTHER ANALYSES. Keefe Bruyette also reviewed selected investment
research reports, earnings estimates, historical stock price performance
relative to the S&P 500 and to an index of 50 bank stocks, and other financial
data for BNHC and PHFG.

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 analyses. None of

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<PAGE>

the banking institutions selected for use in developing comparisons is identical
to BNHC and none of the New England Acquisitions, National Acquisitions or
Recent Acquisitions is identical to the Merger. Accordingly, Keefe Bruyette
indicated to the BNHC 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 BNHC, PHFG and the selected companies and acquisitions reviewed. The
analyses were prepared by Keefe Bruyette solely for the purpose of preparing its
opinion of October 25, 1995 to the BNHC Board as to the fairness of the Merger
Consideration to be received by shareholders of BNHC, and do not purport to be
appraisals or necessarily reflect the prices at which BNHC 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.

Pursuant to an engagement letter, dated October 2, 1992 (the "Keefe
Bruyette Engagement Letter"), BNHC agreed to pay Keefe Bruyette a fee equal to
the greater of (i) $650,000 or (ii) 1% of the market value of the consideration
paid by the party acquiring BNHC. Such fee has been or will be paid in three
parts: (1) at the signing of the Agreement, (2) upon the mailing of this
Prospectus/Joint Proxy Statement and (3) at the closing of the Merger. As of
the date hereof, $425,000 has been paid to Keefe Bruyette. Because the fee is
contingent upon the value of PHFG Common Stock on a future date, the total fee
payable to Keefe Bruyette cannot yet be determined. Pursuant to the Keefe
Bruyette Engagement Letter, BNHC also agreed to reimburse Keefe Bruyette for
reasonable out-of-pocket expenses and disbursements incurred in connection with
its retention and to indemnify against certain liabilities, including
liabilities under the federal securities laws.

PHFG. In October 1995, PHFG retained M.A. Schapiro to provide certain
financial advisory and investment banking services to PHFG in connection with
the Merger, including the rendering of an opinion with respect to the fairness
of the Aggregate Consideration from a financial point of view to PHFG
shareholders.

M.A. Schapiro was selected to act as PHFG's financial advisor based upon
its qualifications, expertise and reputation. M.A. Schapiro is a nationally
recognized investment banking firm that specializes in the commercial banking
and thrift industries. M.A. Schapiro is continually engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, private placements, recapitalizations, competitive
biddings, secondary distributions of listed and unlisted securities and
valuations for estate, corporate and other purposes. In the ordinary course of
its business, M.A. Schapiro 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 BNHC.

On October 24, 1995, at the meeting at which the PHFG Board approved and
adopted the Agreement and the transactions contemplated thereby, M.A. Schapiro
rendered

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<PAGE>

its oral opinion to the PHFG Board that, as of such date, the Aggregate
Consideration was fair to PHFG shareholders from a financial point of view.
That opinion was updated as of the date of this Prospectus/Joint Proxy
Statement. In connection with its opinion dated the date of this
Prospectus/Joint Proxy Statement, M.A. Schapiro also confirmed the
appropriateness of its reliance on the analysis used to render its October 24,
1995 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 M.A. Schapiro with respect to the investigations made or procedures
followed by M.A. Schapiro in rendering its opinions.

M.A. Schapiro'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 M.A. SCHAPIRO, 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 connection with its opinion dated the date hereof, M.A. Schapiro
reviewed, among other things: (i) the Agreement and the Stock Option Agreements,
(ii) this Prospectus/Joint Proxy Statement; (iii) publicly available reports
filed with the SEC by PHFG and BNHC; (iv) certain other publicly available
financial and other information concerning PHFG and BNHC; (v) certain other
internal information, including financial forecasts, relating to PHFG and BNHC,
prepared by the managements of PHFG and BNHC and furnished to M.A. Schapiro for
purposes of its analysis; and (vi) publicly available information concerning
certain other banks, bank holding companies, savings banks and savings and loan
holding companies, the trading markets for their securities and the nature and
terms of certain other merger and acquisition transactions believed relevant to
its inquiry. M.A. Schapiro also met with certain officers and representatives
of PHFG and BNHC to discuss the foregoing as well as other matters relevant to
its inquiry, including the past and current business operations, results of
regulatory examinations, financial condition, current loan quality and trends
and future prospects of PHFG and BNHC, both separately and on a combined basis.
In addition, M.A. Schapiro reviewed the reported price and trading activity for
the PHFG Common Stock and the BNHC Common Stock, compared certain financial and
stock market information for PHFG and BNHC with similar information for certain
other companies, the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the commercial
banking and thrift industries specifically and other industries generally and
performed such other studies and analyses as it considered appropriate. M.A.
Schapiro also took into account its assessment of general economic, market and
financial conditions and its experience in other transactions, as well as its

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<PAGE>

experience in securities valuation and its knowledge of the banking industry
generally. M.A. Schapiro's opinions were necessarily based upon conditions as
they existed and could be evaluated on the respective dates thereof and the
information made available to M.A. Schapiro through the dates thereof.

In conducting its review and in arriving at its opinions, M.A. Schapiro
relied upon and assumed the accuracy and completeness of the financial and other
information provided to it (including the accuracy of the representations and
warranties contained in the Agreement) or publicly available and did not attempt
independently to verify the same. M.A. Schapiro relied upon the managements of
PHFG and BNHC as to the reasonableness and achievability of the financial
forecasts (and the assumptions and bases therefor) provided to M.A. Schapiro,
and assumed that such financial forecasts reflected the best currently available
estimates and judgments of such managements and that such financial forecasts
would be realized in the amounts and in the time periods estimated by such
managements. M.A. Schapiro also assumed, without independent verification, that
the aggregate allowances for loan losses for PHFG and BNHC were adequate to
cover such losses. M.A. Schapiro did not make or obtain any evaluations or
appraisals of the property of PHFG or BNHC.

The financial forecasts reviewed by M.A. Schapiro were prepared by the
managements of PHFG and BNHC. Neither PHFG nor BNHC publicly discloses internal
management forecasts of the type provided to the PHFG Board and to M.A. Schapiro
in connection with the review of the Merger, and such financial forecasts were
not prepared with a view towards public disclosure. The financial forecasts
were based upon numerous variables and assumptions which are inherently
uncertain, including without limitation factors related to general economic and
competitive conditions, as well as trends in asset quality. Accordingly, actual
results could vary significantly from those set forth in such financial
forecasts.

M.A. Schapiro was retained by the PHFG Board to express an opinion as to
the fairness, from a financial point of view, to the PHFG shareholders of the
Aggregate Consideration to be paid in the Merger. M.A. Schapiro did not address
any issue other than the fairness of the Aggregate Consideration, from a
financial point of view, to PHFG shareholders and did not address PHFG's
underlying business decision to proceed with the Merger. M.A. Schapiro did not
make any recommendation to the PHFG Board with respect to any approval of the
Merger.

The following is a summary of the material financial analyses performed
by M.A. Schapiro in connection with providing its oral opinion of October 24,
1995 and does not purport to be a complete description of all analyses employed
by M.A. Schapiro.

(a) SUMMARY. M.A. Schapiro summarized the terms of the Merger, including
the conversion of each share of BNHC Common Stock into the right to receive two
shares of PHFG Common Stock. M.A. Schapiro also analyzed the competitive and
economic factors

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<PAGE>

in the Northeast as they affect financial institutions, earnings sensitivity,
pricing comparability and earnings per share estimates for the pro forma
company.

(b) ANALYSIS OF OTHER MERGER TRANSACTIONS. M.A. Schapiro analyzed certain
other commercial bank merger and acquisition transactions in the Northeast
(including the states of Connecticut, Maine, Massachusetts, New Hampshire, New
Jersey, New York, Pennsylvania, Rhode Island and Vermont), announced during the
period from January 1, 1993 to October 24, 1995, in which the total
consideration was between $25 million and $500 million. In addition, M.A.
Schapiro analyzed certain other commercial bank merger and acquisition
transactions in the United States in which the total consideration was between
$25 million and $250 million. M.A. Schapiro compared price/earnings,
price/book value and price/fully diluted tangible book value multiples of the
Merger to the median multiples for the transactions analyzed. Set forth
below are the median deal multiples M.A. Schapiro presented to the PHFG Board.

Median of Median of
Selected Selected U.S.
Northeast Bank Bank
PHFG/BNHC Acquisitions Acquisitions
--------- ------------- -------------

Price/Earnings(1) 13.1x 18.4x 16.0x
Price/Book Value(1) 193.9% 201.3% 212.5%
Price/Tangible Book Value(1) 197.8% 202.6 % 221.1%

_____________
(1) Multiples based upon PHFG's closing price of $19.75 on October 23, 1995.

M.A. Schapiro's analysis showed that the range of implied valuations
of BNHC, applying the median deal multiples described above to BNHC's
earnings, book value and tangible book value, was $40.46 to $55.43 per share.
The results produced in this analysis do not purport to be indicative of
actual values or expected values of BNHC or the shares of BNHC Common Stock.

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<PAGE>

The selected bank acquisition transactions for the Northeast included in
calculating the above median multiples were as follows:

State
of State of
Buyer Target Buyer Target
- -------- ------- ---------------------------- -------------------------------
VT MA Chittenden Corporation Flagship Bank & Trust

NY NY North Fork Corporation Extebank

NJ NJ Hubco, Inc. Growth Financial Corp.

PA PA BT Financial Corporation Huntington National Bank

NJ NJ UJB Financial Corp. Flemington NB & TC

PA PA Keystone Financial National American Bancorp

NJ NJ The Summit Bancorporation Garden State Bancshares

PA NJ Meridian Bancorp United Counties Bancorp

NY CT Bank of New York, Inc. Putnam Trust Co.

NJ NJ Hubco, Inc. Urban National Bank

NY NY Staten Island Savings Bank Gateway Bancorp

NJ PA Midlantic Corp. Old York Road Bancorp.

VT MA Chittenden Corporation Bank of Western Massachusetts

NJ NJ Valley National Bancorp. Rock Financial Corp.

NJ NJ National Westminster Bancorp. Rock Financial Corp.

OH ME/VT KeyCorp., Inc. Casco Northern & Bank Vermont

MA NH Shawmut National Corp. New Dartmouth Bank

(c) DISCOUNTED CASH FLOW. M.A. Schapiro used two scenarios in performing
discounted cash flow analyses of BNHC. The first scenario assumed annual
earnings and dividend growth for BNHC of 5%, discount rates of 12% to 16%, and
terminal price multiples ranging from l0x to 16x to apply to estimated earnings
in the year 2000. This first scenario showed a range of present values per
share of BNHC Common Stock from $22.82 to $41.46. The second scenario used the
same assumptions, with the exception that annual earnings and dividend growth
for BNHC was assumed to be 10%. This second scenario showed a range of present
values per share of BNHC Common Stock from $27.20 to $49.63. M.A. Schapiro
utilized the discounted cash flow analysis because it is a widely-used

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<PAGE>

valuation methodology, but the analysis is based on numerous assumptions that
are subject to change. As such, the results produced in this analysis do not
purport to be indicative of the actual values or expected values of BNHC or the
shares of BNHC Common Stock.

(d) ANALYSIS OF THE COMBINED COMPANY. M.A. Schapiro analyzed certain
balance sheet and income statement data for PHFG and BNHC on a pro forma
combined basis. Such analysis reviewed the profitability, capital, credit
quality and market niches of PHFG and BNHC. The analysis showed, among other
things, that the combined company would have approximately $4.2 billion in
assets and shareholders' equity of approximately $340 million after one-time
restructuring charges to be taken in connection with the Merger. Profitability
was analyzed assuming no expense savings and the impact of realizing
approximately $8 million in expense savings.

(e) ANALYSIS OF COMPARABLE COMPANIES. M.A. Schapiro analyzed the relative
performance and outlook for BNHC by comparing certain financial information of
BNHC with a group of selected publicly-traded bank holding companies located in
the Northeast. The group of 25 companies included BankNorth Group, Inc.,
Chittenden Corporation, Vermont Financial Services Corp., UST Corporation,
Independent Bank Corp., Hubco, Inc., United National Bancorp, BSB Bancorp,
Community Bank System, Inc., Commercial Bank of New York, NBT Bancorp, Merchants
New York Bancorp, Evergreen Bancorp, Inc., Suffolk Bancorp, Arrow Financial
Corporation, USBANCORP, Inc., FNB Corporation, First Western Bancorp, Inc., S&T
Bancorp, National Penn Bancshares, Inc., Financial Trust Corp, BT Financial
Corporation, Omega Financial Corporation, JeffBanks, Inc. and Harleysville
National Corp.

M.A. Schapiro compared BNHC with the comparable companies based upon
selected operating statistics, including those measuring capitalization,
profitability and credit quality, using data at or for the twelve months ended
September 30, 1995. The median capitalization levels for the comparables was
8.60% common equity to assets, 8.08% Tier 1 leverage ratio and 13.26% total
risk-based capital ratio. BNHC's ratios for these measures were 8.61%, 8.62%
and 18.19%, respectively. The median return on average assets was 1.11% for the
comparables and 1.30% for BNHC. For return on average equity, the median for
the comparables was 13.03% and 15.78% for BNHC. The median net interest margin
was 5.00% for the comparables and 5.31% for BNHC. The median ratio of
nonperforming assets to loans and other real estate owned was 1.54% for the
comparables and 3.24% for BNHC. The median ratio of reserves to nonperforming
assets was 137.3% for the comparables and 69.2% for BNHC, while reserves to
total loans was 1.67% for the comparables and 2.27% for BNHC.

M.A. Schapiro believes that its analyses and the summary set forth above
must be considered as a whole and that selecting portions of such analyses and
the factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and the processes underlying
M.A. Schapiro's opinion. The preparation of a fairness opinion is a complex
process involving subjective judgments and is not necessarily

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<PAGE>

susceptible to partial analyses or summary description. In its analyses, M.A.
Schapiro made numerous assumptions with respect to industry performance,
business and economic conditions and other matters, many of which are beyond the
control of PHFG and BNHC. Any estimates contained in M.A. Schapiro's analyses
are not necessarily indicative of future results or values, which may be
significantly more or less favorable than such estimates. Estimates of values
of companies do no purport to be appraisals or necessarily reflect the price at
which companies or their securities actually may be sold. No company or
transaction utilized in M.A. Schapiro's analyses was identical to PHFG, BNHC or
the Merger. None of the analyses performed by M.A. Schapiro was assigned a
greater significance by M.A. Schapiro than any other.

PHFG and M.A. Schapiro have entered into a letter agreement, dated October
24, 1995 (the "M.A. Schapiro Engagement Letter"), relating to the services to be
provided by M.A. Schapiro in connection with the Merger. Pursuant to the M.A.
Schapiro Engagement Letter, PHFG agreed to pay M.A. Schapiro $50,000 upon
execution of the M.A. Schapiro Engagement Letter and an additional $50,000 upon
delivery of the M.A. Schapiro fairness opinion. In the M.A. Schapiro Engagement
Letter, PHFG also agreed to reimburse M.A. Schapiro for its reasonable and
necessary out-of-pocket expenses and to indemnify against certain liabilities,
including liabilities under the federal securities laws.

EFFECTS OF THE MERGER

EFFECT ON BNHC'S SHAREHOLDERS. Upon consummation of the Merger, each
shareholder of BNHC shall be entitled to receive two shares of PHFG Common
Stock, subject to possible adjustment under certain circumstances, in
consideration for each share of BNHC Common Stock then held and thereupon shall
cease to be shareholders of BNHC.

EFFECT ON BNHC. Upon consummation of the Merger, BNHC, as the surviving
corporation of the Merger, shall be a wholly-owned subsidiary of PHFG and shall
succeed to all the rights, obligations and properties of First Coastal, the
separate corporate existence of which shall cease.

Upon consummation of the Merger, the BNHC Board shall consist of nine
current directors of BNHC, including Messrs. Thurber and Shea, and up to seven
directors nominated by PHFG. Upon consummation of the Merger, the current
executive officers of BNHC shall be the executive officers of BNHC, except that
Mr. Shea shall be the President and Chief Executive Officer, Mr. Thurber shall
be Chairman of the Board, and Mr. Norman E. Bilodeau, President and Chief
Executive Officer of First Coastal and FNBP, shall be Executive Vice President
of BNHC.

EFFECT ON PHFG. Upon consummation of the Merger, Messrs. Thurber and Shea
will become directors of PHFG, for terms expiring at the first annual meeting of
shareholders of PHFG following their election. PHFG will include Messrs.
Thurber and Shea on the list of nominees for director presented by the Board of
Directors of PHFG and for which such

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Board shall solicit proxies at the first annual meeting of shareholders
following their initial election as directors, which persons shall be nominated
for three-year terms, or, if necessary in an individual case to ensure that the
number of directors in each class of directors of PHFG is as nearly equal in
number as possible, a two-year term. In addition, during the one-year period
following the Merger, PHFG has agreed to consider for election to the PHFG Board
a nominee who is a resident of New Hampshire and is recommended by the BNHC
Board after the Effective Time.

EXCHANGE OF BNHC COMMON STOCK CERTIFICATES

At the Effective Time, each holder of a certificate or certificates
theretofore evidencing issued and outstanding shares of BNHC 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 BNHC 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 that
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 BNHC 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. Upon surrender to the Exchange Agent of one or
more certificates evidencing shares of BNHC 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 BNHC Common Stock previously represented
by such certificate or certificates surrendered shall have been converted
pursuant to the Agreement. PHFG shall be entitled, after the Effective Time, to
treat certificates representing shares of BNHC Common Stock as evidencing
ownership of the number of full shares of PHFG Common Stock into which the
shares of BNHC 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 BNHC of certificates representing shares of BNHC Common Stock. If any such
certificates are presented to BNHC or the transfer agent for the BNHC 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.

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<PAGE>

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 certificate or certificates
representing BNHC Common Stock, at which time such dividends shall be remitted
to such person, without interest.

Because of the Exchange Ratio of two shares of PHFG Common Stock for each
share of BNHC Common Stock, it is not anticipated that holders of shares of BNHC
Common Stock will be entitled to any fractional share interests in PHFG Common
Stock upon consummation of the Merger. In the event that holders of BNHC Common
Stock become entitled to any such fractional share interests as a result of an
adjustment in the Exchange Ratio or otherwise, no fractional shares of PHFG
Common Stock shall be issued in the Merger to holders of shares of BNHC Common
Stock. Each holder of shares of BNHC 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 BNHC 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.

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 and BNHC) necessary to authorize
the execution and delivery of the Agreement and the Bank 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 and the Bank 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 BNHC 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 or the Bank 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

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<PAGE>

authority; (v) the shares of PHFG Common Stock to be issued in connection with
the Merger shall have been approved for quotation on NASDAQ; (vi) the
independent public accountants of each of PHFG and BNHC shall have issued
letters dated as of the Effective Time to the effect that the Merger shall be
accounted for as a pooling of interests under generally accepted accounting
principles; and (vii) each of PHFG and BNHC 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(a) of the Code and with respect
to certain other related federal income tax considerations.

In addition to the foregoing conditions, the obligations of PHFG and First
Coastal 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 BNHC 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 BNHC; (iii) the receipt of a certificate from
specified officers of BNHC with respect to compliance with the conditions
relating to (i) and (ii) immediately above as set forth in the Agreement; (iv)
the receipt of certain legal opinions from BNHC's legal counsel; and (v) the
receipt by PHFG and First Coastal of such certificates of BNHC's officers or
others and such other documents to evidence fulfillment of the conditions
relating to BNHC as PHFG may reasonably request. Any of the foregoing
conditions may be waived by PHFG and First Coastal.

In addition to the other conditions set forth above, BNHC'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 First Coastal; (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 certain legal opinions from legal counsel to PHFG; and (v) the
receipt by BNHC of such certificates of PHFG's or First Coastal's officers or
others and such other documents to evidence fulfillment of the conditions
relating to them as BNHC may reasonably request. Any of the foregoing
conditions may be waived by BNHC.

REGULATORY APPROVALS

Consummation of the Merger is subject to prior receipt of all required
approvals and consents of the Merger and the Bank Merger by all applicable
federal and state regulatory authorities. In order to consummate the Merger and
the Bank Merger, PHFG, First Coastal and/or FNBP must obtain the prior consent
and approval, as applicable, of the FRB, the FDIC, the OCC, the Superintendent
and the Bank Commissioner.

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The Merger is subject to the prior approval of the FRB under the BHCA and
the Bank Merger is subject to the prior approval of the FDIC under the Bank
Merger Act ("BMA") provisions of the Federal Deposit Insurance Act. Pursuant to
the applicable provisions of the BHCA and the BMA, the FRB may not approve the
merger and the FDIC may not approve the Bank Merger 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; or (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 FRB or the FDIC, as applicable, 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. In conducting its review of any application for
approval, each of the FRB and the FDIC is required to consider whether the
financial and managerial resources of the acquiring bank holding company and
acquiring bank are adequate (including consideration by a variety of means of
the competence, experience and integrity of the applicant's directors, officers
and principal stockholders and compliance with, among other things, fair lending
laws). Each of the FRB and the FDIC has the authority to deny an application if
it concludes that the combined organization would have an inadequate capital
position or if the acquiring organization does not meet the requirements of the
Community Reinvestment Act of 1977, as amended.

Each of the BHCA and the BMA provides that a transaction approved by the
applicable federal banking agency generally may not be consummated until 30 days
after approval by such agency. If the U.S. Department of Justice and the
relevant agency otherwise agree, this 30-day period may be reduced to as few as
15 days. During such period, the U.S. Department of Justice may commence a
legal action challenging the transaction under the antitrust laws. The
commencement of an action would stay the effectiveness of the approval of the
federal banking agency unless a court specifically orders otherwise. If,
however, the U.S. Department of Justice does not commence a legal action during
such waiting period, it may not thereafter challenge the transaction except in
an action commenced under Section 2 of the Sherman Antitrust Act.

Under the National Bank Act, a national bank such as FNBP which is merging
into a state-chartered bank such as BNH must submit to the OCC a letter of
notification when the merger application is filed with the applicable federal
and state banking regulatory authorities. The notification permits the OCC to
monitor the national bank's compliance with the appropriate laws on mergers,
particularly as those laws relate to shareholders' rights.

The approval of the Superintendent also is required for consummation of the
Merger. Under Maine law, 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

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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 Bank Commissioner must approve the Bank Merger under New Hampshire law.
The Bank Commissioner may conduct such investigation as he deems necessary to
find whether the Bank Merger will promote the public convenience and advantage
and the interest of the merging institutions and their shareholders and
depositors, and whether the Bank Merger can be effected without reducing the
amount standing to the credit of any depositor upon consummation thereof and
without the imposition of restrictions on the withdrawal of funds by depositors.

Applications have been filed with applicable regulatory authorities for
approval of the Merger and the Bank Merger. Although neither PHFG nor BNHC is
aware of any basis for disapproving the Merger and the Bank 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, BNHC 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 BNH shall
carry on their respective businesses in the ordinary course consistent with past
practice. Pursuant to the Agreement, BNHC also agreed to use all reasonable
efforts to (i) preserve its business organization and that of BNH intact, (ii)
keep available to itself and PHFG the present services of the employees of BNHC
and BNH and (iii) preserve for itself and PHFG the goodwill of the customers of
BNHC and BNH and others with whom business relationships exist. In addition,
under the terms of the Agreement, BNHC agreed not to take certain actions, nor
permit BNH 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 BNHC Common Stock, except
for regular quarterly cash dividends at a rate per share of BNHC Common Stock
not in excess of $.18 per share, which shall have the same record and payment
dates as the record and payment dates relating to dividends on the PHFG Common
Stock, it being the intention of the parties that the shareholders of BNHC
receive dividends for any particular quarter on either the BNHC 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 dividend which relates to
the second quarter of 1996 (on or about August 2, 1996), the regular per share

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quarterly dividend on the BNHC Common Stock for such quarter (and any subsequent
quarterly dividends prior to the Effective Time) may be increased to up to $.20
per share; (ii) issue, grant or authorize any capital stock or rights to
acquire the same, other than in each case pursuant to the BNHC Stock Option
Agreement; purchase any shares of BNHC Common Stock; or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization; (iii) amend its articles of incorporation or bylaws; impose,
or suffer the imposition of, any material lien, charge or encumbrance on any
share of stock held by BNHC in BNH, 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
BNHC's defined benefit pension plan (the "Retirement Plan") other than in the
ordinary course of business consistent with past practice; (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 BNHC or BNH or guarantee by BNHC or BNH 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 $100,000 individually or $250,000 in the
aggregate, other 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 (a) for pooling of interests
accounting treatment or (b) as a reorganization within the meaning of Section
368 of the Code, provided that this covenant shall not limit the ability of BNHC
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 BNHC
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, except as expressly contemplated or
permitted by the

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Agreement or with the prior written consent of BNHC, PHFG and its significant
subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice and use all reasonable efforts to preserve intact
their present business organizations and relationships. 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 BNHC: (i) declare, set aside, make or pay any dividend
or other distribution in respect of PHFG Common Stock, except for regular
quarterly cash dividends at a rate per share of PHFG Common Stock not in excess
of $.20 per share; (ii) issue, grant or authorize any capital stock or rights to
acquire the same, other than in each case pursuant to the PHFG Stock Option
Agreement, PHFG employee stock benefit plans, the PHFG Rights Agreement (as
hereinafter defined) and any acquisition permitted under clause (v) below; (iii)
effect any recapitalization, reclassification, stock split or like change in
capitalization; (iv) 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; (v) 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; (vi)
take any action that would prevent or impede the Merger from qualifying (a) for
pooling of interests accounting treatment or (b) 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 BNHC Stock Option
Agreement; (vii) 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 (viii) agree to do
any of the foregoing.

Pursuant to the Agreement, PHFG and BNHC 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.

NO SOLICITATION

Pursuant to the Agreement, neither BNHC nor PHFG shall, and each of them
shall cause its respective subsidiaries not to, solicit or encourage inquiries
or proposals with respect to, furnish any information relating to, or
participate in any negotiations or discussions concerning, any acquisition,
lease or purchase of all or a substantial portion of the assets of, or any
equity interest in, such party or any of its significant subsidiaries, other
than as contemplated by the Agreement, provided, however, that the Board of
Directors of BNHC or PHFG, on behalf of BNHC and PHFG, respectively, 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

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that the failure to do the same would cause the members of such Board of
Directors to breach their fiduciary duties under applicable laws. Each of BNHC
and PHFG has agreed to promptly inform the other party of any such request for
information or of any such negotiations or discussions, as well to instruct its
and its significant 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 New Hampshire, unless a
different date and time is specified as the effective time in such articles of
merger. The Effective Time shall be as set forth in such articles of merger,
which will be filed only after the receipt of all requisite regulatory approvals
of the Merger and the Bank Merger, approval of the Agreement by the requisite
votes of the shareholders of PHFG and BNHC and the satisfaction or waiver of all
other conditions to the Merger and the Bank Merger set forth in the Agreement.

A closing (the "Closing") shall take place immediately prior to the
Effective Time on the fifth business day 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 in the event of a material breach by the
other party of any representation, warranty, material covenant or agreement,
which breach 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 BNHC 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 October 25, 1996,
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 BNHC at any time during
the ten-day period commencing with the date on which the approval of the FRB for
consummation of the Merger is received (the "Determination Date") if the average
of the daily closing prices of a share of PHFG Common Stock, as reported on
NASDAQ, during the period of 20 consecutive trading days ending on the
Determination Date (the "Average Closing Price") is less than $16.00, subject,
however, to the following three sentences. If

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BNHC 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 ten-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 BNHC Common Stock
under the Agreement by adjusting the Exchange Ratio to equal a number
(calculated to the nearest one-thousandth) obtained by dividing (x) $32.00 by
(y) the Average Closing Price. If PHFG so elects within such five-day period,
it shall give prompt written notice to BNHC 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).

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 BNHC, 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
BNHC's shareholders or otherwise materially adversely affects BNHC shareholders
without further approval by those shareholders who are so affected.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Certain directors and executive officers of BNHC may be deemed to have
interests in the Merger in addition to their interests as shareholders
generally. The Board of Directors of BNHC 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 cause each of Davis P. Thurber and Paul R.
Shea to be elected as a director of PHFG for a term which expires at the annual
meeting of shareholders of PHFG following his initial election. In addition,
PHFG agreed to include Messrs. Thurber and Shea on the list of nominees for
director presented by the Board of Directors of PHFG and for which such Board
shall solicit proxies at the first annual meeting of shareholders of PHFG
following his initial election as a director, which persons shall be nominated
for three-year terms, or if necessary in an individual case to ensure that the
number of directors in each class of directors of PHFG is as nearly equal in
number as possible, a two-year term.

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In addition to the foregoing, the Agreement provides that Messrs. Thurber
and Shea and seven other existing directors of BNHC designated by it shall be
directors of BNHC and BNH upon consummation of the Merger and the Bank Merger
(along with up to seven persons designated by PHFG), and that Mr. Thurber shall
serve as Chairman of the Board of such entities.

EMPLOYMENT. Pursuant to the Agreement, PHFG agreed to cause BNHC and BNH,
as necessary in accordance with their respective bylaws, to elect Paul R. Shea
as President and Chief Executive Officer of BNHC and BNH until the earlier of
his retirement and the date he attains age 65.

EMPLOYMENT AGREEMENTS. Pursuant to the Agreement, PHFG agreed to assume
and satisfy, or to cause BNHC to assume and satisfy, BNHC's obligations under
the Amended and Restated Agreement as to Future Employment between BNHC and each
of Davis P. Thurber, Paul R. Shea and Gregory D. Landroche (each an "Employment
Agreement" and together the "Employment Agreements"). The Employment Agreements
are substantially the same and generally provide for employment of the
executive, with specified levels of compensation and benefits, for a period
commencing on the date of a "change of control," which is defined in a manner
which would include the Merger, and ending on the earlier to occur of (i) the
third anniversary of such date and (ii) the last day of the month coinciding
with or next following the date of the executive's actual retirement under the
Retirement Plan. If during the employment period the executive's employment is
terminated by the employer other than for cause or disability or by the
executive for "good reason," the executive would be entitled to the benefits set
forth in his Employment Agreement. The term "good reason" is defined in the
Employment Agreements to include the assignment to the executive of duties which
are inconsistent with his existing offices, the executive's retirement under the
Retirement Plan and the executive's election to terminate his employment for any
reason during a 30-day period immediately following the first anniversary of the
change of control of BNHC.

In the event that an executive's employment was terminated by the employer
other than for cause or disability or by the executive for "good reason," the
executive would be entitled pursuant to his Employment Agreement to a lump sum
payment which generally would consist of (i) amounts earned through the date of
termination, including a pro rata portion of any annual bonus paid for the most
recently completed fiscal year during the employment period, (ii) an amount
equal to three times the executive's Annual Base Salary and Highest Annual
Bonus, as defined in the Employment Agreement, and (iii) an amount equal to the
actuarial equivalent of the retirement benefits to which the executive would
have been entitled under the Retirement Plan and BNHC's Executive Excess Benefit
Plan ("EBP") if the executive's employment had continued for three years after
the termination of employment at the rate of compensation required by the
executive's Employment Agreement. The aggregate amount of the lump sum
severance payments due to Messrs Thurber, Shea and Landroche pursuant to
clause (ii) in the preceding sentence is $1.065 million, $849,000 and
$576,000, respectively, and the aggregate amount of the lump sum

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payments due to such persons in satisfaction of the supplemental retirement
benefits pursuant to clause (iii) in the preceding sentence is approximately
$156,000, $183,000 and $48,000, respectively, assuming the Merger had occurred
on or about December 31, 1995. Pursuant to agreements among the parties to the
Agreement and the covered executives, substantially all of these amounts
were paid during 1995 in order to ensure their deductibility for federal income
tax purposes. In addition to the foregoing benefits, the Employment Agreements
also require the employer to continue benefits for the executive or the
executive's family at least equal to those provided under BNHC's welfare benefit
plans (such as medical, prescription, dental, disability, employee life, group
life, accidental death and travel accident insurance plans) for three years
after the date of termination of employment or such longer period as may be
required by the terms of any plan of BNHC.

EXECUTIVE EXCESS BENEFIT PLAN. Pursuant to the Agreement, PHFG agreed to
satisfy, or to cause BNHC to satisfy, BNHC's obligations under the EBP to
Messrs. Thurber, Shea and Landroche, the sole participants in such plan. The
EBP is intended to provide designated executives of BNHC with payments to
replace benefits such executives would be entitled to pursuant to the terms of
the Retirement Plan but for amendments required to be made to such plan by
virtue of certain limitations on benefits imposed by Sections 401(a)(17) and 415
of the Code. The excess benefit to be provided pursuant to the EBP is to be
calculated at the time that the participant elects to commence monthly pension
benefits under the Retirement Plan and, at the election of a participant, may be
paid in the form of a single lump sum cash payment or in equal annual
installments over a period not to exceed five years. If Messrs. Thurber, Shea
and Landroche had retired and commenced receiving benefits under the Retirement
Plan on or about December 31, 1995 and elected a lump sum payment under the EBP,
the aggregate amount of their excess benefit under the EBP would have been
approximately $325,000, $120,000 and $0, respectively.

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 BNHC or BNH determined as of the Effective Time 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 (i) the articles of incorporation and bylaws of BNHC
and BNH and (ii) each Director Indemnity Agreement which previously had been
entered into by BNHC and certain directors of BNHC and BNH, in each case as in
effect as of the date of execution of the Agreement.

Pursuant to the Agreement, PHFG also agreed to cause BNHC to maintain
BNHC'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

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Effective Time by persons who are currently covered by such insurance policy
maintained by BNHC for a period of three years following the Effective Time.

Other than as set forth above, no director or executive officer of BNHC has
any direct or indirect material interest in the Merger, except insofar as
ownership of BNHC 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
BNHC and BNH shall be entitled to participate in PHFG's employee benefit plans
of general applicability, and until such time BNHC's employee benefit plans
shall remain in effect, provided that no employee of BNHC or BNH 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 BNHC's medical insurance plans, except to the extent such
preexisting condition was excluded from coverage under BNHC'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 BNHC and BNH as such service is recognized by
BNHC and BNH.

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 BNHC
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 BNHC
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 BNHC at the time of the BNHC 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 BNHC at the time of the BNHC Special
Meeting, provided they are not Affiliates of PHFG at or following the Effective
Time, may publicly resell any PHFG Common 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

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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 BNHC in the Merger.
SEC guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales of shares of the acquiring and acquired company by
affiliates of either company in a business combination. SEC guidelines indicate
further that the pooling of interests method of accounting generally will not be
challenged on the basis of sales by affiliates of the acquiring or acquired
company if they do not dispose of any of the shares of the corporation they own
or shares of a corporation they receive in connection with a merger during the
period beginning 30 days before the merger and ending when financial results
covering at least 30 days of post-merger operations of the combined entity have
been published.

Each of PHFG and BNHC has agreed in the Agreement to use its reasonable
best efforts to cause each person who may be deemed to be an Affiliate (for
purposes of Rule 145 and for purposes of qualifying the Merger for pooling of
interests accounting treatment) of such party to deliver to PHFG a letter
agreement intended to preserve the ability to treat the Merger as a pooling of
interests and, in the case of Affiliates of BNHC, to ensure compliance with the
Securities Act.

PHFG has agreed in the Merger Agreement, if requested by an Affiliate who
has entered into an Affiliate Agreement, to use its reasonable best efforts to
publish as promptly as practicable, but in no event later than 90 days after the
end of the first month after the Effective Time in which there are at least 30
days of post-Merger combined operations and net income figures as contemplated
by and in accordance with the terms of the SEC's Accounting Series Release No.
135.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

GENERAL. The following is a summary description of the material federal
income tax consequences of the Merger to shareholders of BNHC. This summary is
not a complete description of all of the consequences of the Merger and, in
particular, may not address federal income tax considerations that may affect
the treatment of a shareholder which, at the Effective Time, already owns some
PHFG Common Stock, is not a U.S. citizen, is a tax-exempt entity or an
individual who acquired BNHC Common Stock pursuant to an

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<PAGE>

employee stock option, or exercises some form of control over BNHC. In
addition, no information is provided herein with respect to the tax consequences
of the Merger under applicable foreign, state or local laws. Consequently, each
shareholder of BNHC is advised to consult a tax advisor as to the specific tax
consequences of the transaction to that shareholder. The following discussion
is based on the Code, as in effect on the date of this Prospectus/Joint Proxy
Statement, without consideration of the particular facts or circumstances of any
holder of BNHC Common Stock.

THE MERGER. BNHC has received an opinion from Wachtell, Lipton, Rosen &
Katz, special counsel to BNHC, to the effect that, assuming the Merger is
consummated, the material federal income tax consequences of the Merger to the
shareholders of BNHC will be as follows: no gain or loss will be recognized by
shareholders of BNHC upon the exchange of their BNHC Common Stock solely for
shares of PHFG Common Stock pursuant to the Merger; the basis of the BNHC Common
Stock to be received by a BNHC shareholder receiving solely PHFG Common Stock
will be the same as his or her basis in the BNHC Common Stock surrendered in
exchange therefor; and the holding period of the shares of PHFG Common Stock to
be received by a BNHC shareholder receiving solely PHFG Common Stock will
include the period during which such BNHC shareholder held the BNHC Common Stock
surrendered in exchange therefor, provided the surrendered BNHC Common Stock was
held by such shareholder as a capital asset on the date of the Merger.

Each party's obligation to effect the Merger is conditioned on the delivery
of an opinion to BNHC from Wachtell, Lipton, Rosen & Katz, 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 pooling of
interests transaction under generally accepted accounting principles, and it is
a condition to the parties' consummation of the Merger that PHFG and BNHC
receive letters, dated the Effective Time, from their respective independent
public accountants to the effect that the Merger qualifies for such accounting
treatment. See "The Merger - Conditions to the Merger." As required by
generally accepted accounting principles, under pooling of interests accounting,
as of the Effective Time, the assets and liabilities of BNHC would be added to
those of PHFG at their recorded book values and the shareholders' equity
accounts of PHFG and BNHC would be combined on PHFG's consolidated balance
sheet. On a pooling of interests accounting basis, income and other financial
statements of PHFG issued after consummation of the Merger would be restated
retroactively to reflect the consolidated combined financial position and
results of operations of PHFG and BNHC as if the Merger had taken place prior to
the periods covered by such financial statements. The unaudited

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<PAGE>

pro forma financial information contained in this Prospectus/Joint Proxy
Statement has been prepared using the pooling of interests accounting method to
account for the Merger. See "Selected Pro Forma Consolidated Financial Data"
and "Pro Forma Combined Consolidated Financial Data."

The purchase method of accounting has been or will be used to reflect each
of the Purchase Acquisitions upon its consummation. As required by generally
accepted accounting principles, under purchase 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 Purchase Acquisitions
reflect such values. Financial statements of PHFG issued before consummation of
the Purchase Acquisitions 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 Purchase Acquisitions. 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 BNHC.

STOCK OPTION AGREEMENTS

As an inducement and a condition to PHFG's entering into the Agreement,
PHFG and BNHC also entered into the BNHC Option Agreement, pursuant to which
BNHC, as issuer, granted PHFG, as grantee, the BNHC 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 BNHC), to purchase up to 808,767 shares of BNHC
Common Stock, representing 19.9% of the outstanding shares of BNHC Common Stock,
at a price of $33.50 per share, subject to adjustment in certain circumstances
and termination within certain periods. As an inducement and a condition to
BNHC's entering into the Agreement, PHFG and BNHC also entered into the PHFG
Option Agreement, pursuant to which PHFG, as issuer, granted BNHC, 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 BNHC),
to purchase up to 1,674,894 shares of PHFG Common Stock, representing
approximately 9.9% 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

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<PAGE>

an Option may be exercised, the terms of the BNHC 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 BNHC with respect to the
BNHC Stock Option Agreement and PHFG with respect to the PHFG Stock Option
Agreement, (ii) "Grantee" means PHFG with respect to the BNHC Stock Option
Agreement and BNHC with respect to the PHFG Stock Option Agreement and (iii)
"Option" means the BNHC 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.

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 20% or more of the consolidated assets of Issuer and its
subsidiaries, or (C) the issuance, sale or other disposition of (including
by way of merger, consolidation, share exchange or any similar transaction)
securities representing 20% or more of the voting power of Issuer or any of
its subsidiaries (any of the foregoing an "Acquisition Transaction"); or

(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3

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<PAGE>

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.

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.

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<PAGE>

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.

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 BNHC Option Agreement and the PHFG Option Agreement are
included as Annexes II and III to this Prospectus/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 October 25, 1995, with Davis P. Thurber, Sidney Thurber
Cox and Constance T. Prudden, all of whom are related and are either existing,
or in the case of Ms. Prudden recently resigned, directors of BNHC. See
"Certain Beneficial Owners of BNHC Common Stock." 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 BNHC, agreed, among other
things, not to sell, pledge, transfer or otherwise dispose of his or her shares
of BNHC Common Stock prior to the meeting of shareholders of BNHC at which the
Agreement is considered and to vote such shares of BNHC Common Stock in favor of
the Agreement.

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<PAGE>

DISSENTERS' RIGHTS

Pursuant to Sections 293-A:13.01 et seq. of the NHBCA, in the event that
the Merger is consummated, any holder of shares of BNHC Common Stock who objects
to the Merger is entitled to dissent from the Merger and to have the fair value
of such shares ("Dissenting Stock") as determined by BNHC, or if necessary,
judicially determined, paid to him or her, by complying with the provisions of
Sections 293-A:13.01 et seq. of the NHBCA. Failure to take any steps set forth
in Sections 293-A:13.01 et seq. in connection with the exercise of such rights
may result in termination or waiver thereof.

The following is a summary of the statutory procedures required to be
followed by a holder of Dissenting Stock (a "dissenting shareholder") in order
to exercise his or her rights under the NHBCA. This summary is qualified in its
entirety by reference to Sections 293-A:13.01 et seq. of the NHBCA, the text of
which is attached as Annex VII to this Prospectus/Joint Proxy Statement.

If a shareholder elects to exercise dissenters' rights with respect to the
Merger, such shareholder must (i) deliver to BNHC prior to the vote on the
Merger at the Special Meeting a written notice of intention to demand payment
for his shares if the Merger is effected and (ii) not vote in favor of the
Merger. The written notice required to be delivered to BNHC by a dissenting
shareholder is in addition to and separate from any proxy or vote against the
Merger. Neither voting against nor failure to vote for the Merger will
constitute the written notice required to be filed by a dissenting shareholder.
Failure to vote against the Merger, however, will not constitute a waiver of
rights under Sections 293-A:13.01 et seq. of the NHBCA provided that a written
notice has been properly filed. A signed proxy that is returned but which does
not contain any instructions as to how it should be voted will be voted in favor
of approval of the Merger and will be deemed a waiver of dissenters' rights.
See "The Special Meeting - Voting and Revocation of Proxies."

Subject to the foregoing, a beneficial shareholder may assert dissenters'
rights as to shares held on his or her behalf only if (i) he or she submits to
BNHC the record shareholder's written consent to the dissent not later than the
time the beneficial shareholder asserts dissenters' rights and (ii) he or she
does so with respect to all shares of BNHC Common Stock of which he or she is
the beneficial owner or over which he or she has the power to direct the vote.
A record holder of shares of BNHC Common Stock may dissent on behalf of any
beneficial owner with respect to all but not less than all the shares of such
beneficial owner if the record holder notifies BNHC in writing of the name and
address of each such person on whose behalf he asserts dissenters' rights. All
notices of intention to demand payment should be addressed to Davis P. Thurber,
Chairman and President, Bank of New Hampshire Corporation, 300 Franklin Street,
Manchester, New Hampshire 03101.

If the Merger is approved, BNHC is obligated to give written notice to each
dissenting shareholder who timely filed a notice of intention to demand payment
and who

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<PAGE>

did not vote in favor of approval of the Merger no later than 10 days after the
approval of the Merger by the shareholders of BNHC. The notice must be
accompanied by a copy of Sections 293-A:13.01 et seq. and must (i) state where a
demand for payment must be sent and where and when certificates for Dissenting
Stock must be deposited in order to obtain payment, (ii) inform holders of
uncertificated shares to what extent transfer of the shares will be restricted
after the payment demand is received, (iii) be accompanied by a form for
demanding payment that includes the date of the first announcement to news media
or to shareholders of the terms of the proposed Merger (October 25, 1995) and
requires that the person asserting dissenters' rights certify whether or not he
or she acquired beneficial ownership of the shares before that date and (iv) set
a date by which BNHC shall receive the payment demand, which date shall not be
less than 30 days nor more than 60 days after the date the notice is delivered.
The dissenting shareholder must demand payment, certify whether he or she
acquired ownership of such shares prior to October 25, 1995 and deposit the
certificates in accordance with the terms of the notice. A dissenting
shareholder who fails to demand payment or deposit certificates for Dissenting
Stock, as required, shall have no right under Sections 293-A:13.01 et. seq. to
receive payment for the Dissenting Stock.

Unless the Merger has been effected and BNHC has made the payment required
below within 60 days after the date for demanding payment and depositing
certificates for Dissenting Stock, BNHC shall return any certificates for
Dissenting Stock so deposited. If such Dissenting Stock has been returned by
BNHC, BNHC may at a later time send a new notice conforming to the requirements
herein described.

As soon as the Merger has been consummated, or upon receipt of demand for
payment, if the Merger has already been consummated, BNHC shall pay to each
dissenting shareholder who has made proper demand and deposited his or her
certificates the amount which BNHC estimates to be the fair value of his or her
Dissenting Stock, with accrued interest, if any, accompanied by (i) BNHC's
balance sheet as of the end of a fiscal year ending not more than 16 months
before the date of payment, (ii) an income statement and a statement of changes
in shareholders' equity for such fiscal year, (iii) BNHC's latest available
interim financial statements, if any, (iv) a statement of BNHC's estimate of the
fair value of the shares, (v) an explanation of how the interest was calculated
and (vi) a statement of the dissenting shareholder's right to demand
supplemental payment pursuant to Section 293-A:13.28 if the shareholder is
dissatisfied with BNHC's offer, as well as a copy of Sections 293-A:13.01 et
seq. BNHC may withhold payment from any dissenting shareholder acquiring
beneficial ownership of the BNHC Common Stock subsequent to October 25, 1995,
the date on which announcement of the Merger was first made. For such shares of
BNHC Common Stock acquired after October 25, 1995, BNHC, upon consummation of
the Merger, shall estimate the fair value of such shares, plus accrued interest,
if any, and pay such estimated amount to each holder of such shares who agrees
to accept such payment in full satisfaction of his or her demand. With each
such offer of payment, BNHC shall send its estimate of the fair value of such
shares of BNHC Common Stock, an explanation of how the interest was calculated,
and a statement of such dissenting

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<PAGE>

shareholder's right to demand payment if such dissenting shareholder is
dissatisfied with such offer.

Fair value of Dissenting Stock means the value immediately before the
Effective Time, excluding any change in value in anticipation of the Merger if
such exclusion is not inequitable (which amount may be more, less or the same as
the consideration to be received by shareholders of BNHC in connection with the
Merger).

If BNHC fails to remit such fair value to the dissenting shareholder within
60 days from the date set for demanding payment, or if BNHC fails to return any
deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days of the date set for demanding payment, or
if such dissenting shareholder believes the amount paid or offered to be paid,
as the case may be, to be less than fair value (or that the interest, if any, is
not correct), such dissenting shareholder may send BNHC his or her own estimate
of fair value (and interest, if any) and demand payment of the deficiency, or
reject BNHC's offer and demand payment of the fair value (and interest, if any).
If the dissenting shareholder does not notify BNHC of his or her payment demand
within 30 days after BNHC has made payment or offered payment, as the case may
be, such shareholder shall be entitled to no more than the amount remitted.

Within 60 days after a demand for payment of the deficiency, if it remains
unsettled, BNHC shall file a petition with the Superior Court of Hillsborough
County, New Hampshire (the "Court") requesting determination of the fair value
of the Dissenting Stock and accrued interest. All dissenting shareholders whose
demands have not been settled shall be parties to such action and shall be
served a copy of the petition. The Court shall determine the fair value of the
Dissenting Stock and each dissenting shareholder shall be entitled to judgment
for the amount by which the amount previously remitted by BNHC is exceeded by
the Court's determination of fair value, if any. If BNHC does not file a
petition, each dissenting shareholder who has made a demand and who has not
settled his or her claim shall be entitled to receive the amount demanded with
interest and may sue to enforce his or her claim in an appropriate court.

Costs of an appraisal proceeding, including costs and expenses of
appraisers appointed by the Court, shall be determined by the Court and assessed
against BNHC, except that the Court may assess any part of such costs and
expenses to all or some of the dissenting shareholders who are parties and whose
action the court finds to be arbitrary, vexatious or not in good faith in
demanding payment under Sections 293-A:13.01 et seq. Fees and expenses of
counsel and experts for the respective parties may be assessed against (i) BNHC
if the Court finds it failed to comply substantially with the requirements of
Sections 293-A:13.01 et seq. or (ii) either BNHC or a dissenting shareholder if
the court finds that the party acted arbitrarily, vexatiously or not in good
faith with respect to its dissenters' rights. The court may award reasonable
attorney fees to be paid out of the amounts awarded to the dissenting
shareholders if the court finds that the services of counsel for any dissenting
shareholder have been of substantial benefit to other dissenting shareholders
similarly situated and that such attorney fees should not be assessed against
BNHC.

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MANAGEMENT OF PHFG AFTER THE MERGER

Upon consummation of the Merger, the directors and executive officers of
PHFG will be the directors and executive officers of PHFG immediately prior to
the Merger, except two of the existing directors of BNHC will become directors
of PHFG. In addition, during the one-year period following the Merger, PHFG has
agreed to consider for election to the PHFG Board a nominee who is a resident of
New Hampshire and is recommended by the BNHC Board after the Effective Time.
See "The Merger - Effects of the Merger."

The following table sets forth certain information about each director of
BNHC who will become a director of PHFG upon consummation of the Merger.

Position with BNHC and Director of
Principal Occupation BNHC
Name Age During the Past Five Years Since(1)
---- --- -------------------------- --------

Davis P. Thurber Chairman of the Board and 1949
President of BNHC; Chairman
of the Board of BNH;
director of Pennichuck
Corporation and
EnergyNorth, Inc.

Paul R. Shea Senior Executive Vice 1989
President of BNHC;
Director, President and
Chief Executive Officer of
BNH

- ---------------

(1) Includes service with predecessor institutions.

Additional information about the foregoing persons is contained in BNHC's
Proxy Statement for its 1995 annual meeting of shareholders, relevant portions
of which are incorporated by reference in this Prospectus/Joint Proxy Statement
pursuant to BNHC's Annual Report on Form 10-K for the year ended December 31,
1994. See "Incorporation of Certain Documents by Reference" and "Available
Information."

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PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma combined condensed consolidated balance
sheet combines the consolidated historical balance sheets of PHFG and BNHC and
the assets and liabilities involved in the only Purchase Acquisition pending at
September 30, 1995 (the Branch Acquisition), assuming the Merger was consummated
and such assets and liabilities were acquired as of September 30, 1995, on a
pooling of interests accounting basis with respect to the Merger and on a
purchase accounting basis with respect to such Purchase Acquisition.

The following unaudited pro forma combined condensed consolidated
statements of operations present the combined consolidated statements of
operations of PHFG and BNHC and the Purchase Acquisitions assuming (i) PHFG and
BNHC had been combined at the beginning of each period presented on a pooling of
interests basis with respect to the Merger and (ii) the Purchase Acquisitions
had been consummated as of January 1, 1994 under the purchase accounting basis.
Pro forma financial information for the acquisition of Bankcore and the Branch
Acquisition reflects information from January 1, 1994 to the actual consummation
date (July 1, 1995) in the case of the acquisition of Bankcore and to September
30, 1995 in the case of the Branch Acquisition.

For a description of the pooling of interests accounting with respect to
the Merger and the purchase accounting with respect to the Purchase
Acquisitions, 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 a proposed restructuring charge in connection with the Merger
has been reflected in the pro forma combined condensed consolidated balance
sheet; however, because the proposed restructuring charge is nonrecurring, it
has 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 and the Purchase
Acquisitions.

The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the Merger and the Purchase Acquisitions been consummated at the
beginning of the applicable periods indicated, nor is it necessarily indicative
of the results of operations in future periods or the future financial position
of the combined entities.

The pro forma information should be read in conjunction with the historical
consolidated financial statements of PHFG and BNHC, including the related notes,
which are incorporated by reference in this Prospectus/Joint Proxy Statement,
and in conjunction with the selected consolidated historical 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."

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PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
PHFG, BNHC AND THE PURCHASE ACQUISITIONS
SEPTEMBER 30, 1995
(Unaudited)
(In Thousands, Except Share Data)

PHFG
and Pro
Pro Forma BNHC Branch Forma
PHFG BNHC Adjustments Combined Acquisition Combined
---- ---- ----------- -------- ---------- --------
(1) (1)(2)
<S> <C> <C> <C> <C> <C> <C>

ASSETS

Cash and due from banks $95,045 $69,512 $ 0 $164,557 $ 0 $164,557
Federal funds sold 23,220 58,000 0 81,220 0 81,220
Securities available for sale
at market value 508,093 3,686 0 511,779 (33,321) 478,458
Securities held-to-maturity
(amortized cost) 0 275,956 0 275,956 0 275,956
Loans held for sale 64,150 0 0 64,150 0 64,150
Loans and leases 2,222,510 530,726 0 2,753,236 250,689 3,003,925
---------- -------- -------- ---------- -------- ----------
Less: Allowance for loan and
lease losses 48,834 12,073 0 60,907 4,591 65,498
---------- -------- -------- ---------- -------- ----------
Net loans and leases 2,173,676 518,653 0 2,692,329 246,098 2,938,427
---------- -------- -------- ---------- -------- ----------
Premises and equipment 41,469 10,634 0 52,103 380 52,483
Goodwill and other intangibles 21,744 1,644 0 23,388 19,414 42,802
Mortgage servicing rights 19,571 0 0 19,571 0 19,571
Other real estate and repossessed
assets owned 8,220 7,959 0 16,179 0 16,179
Deferred income taxes 26,528 5,276 0 31,804 0 31,804
Interest and dividends receivable 21,587 7,938 0 29,525 0 29,525
Other assets 33,910 3,069 0 36,979 0 36,979
---------- -------- -------- ---------- -------- ----------
Total assets $3,037,213 $962,327 $ 0 $3,999,540 $232,571 $4,232,111
---------- -------- -------- ---------- -------- ----------
---------- -------- -------- ---------- -------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Regular savings $316,939 $259,108 $ 0 $576,047 $27,798 $603,845
Money market access accounts 414,008 45,761 0 459,769 20,789 480,558
Certificates of deposit 1,129,401 232,504 0 1,361,905 97,501 1,459,406
NOW accounts 207,830 137,373 0 345,203 16,283 361,486
Demand deposits 262,787 160,756 0 423,543 10,200 433,743
---------- -------- -------- ---------- -------- ----------
2,330,965 835,502 0 3,166,467 172,571 3,339,038
---------- -------- -------- ---------- -------- ----------
Federal funds purchased 600 0 0 600 0 600
Securities sold under repurchase
agreements 116,653 30,392 0 147,045 0 147,045
Borrowings from the Federal Home
Loan Bank of Boston 275,948 0 0 275,948 60,000 335,948
Other borrowings 21,711 3,072 0 24,783 0 24,783
Deferred income taxes 9,490 0 0 9,490 0 9,490
Other liabilities 20,252 10,551 4,776(3) 35,579 0 35,579
---------- -------- -------- ---------- -------- ----------
Total liabilities 2,775,619 879,517 4,776(3) 3,659,912 232,571 3,892,483
---------- -------- -------- ---------- -------- ----------
Shareholders' equity:
Preferred Stock, par value $0.01;
5,000,000 shares authorized,
none issued 0 0 0 0 0 0
Common Stock, par value $0.01;
30,000,000 shares authorized:
PHFG 175 81 (4) 256 0 256
BNHC 10,160 (10,160)(4) 0 0 0
Paid in capital 186,900 27,289 10,079 (4) 224,268 0 224,268
Retained earnings 81,998 45,307 (4,776)(3) 122,529 0 122,529
Net unrealized gain (loss) on
securities available for sale 710 54 0 764 0 764
Treasury stock at cost (8,189) 0 0 (8,189) 0 (8,189)
---------- -------- -------- ---------- -------- ----------
Total shareholders' equity 261,594 82,810 (4,776)(3) 339,628 0 339,628
---------- -------- -------- ---------- -------- ----------
Total liabilities and
shareholders' equity $3,037,213 $962,327 $ 0 $3,999,540 $232,571 $4,232,111
---------- -------- -------- ---------- -------- ----------
---------- -------- -------- ---------- -------- ----------

</TABLE>

68
<PAGE>

Notes to Pro Forma Combined Condensed Consolidated Balance Sheet

(1) During the period from January 1, 1994 through November 25, 1995, PHFG
completed or had pending the following acquisitions accounted for under the
purchase method: (i) the acquisition of five branch offices and related
deposits of approximately $173 million, as well as approximately $250 million of
loans, from Shawmut Bank NH, which was pending as of November 25, 1995 and is
expected to be consummated during the first quarter of 1996, (ii) the
acquisition of Bankcore for an aggregate of 751,600 shares of PHFG Common Stock
and $9.6 million principal amount of PHFG Debentures due 2000, which was
completed on July 1, 1995 and (iii) the acquisition of seven branch offices and
related deposits of $46.1 million, as well as $17.1 million of loans, from Fleet
Bank of Maine for $838,000, which was completed on June 15, 1995. Because the
purchase of branch offices from Fleet Bank of Maine does not constitute a
sufficient continuity of operations and additional financial data is not
available to develop meaningful and reliable pro forma income statement
information with respect to such acquisition, the pro forma combined condensed
consolidated statements of operations presented herein do not include any pro
forma adjustments related thereto.

Goodwill related to the acquisition of Bankcore amounted to $3.4 million,
deposit base premium related to the Branch Acquisition is currently expected to
aggregate $19.4 million and deposit base premium related to the acquisition of
seven branch offices from Fleet Bank of Maine amounted to $838,000.

In connection with the acquisition of Bankcore, the pro forma financial
information presented herein includes actual repurchases of 751,600 shares of
PHFG Common Stock for an aggregate of $9.6 million. The dedicated stock
repurchase program was completed for the expressed purpose of reissuing the
repurchased shares in conjunction with the Bankcore transaction. The pro forma
financial information presented herein assumes the Bankcore transaction was
financed through a combination of PHFG Debentures due 2000 and cash obtained
from the sale of investments used to repurchase the 751,600 shares of PHFG
Common Stock.

(2) The pending Branch Acquisition reflects PHFG's intent to finance the
purchase through a combination of borrowings and the sale of securities
available for sale. The allowance for loan and lease losses represents the
discount on the loans being acquired because in the judgment of management the
discount substantially represents an adjustment for credit risk.

(3) Reflects an estimated $5.6 million of one-time reorganization and
restructuring costs related to the Merger, less $849 thousand of related tax
benefits. The restructuring charges relate primarily to terminations of
employment contracts and severance obligations ($3.7 million) and professional
fees ($2.0 million).

(4) Represents the par value of PHFG Common Stock to be issued in
connection with the Merger, with related adjustment to paid-in capital. The
PHFG Common Stock to be issued in connection with the Merger was calculated by
multiplying the number of outstanding shares of BNHC Common Stock by the
Exchange Ratio.

69
<PAGE>

PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG, BNHC AND THE PURCHASE ACQUISITIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
(In Thousands, Except Share Data)

PHFG,
Bankcore
and Pro
BNHC Branch Forma
PHFG Bankcore BNHC Combined Acquisition Combined
----- -------- ---- -------- ----------- --------
(1) (3) (3) (2) (3)
<S> <C> <C> <C> <C> <C> <C>

Interest and dividend income:
Interest and fees on loans and leases $150,237 $3,269 $37,454 $190,960 $15,769 $206,729
Interest on mortgage-backed
investments 9,420 0 80 9,500 0 9,500
Interest on other investments 12,777 1,124 (4) 14,766 28,667 (1,398) 27,269
Dividends on equity securities 1,297 0 162 1,459 0 1,459
---------- ------ --------- ---------- ------- ----------
Total interest and dividend income 173,731 4,393 52,462 230,586 14,371 244,957
---------- ------ --------- ---------- ------- ----------

Interest expense:
Interest on deposits 62,371 1,795 16,142 80,308 7,398 (7) 87,706
Interest on borrowed funds 19,182 431 (4) 1,345 20,958 2,693 23,651
---------- ------ --------- ---------- ------- ----------

Total interest expense 81,553 2,226 17,487 101,266 10,091 111,356
---------- ------ --------- ---------- ------- ----------

Net interest income 92,178 2,167 34,975 129,320 4,280 133,601

Provision for loan losses 1,800 109 1,350 3,259 0 3,259
---------- ------ --------- ---------- ------- ----------

Net interest income after
provision for loan losses 90,378 2,058 33,625 126,061 4,280 130,342
---------- ------ --------- ---------- ------- ----------

Noninterest income:
Customer services 6,120 245 2,889 9,254 226 9,480
Mortgage banking services 7,742 0 185 7,927 0 7,927
Loan related services 789 0 918 1,707 0 1,707
Trust and investment advisory
services 1,163 0 3,096 4,259 0 4,259
Net securities gains (losses) (106) 483 (1) 376 0 376
Net gains on sales of consumer loans 0 0 154 154 0 154
Other noninterest income 97 279 396 772 0 772
---------- ------ --------- ---------- ------- ----------
15,805 1,007 7,637 24,449 226 24,675
---------- ------ --------- ---------- ------- ----------

Noninterest expenses:
Salaries and employee benefits 35,668 1,023 14,384 51,075 704 51,779
Occupancy 5,580 281 2,372 8,233 0 8,233
Data processing 5,222 0 1,252 6,474 0 6,474
Deposit and other assessments 2,958 127 874 3,959 188 4,147
Equipment 3,461 0 1,293 4,754 0 4,754
Collection and carrying costs of
nonperforming assets 1,180 0 710 1,890 0 1,890
Advertising and marketing 2,662 0 857 3,519 0 3,519
Other noninterest expenses 12,393 959 (5) 5,073 18,425 555 18,980
---------- ------ --------- ---------- ------- ----------
69,124 2,390 26,815 98,329 1,447 99,776
---------- ------ --------- ---------- ------- ----------

Income (loss) before income tax
(benefit) 37,059 675 14,447 52,181 3,059 55,240
Applicable income tax (benefit) 12,536 (115) (6) 4,909 17,330 1,075 (6) 18,405
---------- ------ --------- ---------- ------- ----------
Net income (loss) $24,523 $790 $9,538 $34,851 $1,984 $36,835
---------- ------ --------- ---------- ------- ----------
---------- ------ --------- ---------- ------- ----------
Earnings per share $1.49 $2.35 $1.42 $1.50
Average shares outstanding 16,445,433 4,064,165 24,573,763 24,573,763

</TABLE>

70
<PAGE>

PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG, BNHC AND THE PURCHASE ACQUISITIONS
NINE MONTHS ENDED SEPTEMBER 30, 1994
(Unaudited)
(In Thousands, Except Share Data)

PHFG,
Bankcore
and
BNHC Branch Pro Forma
PHFG Bankcore BNHC Combined Acquisition Combined
---- -------- ---- -------- ----------- ---------
(1) (3) (3) (2) (3)
<S> <C> <C> <C> <C> <C> <C>

Interest and dividend income:
Interest and fees on loans and leases $123,846 $4,227 $33,660 $161,733 $15,769 $177,502
Interest on mortgage-backed
investments 9,185 0 112 9,297 0 9,297
Interest on other investments 8,852 1,326 (4) 10,552 20,730 (1,398) 19,331
Dividends on equity securities 1,063 0 147 1,210 0 1,210
---------- ------ --------- ---------- ------- ----------
Total interest and dividend income 142,946 5,553 44,471 192,970 14,371 207,340
---------- ------ --------- ---------- ------- ----------

Interest expense:
Interest on deposits 50,934 2,301 14,715 67,950 7,398 (7) 75,348
Interest on borrowed funds 12,940 630 (4) 609 14,179 2,693 16,871
---------- ------ --------- ---------- ------- ----------
Total interest expense 63,874 2,931 15,324 82,129 10,091 92,219
---------- ------ --------- ---------- ------- ----------

Net interest income 79,072 2,622 29,147 110,841 4,280 115,121

Provision for loan losses 1,752 (350) 1,132 2,534 0 2,534
---------- ------ --------- ---------- ------- ----------

Net interest income after
provision for loan losses 77,320 2,972 28,015 108,307 4,280 112,587
---------- ------ --------- ---------- ------- ----------

Noninterest income:
Customer services 5,029 353 2,925 8,307 226 8,533
Mortgage banking services 6,158 0 245 6,403 0 6,403
Loan related services 761 0 964 1,725 0 1,725
Trust and investment advisory
services 1,177 0 2,912 4,089 0 4,089
Net securities gains (losses) 354 (164) 165 355 0 355
Net gains on sales of consumer loans 33 0 0 33 0 33
Other noninterest income 1,408 450 75 1,933 0 1,933
---------- ------ --------- ---------- ------- ----------
14,920 639 7,286 22,845 226 23,071
---------- ------ --------- ---------- ------- ----------

Noninterest expenses:
Salaries and employee benefits 32,358 1,585 13,718 47,661 704 48,365
Occupancy 5,642 408 2,351 8,401 0 8,401
Data processing 4,490 0 779 5,269 0 5,269
Deposit and other assessments 4,335 195 1,643 6,173 298 6,471
Equipment 3,385 0 1,361 4,746 0 4,746
Collection and carrying costs of
nonperforming assets 3,228 0 1,363 4,591 0 4,591
Advertising and marketing 2,381 0 815 3,196 0 3,196
Other noninterest expenses 11,587 938 (5) 4,609 17,134 555 17,689
---------- ------ --------- ---------- ------- ----------
67,406 3,126 26,639 97,171 1,557 98,728
---------- ------ --------- ---------- ------- ----------

Income (loss) before income tax
(benefit) 24,834 485 8,662 33,981 2,949 36,930
Applicable income tax (benefit) 6,578 139 (6) 2,718 9,435 1,003 (6) 10,438
---------- ------ --------- ---------- ------- ----------
Net income (loss) $18,256 $346 $5,944 $ 24,546 $1,946 $26,492
---------- ------ --------- ---------- ------- ----------
---------- ------ --------- ---------- ------- ----------
Earnings per share $1.09 $1.46 $0.99 $1.07
Average shares outstanding 16,700,198 4,066,000 24,832,198 24,832,198

</TABLE>

71
<PAGE>

PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG, BNHC AND THE PURCHASE ACQUISITIONS
YEAR ENDED DECEMBER 31, 1994
(Unaudited)
(In Thousands, Except Share Data)

PHFG,
Bankcore Pro
and BNHC Branch Forma
PHFG Bankcore BNHC Combined Acquisition Combined
---- -------- ---- -------- ----------- ---------
(1) (3) (3) (2) (3)
<S> <C> <C> <C> <C> <C> <C>

Interest and dividend income:
Interest and fees on loans and leases $170,038 $5,946 $45,790 $221,774 $21,083 $242,857
Interest on mortgage-backed
investments 12,409 0 145 12,554 0 12,554
Interest on other investments 12,417 1,844 (4) 14,706 28,967 (1,869) 27,097
Dividends on equity securities 1,532 51 211 1,794 0 1,794
---------- ------ --------- ---------- ------- ----------
Total interest and dividend income 196,396 7,841 60,852 265,089 19,214 284,302
---------- ------ --------- ---------- ------- ----------

Interest expense:
Interest on deposits 68,224 3,147 19,696 91,067 9,883 (7) 100,950
Interest on borrowed funds 19,050 846 (4) 1,032 20,928 3,600 24,528
---------- ------ --------- ---------- ------- ----------
Total interest expense 87,274 3,993 20,728 111,995 13,483 125,478
---------- ------ --------- ---------- ------- ----------

Net interest income 109,122 3,848 40,124 153,094 5,731 158,824

Provision for loan losses 1,857 46 1,580 3,483 0 3,483
---------- ------ --------- ---------- ------- ----------

Net interest income after
provision for loan losses 107,265 3,802 38,544 149,611 5,731 155,341
---------- ------ --------- ---------- ------- ----------

Noninterest income:
Customer services 6,765 325 3,931 11,021 301 11,322
Mortgage banking services 8,065 0 307 8,372 0 8,372
Loan related services 1,016 0 1,291 2,307 0 2,307
Trust and investment advisory services 1,569 0 3,902 5,471 0 5,471
Net securities gains (losses) (419) (222) 165 (476) 0 (476)
Net gains on sales of consumer loans 33 0 0 33 0 33
Other noninterest income 1,489 601 92 2,182 0 2,182
---------- ------ --------- ---------- ------- ----------
18,518 704 9,688 28,910 301 29,211
---------- ------ --------- ---------- ------- ----------

Noninterest expenses:
Salaries and employee benefits 43,563 2,030 18,309 63,902 939 64,841
Occupancy 7,438 291 3,122 10,851 0 10,851
Data processing 6,174 0 1,248 7,422 0 7,422
Deposit and other assessments 5,735 285 2,183 8,203 397 8,600
Equipment 4,413 0 1,669 6,082 0 6,082
Collection and carrying costs of
nonperforming assets 4,295 149 1,527 5,971 0 5,971
Advertising and marketing 3,692 0 1,055 4,747 0 4,747
Other noninterest expenses 15,448 1,529 (5) 6,434 23,411 740 24,151
---------- ------ --------- ---------- ------- ----------
90,758 4,284 35,547 130,589 2,076 132,665
---------- ------ --------- ---------- ------- ----------

Income (loss) before income tax (benefit) 35,025 222 12,685 47,932 3,956 51,888
Applicable income tax (benefit) 9,588 19 (6) 4,074 13,681 1,433 (6) 15,114
---------- ------ --------- ---------- ------- ----------
Net income (loss) $25,437 $203 $8,611 $ 34,251 $2,523 $36,774
---------- ------ --------- ---------- ------- ----------
---------- ------ --------- ---------- ------- ----------
Earnings per share $1.52 $2.12 $1.38 $1.48
Average shares outstanding 16,719,800 4,065,000 24,849,800 24,849,800

</TABLE>

72
<PAGE>

PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND BNHC
YEAR ENDED DECEMBER 31, 1993
(Unaudited)
(In Thousands, Except Share Data)

Pro Forma
PHFG BNHC Combined
---- ---- ---------
(3)
<S> <C> <C> <C>

Interest and dividend income:
Interest and fees on loans and leases $157,239 $51,608 $208,847
Interest on mortgage-backed investments 10,266 224 10,490
Interest on other investments 12,446 10,865 23,311
Dividends on equity securities 1,082 22 1,104
---------- --------- -----------
Total interest and dividend income 181,033 62,719 243,752
---------- --------- -----------

Interest expense:
Interest on deposits 74,728 22,065 96,793
Interest on borrowed funds 14,707 805 15,512
---------- --------- -----------
Total interest expense 89,435 22,870 112,305
---------- --------- -----------

Net interest income 91,598 39,849 131,447

Provision for loan losses 9,779 4,200 13,979
---------- --------- -----------

Net interest income after
provision for loan losses 81,819 35,649 117,468
---------- --------- -----------

Noninterest income:
Customer services 6,671 3,791 10,462
Mortgage banking services 6,176 1,163 7,339
Loan related services 1,588 1,323 2,911
Trust and investment advisory services 1,373 3,321 4,694
Net securities gains 1,001 182 1,183
Net gains on sales of consumer loans 2,576 0 2,576
Other noninterest income 319 44 363
---------- --------- -----------
19,704 9,824 29,528
---------- --------- -----------

Noninterest expenses:
Salaries and employee benefits 38,636 17,651 56,287
Occupancy 6,794 3,043 9,837
Data processing 4,965 815 5,780
Deposit and other assessments 5,843 2,524 8,367
Equipment 4,329 1,839 6,168
Collection and carrying costs of
nonperforming assets 11,640 3,268 14,908
Advertising and marketing 2,026 938 2,964
Other noninterest expenses 13,510 5,865 19,375
---------- --------- -----------
87,743 35,943 123,686
---------- --------- -----------

Income before income tax (benefit) 13,780 9,530 23,310
Applicable income tax (benefit) (2,339) 3,138 799
---------- --------- -----------
Net income $16,119 $6,392 $22,511
---------- --------- -----------
---------- --------- -----------
Earnings per share $0.97 $1.80 $0.95
Average shares outstanding 16,601,195 3,552,000 23,705,195

</TABLE>

73
<PAGE>

PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND BNHC
YEAR ENDED DECEMBER 31, 1992
(Unaudited)
(In Thousands, Except Share Data)

Pro Forma
PHFG BNHC Combined
---- ---- ---------
(3)
<S> <C> <C> <C>

Interest and dividend income:
Interest and fees on loans and leases $176,633 $60,836 $237,469
Interest on mortgage-backed investments 6,369 465 6,834
Interest on other investments 15,459 11,551 27,010
Dividends on equity securities 1,229 54 1,283
---------- --------- -----------
Total interest and dividend income 199,690 72,906 272,596
---------- --------- -----------

Interest expense:
Interest on deposits 103,007 29,835 132,842
Interest on borrowed funds 16,140 1,476 17,616
---------- --------- -----------
Total interest expense 119,147 31,311 150,458
---------- --------- -----------

Net interest income 80,543 41,595 122,138

Provision for loan losses 25,225 6,800 32,025
---------- --------- -----------

Net interest income after
provision for loan losses 55,318 34,795 90,113
---------- --------- -----------

Noninterest income:
Customer services 6,345 3,722 10,067
Mortgage banking services 7,287 919 8,206
Loan related services 1,513 1,374 2,887
Trust and investment advisory services 1,204 3,016 4,220
Net securities gains 2,851 8 2,859
Net gains on sales of consumer loans 0 0 0
Other noninterest income 1,250 117 1,367
---------- --------- -----------
20,450 9,156 29,606
---------- --------- -----------

Noninterest expenses:
Salaries and employee benefits 33,598 17,302 50,900
Occupancy 6,827 2,896 9,723
Data processing 4,937 388 5,325
Deposit and other assessments 5,495 2,013 7,508
Equipment 4,072 2,084 6,156
Collection and carrying costs of
nonperforming assets 16,386 6,285 22,671
Advertising and marketing 1,529 644 2,173
Other noninterest expenses 14,076 6,559 20,635
---------- --------- -----------
86,920 38,171 125,091
---------- --------- -----------

Income (loss) before income tax (11,152) 5,780 (5,372)
Applicable income tax 53 1,457 1,510
---------- --------- -----------
Income (loss) before cumulative effect of a change
in accounting principle $(11,205) $4,323 $(6,882)
---------- --------- -----------
---------- --------- -----------
Income (loss) per share before cumulative effect of a
change in accounting principle $(1.18) $1.28 $(0.42)
Average shares outstanding 9,463,093 3,382,000 16,227,093

</TABLE>

74
<PAGE>

Notes to Pro Forma Combined Condensed Consolidated Statements of Operations

(1) The operations of Bankcore for the six months ended June 30, 1995 are
included in the operations of Bankcore for the nine months ended September 30,
1995. The operations of Bankcore subsequent to June 30, 1995 are included in
the operations of PHFG.

(2) The pro forma operations of the Branch Acquisition assumes the
following: (i) interest rates on loans and deposits remain unchanged from the
then-existing rates at June 30, 1995 (the most current date for which data is
available), (ii) reduced investment income to reflect the sale of securities
available for sale, at the weighted average rate earned on investments during
1994, by PHFG in conjunction with the purchase, (iii) interest expense on
additional borrowings, at short term borrowing rates available from the Federal
Home Loan Bank of Boston, in conjunction with the purchase, and (iv) estimated
noninterest income and noninterest expenses, including FDIC deposit insurance
premiums at actual rates during the periods presented.

(3) PHFG expects to achieve operating cost savings following the Merger
and consummation of the Purchase Acquisitions, primarily through the
consolidation of certain data processing and other back office operations. The
operating cost savings are expected to be achieved in various amounts at various
times during the periods subsequent to the consummation of such transactions,
and not ratably over or at the beginning or end of such periods. No adjustment
has been reflected in the pro forma combined statements of operations for the
anticipated cost savings.

For the reasons noted above, it should not be assumed that the dilution in
PHFG's earnings per share reflected in the pro forma combined condensed
consolidated statements of operations for periods prior to the nine months ended
September 30, 1995 will represent actual dilution with respect to the Merger or
the Purchase Acquisitions.

(4) The pro forma adjustments reflect the implied financing costs
associated with the acquisition of Bankcore. The interest expense of the PHFG
Debentures due 2000 is reflected on an interest-only basis for the Debentures
that were actually issued at the time of the transaction for the applicable
periods presented. As a result, interest on borrowed funds has been increased
by $386,000, $579,000 and $772,000 during the nine months ended September 30,
1995 and 1994 and the year ended December 31, 1994, respectively. Interest
income on other investments has been adjusted to reflect the foregone interest
income associated with the cost of the PHFG Common Stock that was acquired in
the open market in a dedicated repurchase program; the shares were subsequently
reissued in conjunction with the acquisition of Bankcore, and the cash paid in
lieu of PHFG Debentures due 2000. As a result, interest on other investments
has been decreased by $290,000, $434,000 and $579,000 during the nine months
ended September 30, 1995 and 1994 and the year ended December 31, 1994,
respectively.

75
<PAGE>

(5) The pro forma adjustment reflects the amortization of goodwill
associated with the purchase of Bankcore, which amounted to $114,000, $171,000
and $228,000 during the nine months ended September 30, 1995 and 1994 and the
year ended December 31, 1994, respectively. The pro forma adjustment for the
nine months ended September 30, 1995 reflects only six months of amortization to
adjust for the July 1, 1995 acquisition date.

(6) The net pro forma adjustments, where applicable, have been tax
effected at an effective tax rate of 34%.

(7) The pro forma adjustment reflects the amortization of the estimated
deposit premium related to the Branch Acquisition, which amounted to $2.08
million, $2.08 million and $2.77 million during the nine months ended September
30, 1995 and 1994 and the year ended December 31, 1994, respectively. The
deposit premium is being amortized over seven years.

DESCRIPTION OF PHFG CAPITAL STOCK

PHFG is authorized to issue up to 30,000,000 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 BNHC 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.

76
<PAGE>

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.

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

77
<PAGE>

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

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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 Board of
Directors of PHFG 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.

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 Board of Directors of PHFG 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 Board of
Directors into three classes to serve for three years with one class being
elected annually; (ii) authorizing the Board to fix the size of the Board
between three and 15 directors; (iii) authorizing directors to fill vacancies in
the 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 Board of Directors 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.

For information relating to certain of the foregoing provisions which may
be avoided by approval of the Board of Directors of PHFG, see "Comparison of the
Rights of Shareholders - Business Combinations with Certain Persons and
Acquisitions of Shares," and for information relating to the manner in which
PHFG may amend its Articles and Bylaws, see "Comparison of the Rights of
Shareholders - Amendment of Governing Instruments."

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TRANSFER AGENT

The transfer agent and registrar for the PHFG Common Stock is Mellon
Securities Transfer Service, New York, New York.

COMPARISON OF THE RIGHTS OF SHAREHOLDERS

PHFG is a Maine corporation subject to the provisions of the MBCA and BNHC
is a New Hampshire corporation subject to the provisions of the NHBCA. Upon
consummation of the Merger, shareholders of BNHC 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 BNHC'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 AGREEMENT AND BYLAWS OF BNHC, THE ARTICLES AND
BYLAWS OF PHFG AND APPLICABLE LAWS AND REGULATIONS.

AUTHORIZED CAPITAL STOCK

BNHC. BNHC's Articles of Agreement authorize the issuance of up to
6,000,000 shares of BNHC Common Stock, of which 4,064,165 shares were
outstanding as of the Record Date, and up to 500,000 shares of preferred stock,
no par value per share ("BNHC Preferred Stock"), of which no shares are issued
and outstanding.

PHFG. PHFG's Articles authorize the issuance of up to 30,000,000 shares of
PHFG Common Stock, of which 16,947,740 shares were outstanding as of the Record
Date, and up to 5,000,000 shares of PHFG 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 PHFG's Board of Directors may fix
and determine by resolution.

ISSUANCE OF CAPITAL STOCK

BNHC. Under the NHBCA, BNHC may issue shares of BNHC capital stock and
rights or options for the purchase of shares of capital stock of BNHC on such
terms and for such consideration as may be determined by the Board of Directors
of BNHC. Neither the NHBCA nor BNHC's Articles of Agreement and Bylaws require
shareholder approval of any such actions. However, the Bylaws of the National
Association of Securities Dealers, Inc. ("NASD") generally require corporations,
such as BNHC, 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

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plans also may be sought in certain instances in order to qualify such plans for
favorable federal income tax and securities law treatment under current laws and
regulations.

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 BNHC, 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 and securities laws
treatment under current laws and regulations.

VOTING RIGHTS

BNHC. Each share of BNHC Common Stock is entitled to one vote per share on
all matters properly presented at meetings of shareholders of BNHC. BNHC's
Articles of Agreement provide that holders of BNHC Common Stock shall have
cumulative voting rights in elections of directors. Cumulative voting enables
each shareholder to give one nominee for director as many votes as is equal to
the total number of nominees multiplied by the number of shares voted, or to
distribute such votes on the same basis among two or more nominees.

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. PHFG's
Articles and Bylaws do not permit shareholders to cumulate their votes in an
election of directors.

For information about the effects of the Merger on the voting rights of
shareholders in connection with business combinations, see "Mergers,
Consolidations and Sales of Assets" and "Business Combinations with Certain
Persons and Acquisitions of Shares" below.

DIVIDENDS AND OTHER DISTRIBUTIONS

BNHC. Under the NHBCA, subject to any restrictions contained in its
articles of incorporation, a New Hampshire corporation such as BNHC may make
distributions to its shareholders, provided that no distribution may be made if,
after giving it effect, the corporation would not be able to pay its debts as
they become due in the usual course of business and the corporation's total
assets would be less than the sum of its total liabilities plus, unless the
articles of incorporation permit otherwise, the amount that would be needed, if
the corporation were to be dissolved at the time of the distribution, to satisfy
the

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preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution.

PHFG. Under the MBCA, subject to any restrictions contained in its
articles of incorporation, a Maine corporation such as PHFG generally may pay
dividends on its outstanding shares in cash or property, (i) out of unreserved
and unrestricted earned surplus of the corporation, or out of the unreserved and
unrestricted net earnings of the current fiscal year and the next preceding
fiscal year taken as a single period, or (ii) if authorized by the articles of
incorporation or a vote of shareholders, out of capital surplus of the
corporation, provided in each case that the corporation is not insolvent and the
payment of the dividend would not render the corporation insolvent.

BNHC AND PHFG. Each of PHFG and BNHC is a legal entity separate and
distinct from its respective banking subsidiary or subsidiaries. PHFG's and
BNHC's principal source of revenue for general corporate purposes, such as the
payment of dividends on PHFG Common Stock and BNHC Common Stock, respectively,
consists of dividends from its respective banking subsidiary or subsidiaries.
The payment of dividends by a bank holding company and its banking subsidiaries
is subject to various regulatory requirements, such as the maintenance of
adequate capital in accordance with the requirements of applicable laws and
regulations. For example, the Federal Deposit Insurance Act generally prohibits
an undercapitalized depository institution from paying dividends. In addition,
if, in the opinion of the applicable federal banking agency, a bank holding
company or a bank under its jurisdiction is engaged in or is about to engage in
an unsafe or unsound practice (which, depending on the financial condition of
the institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such organization cease and desist from
such practice. The federal banking agencies also have issued policy statements
which provide that bank holding companies and insured depository institutions
should generally only pay dividends out of current operating earnings.

CLASSIFICATION AND SIZE OF BOARD OF DIRECTORS

BNHC. The Bylaws of BNHC provide that the number of directors of BNHC
shall not be less than five nor more than 25, as from time to time set by the
shareholders of BNHC, provided that the Board of Directors of BNHC, by an
affirmative vote of two thirds of the full Board of Directors at any meeting of
the Board of Directors called for that purpose, may in any given calendar year
increase the number of directors by no more than two and appoint qualified
persons to fill the vacancies so created until the next annual meeting of
shareholders. Currently the number of directors of BNHC is 17.

BNHC's Bylaws provide that the term of office of each director of BNHC
shall be one year and until his or her successor is elected and qualified.

PHFG. The Articles of PHFG provide that the Board of Directors of PHFG may
increase or decrease the number of directors of PHFG by resolution, and that the

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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 10, which will be increased to 12 upon
consummation of the Merger. See "The Merger - Interests of Certain Persons in
the Merger."

Pursuant to PHFG's Articles and Bylaws, the Board of Directors of PHFG 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

BNHC. Any vacancy occurring in the Board of Directors of BNHC resulting
from death, resignation, removal or increase in the number of directors or other
cause may be filled by a majority vote of the remaining directors, although less
than a quorum. A director elected to fill a vacancy shall serve until the next
annual meeting of shareholders of BNHC.

Under BNHC's Bylaws, any director may be removed, either with or without
cause, by a vote of the shareholders representing two thirds of the shares of
the capital stock eligible to vote thereon at any annual meeting or special
meeting of shareholders called for that purpose.

PHFG. Vacancies occurring in the Board of Directors of PHFG by reason of
an increase in the number of directors may be filled by the Board of Directors
of PHFG, and any directors so chosen shall hold office until the next election
of directors by the shareholders of PHFG. Any other vacancy in the Board of
Directors of PHFG, 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 CONFLICT OF INTEREST TRANSACTIONS

BNHC. The NHBCA generally provides that transactions involving a New
Hampshire corporation and an interested director of that corporation are not
voidable by the corporation solely because of such director's interest if: (i)
the material facts are

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disclosed 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, exclusive of any shares owned by
or voted under the control of the benefited director, or (iii) the transaction
was fair to the corporation. The NHBCA provides that a New Hampshire
corporation may not lend money to or guarantee the obligation of a director of
the corporation unless (i) the loan or guarantee is approved by a majority of
the shares entitled to vote thereon, exclusive of the shares owned by or voted
under the control of the benefited director, or (ii) the board of directors of
the corporation determines that the loan or guarantee benefits the corporation
and either approves the specific loan or guarantee or a general plan authorizing
loans and guarantees.

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 AND OFFICERS

BNHC. BNHC's Articles of Agreement provide that, to the fullest extent not
prohibited by law, no director and/or officer of BNHC shall be personally liable
to BNHC or its shareholders for monetary damages for conduct as a director. The
NHBCA does not contain a provision which limits or eliminates the personal
liability of a director or officer of a New Hampshire corporation in certain
circumstances, but does provide that a director or officer of a New Hampshire
corporation shall not be liable for any action taken as such, or any failure to
take any action, if he or she performed the duties of his office in compliance
with the applicable sections of the NHBCA.

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. Neither
the MBCA nor the Articles and Bylaws of PHFG contain provisions which limit or
eliminate the personal liability of officers in certain circumstances.

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SPECIAL MEETINGS OF SHAREHOLDERS

BNHC. BNHC's Bylaws provide that special meetings of shareholders of BNHC
may be called by the Chairman of the Board or the President or by a majority of
the Board of Directors of BNHC and shall be called by the Board of Directors of
BNHC upon the written request of the holders of not less than 10% of the
outstanding capital stock of BNHC.

PHFG. Special meetings of shareholders of PHFG may be called by the
Chairman, the President or a majority of the Board of Directors of PHFG 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 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

BNHC. BNHC'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 BNHC (i) not less than 90 days prior to any annual meeting of BNHC, unless
the date of any annual meeting shall be changed to a date more than 30 days
before or 90 days after the date of the immediately preceding annual meeting, or
(ii) not less than ten days prior to any special meeting called for the election
of directors, provided, however, that if less than 21 days' notice of the
special meeting is given to shareholders, such nomination(s) shall be mailed or
delivered to the President by the seventh day following the day on which the
notice of the special meeting was mailed. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the total number of shares of capital stock of BNHC that
will be voted for each proposed nominee; (d) the name and residence address of
the notifying shareholder; (e) the number of shares of capital stock of BNHC
owned by the notifying shareholder; and (f) whether or not the notifying
shareholder intends to elect cumulative voting.

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. Each such notice shall set forth: (a) the name
and address of the shareholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the shareholder is
a holder of record of stock of PHFG entitled to vote at such meeting and intends
to appear in person

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or by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or person (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder; (d) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the SEC; and (e) the consent of each nominee to
serve as a director of PHFG if so elected.

SHAREHOLDER PROPOSALS

BNHC. BNHC does not have a provision in its Bylaws relating to shareholder
proposals at annual meetings of shareholders. Shareholder proposals which are
proposed to be included in the proxy statement and form of proxy of BNHC
relating to an annual meeting must be submitted in accordance with the notice
and other requirements of Rule 14a-8 under the Exchange Act.

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 to the Clerk shall set forth as to each matter the shareholder proposes
to bring before the annual meeting (a) a brief description of the business
desired to be brought before the annual meeting; (b) the name and address, as
they appear on PHFG's books, of the shareholder proposing such business; (c) the
class and number of shares of PHFG which are beneficially owned by the
shareholder; and (d) any material interest of the shareholder in such business.
Shareholder proposals which are proposed to be included in the proxy statement
and form of proxy of PHFG relating to an annual meeting must be submitted in
accordance with the notice and other requirements of Rule 14a-8 under the
Exchange Act.

SHAREHOLDER ACTION WITHOUT A MEETING

BNHC. The NHBCA provides that any action required or permitted to be taken
at an annual or special meeting of shareholders may be taken without a meeting
if the action is taken by all the shareholders entitled to vote on the action by
one or more written consents. Unanimous written consent is obtainable, as a
practical matter, only on matters on which there are only a relatively few
shareholders entitled to vote.

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.

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SHAREHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS

BNHC. The NHBCA provides that a list of shareholders of a New Hampshire
corporation such as BNHC must be available for inspection by any shareholder,
beginning two business days after notice of the meeting of shareholders is given
for which the list was prepared and continuing through the meeting. The NHBCA
also provides that a shareholder of a New Hampshire corporation may inspect and
copy certain specified records of the corporation during regular business hours
if the shareholder (i) has made a demand in writing at least five business days
in advance of the date on which he or she desires to inspect and copy records,
and such demand is made in good faith and states a proper purpose, (ii)
described with reasonable particularity his purpose and the records to be
inspected and (iii) the records are directly connected with the purpose. The
NHBCA authorizes a shareholder of a New Hampshire 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 incurred to obtain the order unless the corporation proves that it refused
inspection in good faith because it had a reasonable basis for doubt about the
right of the shareholder to inspect the records demanded.

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

BNHC. Except for certain amendments which may be effected by the Board of
Directors of BNHC, no amendment of BNHC's Articles of Agreement may be made
unless it is first proposed by the Board of Directors of BNHC, which shall
recommend adoption of the amendment by shareholders unless there is a conflict
of interest or other special circumstances, and thereafter approved by the
holders of a majority of the total votes eligible to be cast at a legal meeting,
provided that Article VII of BNHC's Articles of Agreement (dealing with certain
business combinations) may not be amended, repealed or supplemented without the
affirmative vote of the shareholders representing two-thirds of the capital
stock of BNHC entitled to vote thereon at any annual or special meeting of
shareholders called for that purpose. See "Business Combinations with Certain
Persons and Acquisitions of Shares" below.

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The Bylaws of BNHC generally may be amended by (i) the affirmative vote of
the shareholders representing a majority of the capital stock entitled to vote
thereon at any annual meeting or special meeting called for that purpose or (ii)
the affirmative vote of a majority of the full Board of Directors of BNHC at any
regular meeting or special meeting called for that purpose, provided that
certain sections of the Bylaws may not be amended without the affirmative vote
of either the shareholders representing two-thirds of the capital stock entitled
to vote thereon or two-thirds of the full Board of Directors. The sections in
BNHC's Bylaws requiring such a higher vote for amendment consist of those
relating to the number and election of directors, shareholder nominations for
director, removal of directors and amendment of the Bylaws.

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 and Acquisitions of Shares" 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

BNHC. The NHBCA requires the approval of the Board of Directors of BNHC,
which shall recommend adoption by shareholders unless there is a conflict of
interest or other special circumstances, and the holders of at least a majority
of the outstanding BNHC Common Stock for mergers, consolidations and share
exchanges in which BNHC is a participating corporation and for sales of all or
substantially all of its property and assets. The NHBCA would permit BNHC to
merge with another corporation without obtaining the approval of BNHC's
shareholders if: (i) BNHC is the surviving corporation of the merger; (ii) the
plan of merger does not amend the articles of incorporation of the surviving
corporation, except for certain permitted amendments; (iii) each shareholder of
BNHC will hold the same number of shares with identical terms after the merger
as before the merger; and (iv) the number of voting shares outstanding after the
merger, plus the number of voting shares issuable as a result of the merger,
will not exceed by more than 20% the total number of voting shares of BNHC
outstanding immediately before the merger.

PHFG. The MBCA 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

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consolidations in which PHFG is a participating corporation and for sales of all
or substantially all of PHFG's property and assets. The MBCA would permit PHFG
to merge or consolidate with another corporation without obtaining the approval
of PHFG's shareholders if: (i) PHFG is the surviving corporation of the merger;
(ii) the plan of merger does not amend the Articles; and (iii) the shares of any
class of stock of PHFG to be issued or delivered under the plan of merger do not
exceed 15% of the shares of PHFG of the same class outstanding immediately prior
to the effective date of the merger.

BUSINESS COMBINATIONS WITH CERTAIN PERSONS AND ACQUISITIONS OF SHARES

BNHC. The Articles of Agreement of BNHC contain a provision which requires
that mergers and certain other business combinations with an "interested
shareholder," as defined, be approved by the holders of two-thirds of the
capital stock of BNHC entitled to vote thereon at an annual meeting or special
meeting of the shareholders called for that purpose, provided that a merger or
other business combination which previously has been approved by a majority of
BNHC's "continuing directors," as defined, shall be authorized by an affirmative
vote of the holders of a majority of the capital stock of BNHC entitled to vote
thereon. An "interested shareholder" for this purpose generally includes any
person, firm or entity which is the beneficial owner of more than 10% of the
voting stock of BNHC.

Neither the Articles of Agreement and Bylaws of BNHC nor the NHBCA contain
provisions which are comparable to the MBCA discussed below dealing with
business combinations with certain persons and acquisitions of shares of voting
stock of PHFG.

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 approves the
merger or other business combination in the manner provided therein. 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.

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 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

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<PAGE>

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

BNHC. Under the NHBCA, a shareholder of a New Hampshire corporation such
as BNHC generally has the right to dissent from, and obtain payment of the fair
value of his shares in the event of, a merger or share exchange in which the
corporation is participating, a sale of all or substantially all of the property
and assets of the corporation and certain amendments to the corporation's
articles of incorporation which materially and adversely affect rights in
respect of the shareholder's shares in certain specified respects, subject to
specified procedural requirements. For a detailed description of the
dissenters' rights of shareholders of BNHC 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 sale of all or substantially all of the assets
of the corporation, subject to specified procedural requirements. The MBCA
generally does not confer appraisal rights, however, 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." Moreover, even if a
corporation's stock meets the foregoing requirements, 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,

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<PAGE>

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

BNHC. The Board of Directors of BNHC has not adopted a shareholder rights
plan.

PHFG. The Board of Directors of PHFG has adopted a shareholder rights
plan, as described under "Description of PHFG Capital Stock - PHFG Rights."

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<PAGE>

CERTAIN BENEFICIAL OWNERS OF PHFG COMMON STOCK

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information as to the PHFG Common Stock
beneficially owned as of December 31, 1995 by (i) each director and executive
officer of PHFG and (ii) all directors and executive officers of PHFG as a
group.

Shares Beneficially Owned
as of December 31, 1995(1)
-----------------------------
Name of Beneficial Owner Amount Percent
------------------------------ --------------- -------------
Directors:
Robert P. Bahre . . . . . . . . . . . . 38,660(2) --%
Everett W. Gray . . . . . . . . . . . . 5,504(2) --
Andrew W. Greene . . . . . . . . . . . . 3,179(2) --
Katherine M. Greenleaf . . . . . . . . . 7,123(2) --
Dana S. Levenson . . . . . . . . . . . . 4,262(2) --
Robert A. Marden . . . . . . . . . . . . 7,864(2)(3) --
Malcolm W. Philbrook, Jr. . . . . . . . . 46,879(2)(4) --
Pamela P. Plumb . . . . . . . . . . . . 9,116(2) --
William J. Ryan . . . . . . . . . . . . 146,295(5) --
Curtis M. Scribner . . . . . . . . . . . 8,303(2) --

Executive Officers who are not Directors:
Henry G. Beyer . . . . . . . . . . . . . 41,350(5) --
John W. Fridlington . . . . . . . . . . 38,594(5) --
John E. Menario . . . . . . . . . . . . 85,692(5)(6) --
Peter J. Verrill . . . . . . . . . . . . 64,285(5)(7) --

All directors and executive officers of
PHFG as a group (14 persons) . . . . . . . 507,106 2.9%(8)

- --------------------

(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.

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<PAGE>

(2) Includes options to purchase 1,000 shares granted under PHFG's 1995 Stock
Option Plan for Non-Employee Directors.

(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 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 (as of June 30, 1995) and Profit Sharing Employee
Stock Ownership Plan, and options to purchase shares of PHFG Common Stock
pursuant to PHFG's 1987 Stock Option and Stock Appreciation Rights Plan
("Option Plan") which are exercisable within 60 days of December 31,
1995, as follows:

Profit Sharing Currently
Employee Stock Exercisable
Thrift Incentive Plan Ownership Plan Options
--------------------- ---------------- ------------
William J. Ryan . . . 21,678 2,062 110,727
Henry G. Beyer . . . 10,020 1,482 29,823
John W. Fridlington 2,827 1,176 34,823
John E. Menario . . . 55,412 2,283 34,554
Peter J. Verrill . . 17,334 2,063 40,569

(6) Includes 28,920 shares held jointly with Mr. Menario's wife and 1,247
shares held solely by Mr. Menario's wife, with whom beneficial ownership of
such shares is shared.

(7) Includes 3,344 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 116,337 shares of PHFG Common Stock which are held
by the trusts established pursuant to the Thrift Incentive Plan (107,271
shares) and the Profit Sharing Employee Stock Ownership Plan (9,066 shares)
and which have been allocated to the accounts of executive officers of PHFG
as a group. Also includes 250,496 shares which Messrs. Ryan, Beyer,
Fridlington, Menario and Verrill have the right to acquire through the
exercise of stock options pursuant to the Option Plan. 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

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<PAGE>

directors and executive officers of PHFG as a group. Exclusive of shares
which may be acquired upon the exercise of stock options, directors and
executive officers of PHFG as a group beneficially owned 256,661 shares or
1.5% of the issued and outstanding PHFG Common Stock.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as to the PHFG 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 PHFG
to be the beneficial owner of 5% or more of the outstanding PHFG Common Stock as
of December 31, 1995.

Shares Beneficially Owned
as of December 31, 1995
------------------------------
Name and Address of
Beneficial Owner Amount Percent
- ---------------------------------------- --------------- --------------
Brandes Investment Partners, Inc. 985,705(1) 5.8%
San Diego, California

________________________

(1) Based on a Schedule 13G filed under the Exchange Act on March 13, 1995,
Brandes Investment Partners, Inc. has sole voting power over the indicated
shares and sole dispositive power and shared dispositive power over 1,000
shares and 984,705 shares, respectively.

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<PAGE>

CERTAIN BENEFICIAL OWNERS OF BNHC COMMON STOCK

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information as to the BNHC Common Stock
beneficially owned as of December 31, 1995 by (i) each director and executive
officer of BNHC and (ii) all directors and executive officers of BNHC as a
group.

Shares Beneficially Owned
as of December 31, 1995(1)
----------------------------
Name of Beneficial Owner Amount Percent
------------------------------ ------------- ------------
Directors:

Robert L. Bailey . . . . . . . . . . . . 17,074 --%

Robert P. Bass, Jr.(2) . . . . . . . . . 8,680 --

Arthur E. Comolli . . . . . . . . . . . 4,530 --

Raymond G. Cote . . . . . . . . . . . . 7,800 --

Sidney Thurber Cox(3) . . . . . . . . . 173,680 4.3

Raymond J. Creteau . . . . . . . . . . . 17,380 --

Robert B. Field, Jr.(2) . . . . . . . . 12,850 --

Peter J. Griffin . . . . . . . . . . . . 40 --

Morton E. Goulder(2) . . . . . . . . . . 62,752 1.5

Philip D. Labombarde(2) . . . . . . . . 5,640 --

Floyd A. Lamb . . . . . . . . . . . . . 400 --

Peter Prudden(3) . . . . . . . . . . . . 10,964 --

Joseph G. Sakey(2) . . . . . . . . . . . 5,565 --

Paul R. Shea . . . . . . . . . . . . . . 4,130 --

Davis P. Thurber(2)(3)(4) . . . . . . . 167,451 4.1

Georg R. Walker . . . . . . . . . . . . 5,500 --

Richard S. West(2) . . . . . . . . . . . 16,024 --

Executive Officers who are not Directors:

Gregory D. Landroche . . . . . . . . . . 1,248 --

Allen G. Tarbox, Jr. . . . . . . . . . . 2,570 --

Alice L. DeSouza . . . . . . . . . . . . 912 --

All directors and executive officers of
BNHC as a group (20 persons) . . . . . . . 525,190 12.9%

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<PAGE>

___________________

(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 BNHC 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 BNHC Common Stock.

(2) Includes shares owned by a nominee's spouse, minor children, children
or family members living at home, shares to which investment advice is
given, and shares held or owned as a custodian for the benefit of
minors, as to which each beneficial owner disclaims any beneficial
interests as follows:

Director Bass disclaims a beneficial interest in 1,000 shares owned by his
spouse; Director Field disclaims a beneficial interest in 2,550 shares
owned by family members (2,200) and the Robert B. Field Revocable Trust
(350); Director Goulder disclaims a beneficial interest in 35,296 shares
owned by Goulder Investments, Ltd. (33,240) and the Clair T. Goulder
Revocable Trust (2,056); Director Labombarde disclaims a beneficial
interest in 1,940 shares owned by deGaspe Corporation (1,500) and by his
daughter (440); Director Sakey disclaims a beneficial interest in 1,168
shares owned by family members; Director Thurber disclaims a beneficial
interest in 5,000 shares owned by his spouse; and Director West disclaims a
beneficial interest in 8,900 shares owned by family members.

(3) Director Thurber is a first cousin to Director Cox, and Director
Prudden is the son of Constance T. Prudden, Mr. Thurber's sister.

(4) Includes an interest in 41,113 shares held by BNH as trustee under
testamentary trusts created under the wills of George F. Thurber, Sr.
and Muriel D. Thurber, to be voted in person or by proxy at the BNHC
Special Meeting by Director Prudden.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as to persons known to BNHC to
constitute a "group," as that term is used in Section 13(d)(3) of the Exchange
Act, which was the beneficial owner of 5% or more of the outstanding BNHC Common
Stock as of December 31, 1995. As of December 31, 1995, BNHC was not aware
of any other person or entity, including any "group" as that term is used in
Section 13(d)(3) of the Exchange Act, who or which was the beneficial owner of
5% or more of the outstanding BNHC Common Stock.

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<PAGE>

Shares Beneficially Owned
as of December 31, 1995(1)
-----------------------------------
Name and Address of
Beneficial Owner Amount Percent
- ---------------------------------------- --------------- --------------
Sidney Thurber Cox(1) 173,680 4.3%
241 Clinton Street
Watertown, New York 13601

Davis P. Thurber(1) 167,451 4.1
25 Swart Terrace
Nashua, New Hampshire 03060

Constance T. Prudden(1) 100,037 2.5
1 Button Cove Road
Hingham, Massachusetts 02043

Shelley D. Thurber(3) 40,380 1.0
93 Summer Street
Boston, Massachusetts 02110

Steven A. Thurber(2)(3) 38,680 1.0
39-A Manchester Street
Nashua, New Hampshire 03060

George Frederick Thurber(3) 47,020 1.1
227 Summit Avenue
Brookline, Massachusetts 02146

Matthew T. Thurber(3) 47,020 1.1
1 Carey Circle
Revere, Massachusetts 02151
Group total 614,268 15.1%

_____________________

(1) See the above table and related notes.

(2) Mr. Thurber disclaims a beneficial interest in 200 shares held as
custodian and 100 shares held as trustee for his minor child.

(3) Includes 2,200 shares held in the Shirley A. Thurber Trust.

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<PAGE>

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 consolidated financial statements of PHFG as of December 31, 1994 and
1993, and for each of the years in the three-year period ended December 31, 1994
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 consolidated financial statements of BNHC incorporated by reference in
BNHC's Annual Report (Form 10-K) for the year ended December 31, 1994, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon incorporated by reference therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.

PROPOSALS FOR THE 1996
ANNUAL MEETINGS

In the case of each of PHFG and BNHC, the deadline set forth in Rule 14a-8
under the Exchange Act for the submission of proposals by shareholders for
inclusion in the proxy statement and form of proxy to be used by PHFG and BNHC
in connection with its annual meeting of shareholders to be held in April 1996
has passed.

<PAGE>

ANNEX I

AGREEMENT AND PLAN OF MERGER

AMONG

PEOPLES HERITAGE FINANCIAL GROUP, INC.,

FIRST COASTAL BANKS, INC.

AND

BANK OF NEW HAMPSHIRE CORPORATION

DATED AS OF OCTOBER 25, 1995

<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS

PAGE
----
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . .2

ARTICLE II THE MERGER AND THE BANK MERGER. . . . . . . . . . . . . .7

2.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . .7
2.2 Effective Time; Closing . . . . . . . . . . . . . . . . .7
2.3 Treatment of Capital Stock. . . . . . . . . . . . . . . .8
2.4 Shareholder Rights; Stock Transfers . . . . . . . . . . .8
2.5 Dissenting Shares . . . . . . . . . . . . . . . . . . . .8
2.6 Fractional Shares . . . . . . . . . . . . . . . . . . . .9
2.7 Exchange Procedures . . . . . . . . . . . . . . . . . . .9
2.8 Anti-Dilution Provisions. . . . . . . . . . . . . . . . 10
2.9 Additional Actions. . . . . . . . . . . . . . . . . . . 11
2.10 The Bank Merger . . . . . . . . . . . . . . . . . . . . 11

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . 11

3.1 Capital Structure . . . . . . . . . . . . . . . . . . . 11
3.2 Organization, Standing and Authority of the Company . . 12
3.3 Ownership of the Bank . . . . . . . . . . . . . . . . . 12
3.4 Organization, Standing and Authority of the Bank. . . . 12
3.5 Authorized and Effective Agreement. . . . . . . . . . . 13
3.6 Securities Documents and Regulatory Reports . . . . . . 14
3.7 Financial Statements. . . . . . . . . . . . . . . . . . 15
3.8 Material Adverse Change . . . . . . . . . . . . . . . . 15
3.9 Environmental Matters . . . . . . . . . . . . . . . . . 15
3.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . 16
3.11 Legal Proceedings . . . . . . . . . . . . . . . . . . . 17
3.12 Compliance with Laws. . . . . . . . . . . . . . . . . . 17
3.13 Certain Information . . . . . . . . . . . . . . . . . . 18
3.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . 18
3.15 Certain Contracts . . . . . . . . . . . . . . . . . . . 20
3.16 Brokers and Finders . . . . . . . . . . . . . . . . . . 21
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . 21
3.18 Properties. . . . . . . . . . . . . . . . . . . . . . . 21
3.19 Labor . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.20 Required Vote . . . . . . . . . . . . . . . . . . . . . 22
3.21 Accounting for the Merger; Reorganization . . . . . . . 22

<PAGE>

3.22 Disclosures . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR . . . . . . . . . . . . . . . . . . . 23

4.1 Capital Structure . . . . . . . . . . . . . . . . . . . 23
4.2 Organization, Standing and Authority of the Acquiror. . 23
4.3 Ownership of the Acquiror Subsidiaries. . . . . . . . . 24
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries. . . . . . . . . . . . . . . . . 24
4.5 Authorized and Effective Agreement. . . . . . . . . . . 24
4.6 Securities Documents and Regulatory Reports . . . . . . 26
4.7 Financial Statements. . . . . . . . . . . . . . . . . . 26
4.8 Material Adverse Change . . . . . . . . . . . . . . . . 27
4.9 Environmental Matters . . . . . . . . . . . . . . . . . 27
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . 28
4.11 Legal Proceedings . . . . . . . . . . . . . . . . . . . 28
4.12 Compliance with Laws. . . . . . . . . . . . . . . . . . 28
4.13 Certain Information . . . . . . . . . . . . . . . . . . 29
4.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . 30
4.15 Certain Contracts . . . . . . . . . . . . . . . . . . . 31
4.16 Brokers and Finders . . . . . . . . . . . . . . . . . . 31
4.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . 31
4.18 Properties. . . . . . . . . . . . . . . . . . . . . . . 31
4.19 Labor . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.20 Required Vote; Acquiror Rights Agreement. . . . . . . . 32
4.21 Accounting for the Merger; Reorganization . . . . . . . 32
4.22 Disclosures . . . . . . . . . . . . . . . . . . . . . . 33

ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 33

5.1 Reasonable Best Efforts . . . . . . . . . . . . . . . . 33
5.2 Shareholder Meetings. . . . . . . . . . . . . . . . . . 33
5.3 Regulatory Matters. . . . . . . . . . . . . . . . . . . 33
5.4 Investigation and Confidentiality . . . . . . . . . . . 34
5.5 Press Releases. . . . . . . . . . . . . . . . . . . . . 35
5.6 Business of the Parties . . . . . . . . . . . . . . . . 35
5.7 Current Information . . . . . . . . . . . . . . . . . . 40
5.8 Indemnification; Insurance. . . . . . . . . . . . . . . 40
5.9 Certain Directors and Officers. . . . . . . . . . . . . 41
5.10 Benefit Plans and Arrangements. . . . . . . . . . . . . 42
5.11 Accountants' Letters. . . . . . . . . . . . . . . . . . 42
5.12 Certain Policies; Integration . . . . . . . . . . . . . 43
5.13 Restrictions on Resale. . . . . . . . . . . . . . . . . 43

<PAGE>

5.14 Disclosure Supplements. . . . . . . . . . . . . . . . . 44
5.15 Failure to Fulfill Conditions . . . . . . . . . . . . . 44

ARTICLE VI CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . 44

6.1 Conditions Precedent - The Acquiror, the Acquiror Sub
and the Company. . . . . . . . . . . . . . . . . . . . 44
6.2 Conditions Precedent - The Company. . . . . . . . . . . 46
6.3 Conditions Precedent - The Acquiror and the
Acquiror Sub . . . . . . . . . . . . . . . . . . . . . 47

ARTICLE VII TERMINATION, WAIVER AND AMENDMENT . . . . . . . . . . . 48

7.1 Termination . . . . . . . . . . . . . . . . . . . . . . 48
7.2 Effect of Termination . . . . . . . . . . . . . . . . . 49
7.3 Survival of Representations, Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . 49
7.4 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 50
7.5 Amendment or Supplement . . . . . . . . . . . . . . . . 50

ARTICLE VIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 50

8.1 Expenses. . . . . . . . . . . . . . . . . . . . . . . . 50
8.2 Entire Agreement. . . . . . . . . . . . . . . . . . . . 50
8.3 No Assignment . . . . . . . . . . . . . . . . . . . . . 51
8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . 51
8.5 Alternative Structure . . . . . . . . . . . . . . . . . 52
8.6 Interpretation. . . . . . . . . . . . . . . . . . . . . 52
8.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . 53
8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . 53

Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Company Stockholder Agreement
Exhibit C Form of Acquiror Stock Option Agreement
Exhibit D Form of Company Affiliate Letter
Exhibit E Form of Acquiror Affiliate Letter
Exhibit F Matters to be covered by Opinion(s) of Counsel to the Acquiror
Exhibit G Matters to be covered by Opinion(s) of Counsel to the Company

iii

<PAGE>

AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger (the "Agreement"), dated as of October 25,
1995, by and among Peoples Heritage Financial Group, Inc. (the "Acquiror"), a
Maine corporation, First Coastal Banks, Inc. (the "Acquiror Sub"), a New
Hampshire corporation and a wholly-owned subsidiary of the Acquiror, and Bank
of New Hampshire Corporation (the "Company"), a New Hampshire 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 Acquiror Sub with and into
the Company, 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;

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:

<PAGE>

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 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, 1994, 1993 and 1992 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, 1994, 1993 and 1992 as filed by the
Acquiror in its Securities Documents, and (ii) the consolidated statements of
financial condition of the 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,
1994.

"Acquiror Maine Bank" shall mean Peoples Heritage Savings Bank, a
Maine-chartered savings bank and a wholly-owned subsidiary of the Acquiror.

"Acquiror New Hampshire Bank" shall mean The First National Bank of
Portsmouth, a national bank and a wholly-owned subsidiary of the Acquiror
Sub.

"Acquiror Preferred Stock" shall mean the shares of preferred stock, par
value $.01 per share, of the Acquiror.

"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.

<PAGE>

"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.

"Bank" shall mean Bank of New Hampshire, a New Hampshire-chartered
commercial bank and a wholly-owned subsidiary of the Company.

"Bank Commissioner" shall mean the Bank Commissioner of the State of New
Hampshire.

"Bank Merger" shall have the meaning set forth in Section 2.10 hereof.

"Bank Merger Agreement" shall have the meaning set forth in Section 2.10
hereof.

"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.

"BIF" means the Bank Insurance Fund administered by the FDIC or any
successor thereto.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Commission" shall mean the Securities and Exchange Commission.

"Company Common Stock" shall mean the common stock, no par value with a
stated value of $2.50 per share, of the Company.

"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof.

"Company Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of the Company as of December 31, 1994, 1993 and 1992 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, 1994, 1993 and 1992 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, 1994.

"Company Preferred Stock" shall mean the shares of preferred stock, no
par value per share, of the Company.

"Dissenting Shares" shall have the meaning set forth in Section 2.5
hereof.

<PAGE>

"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. Section 9601, ET SEQ; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, ET SEQ;
the Clean Air Act, as amended, 42 U.S.C. Section 7401, ET SEQ; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. Section 1251, ET SEQ; the
Toxic Substances Control Act, as amended, 15 U.S.C. Section 9601, ET SEQ; the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 1101,
ET SEQ; the Safe Drinking Water Act, 42 U.S.C. Section 300f, ET SEQ; and all
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

<PAGE>

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.

"Material Adverse Effect" shall mean, with respect to the Acquiror or
the Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and
its Subsidiaries taken as whole and the Company and the Bank taken as a
whole, respectively, or (ii) materially impairs the ability of the Company,
the Bank, the Acquiror, the Acquiror Sub or the Acquiror New Hampshire Bank
to consummate the transactions contemplated by this Agreement and the Bank
Merger 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 of all institutions with SAIF-insured deposits 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 and (d) the actions contemplated by Section 5.12 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 Acquiror Sub with and into the
Company pursuant to the terms hereof.

"MRSA" shall mean the Maine Revised Statutes Annotated.

"NASD" shall mean the National Association of Securities Dealers, Inc.

"NHBCA" shall mean the New Hampshire Business Corporation Act.

"NHBTCI" shall mean the New Hampshire Board of Trust Company
Incorporation.

"OCC" shall mean the Office of the Comptroller of the Currency of the
U.S. Department of the Treasury, or any successor thereto.

"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.

<PAGE>

"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 joint prospectus/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.

"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.

<PAGE>

ARTICLE II
THE MERGER AND THE BANK MERGER

2.1 THE MERGER

(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Acquiror Sub shall be
merged with and into the Company (the "Merger") in accordance with the
applicable provisions of the NHBCA. The Company 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 New Hampshire. The name of the Surviving Corporation shall continue
to be "Bank of New Hampshire Corporation." Upon consummation of the Merger,
the separate corporate existence of the Acquiror Sub shall terminate.

(b) From and after the Effective Time, the Merger shall have the
effects set forth in Section 293-A:11.06 of the NHBCA.

(c) The Articles of Agreement and Bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be the Articles of Agreement
and Bylaws of the Surviving Corporation, respectively, until altered, amended
or repealed in accordance with their terms and applicable law.

(d) Upon consummation of the Merger, (i) the directors of the Surviving
Corporation shall include (x) Davis P. Thurber, Paul R. Shea and seven of the
directors of the Company immediately prior to the Effective Time designated
by the Company and who are willing to so serve and (y) up to seven of the
directors of the Acquiror Sub immediately prior to the Effective Time
designated by the Acquiror and the Acquiror Sub and who are willing to so
serve, (ii) the executive officers of the Surviving Corporation shall be the
executive officers of the Company immediately prior to the Effective Time,
except that Paul R. Shea shall be President and Chief Executive Officer of
the Surviving Corporation and Norman E. Bilodeau shall be Executive Vice
President of the Surviving Corporation, and (iii) Davis P. Thurber shall be
Chairman of the Board of the Surviving Corporation. Directors and officers
of the Surviving Corporation shall serve for such terms as are specified in
the Articles of Agreement and Bylaws of the Surviving Corporation.

2.2 EFFECTIVE TIME; CLOSING

The Merger shall become effective upon the occurrence of the filing of
articles of merger (the "Articles of Merger") with the Secretary of State of
the State of New Hampshire pursuant to the NHBCA, 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

<PAGE>

the delivery of certificates, opinions and other instruments and documents to
be delivered at the Closing), at the principal executive offices of the
Acquiror in Portland, Maine, or at such other place, at such other time, or
on such other date as the parties may mutually agree upon. At the Closing,
there shall be delivered to the Acquiror and the Company the opinions,
certificates and other documents required to be delivered under Article VI
hereof.

2.3 TREATMENT OF CAPITAL STOCK

Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and 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 become and be converted into
one share of Company Common Stock and shall remain issued and outstanding; and

(c) subject to Sections 2.5 and 2.6 hereof, each share of Company
Common Stock issued and outstanding 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 two shares of
Acquiror Common Stock (subject to possible adjustment as set forth in
Sections 2.8 and 7.1(f) hereof, the "Exchange Ratio").

Section 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.

Section 2.5 DISSENTING SHARES

Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the NHBCA and has not effectively withdrawn
or lost such right as of the Effective Time (the "Dissenting Shares") shall not
be converted into or represent a right to receive shares of Acquiror Common
Stock hereunder, and the holder thereof shall be entitled only to such rights as
are granted by the NHBCA. The Company shall give the Acquiror prompt notice
upon receipt by the Company of any such written demands for payment of the fair
value of such shares of Company Common Stock and of withdrawals of such demands
and any other instruments provided pursuant to the NHBCA

<PAGE>

(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.

Section 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 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.
Notwithstanding anything in this Agreement to the contrary, certificates
representing Company Common Stock surrendered for exchange by any Affiliate of
the Company (as defined in Section 5.13(a) hereof) shall not be exchanged for
certificates representing shares of Acquiror Common Stock in accordance with the
terms of this

<PAGE>

Agreement until the Acquiror has received a written agreement from such
person as specified in Section 5.13(b).

(b) No holder of a certificate theretofore 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. Nothing contained herein shall be deemed to
permit any action which may be proscribed by this Agreement.

<PAGE>

2.9 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 Acquiror Sub 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 Acquiror Sub and its proper officers and directors shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such proper deeds, 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 Acquiror Sub or otherwise to take any
and all such action.

2.10 THE BANK MERGER

The Acquiror and the Company shall take all action necessary and
appropriate, including causing the entering into of a merger agreement by the
Bank and the Acquiror New Hampshire Bank (the "Bank Merger Agreement"), to
cause the Acquiror New Hampshire Bank to merge with and into the Bank (the
"Bank Merger") immediately after consummation of the Merger in accordance
with the applicable laws of the State of New Hampshire and the United States.
The Bank shall be the surviving corporation in the Bank Merger, and shall
continue its corporate existence under the name "Bank of New Hampshire" under
the laws of the State of New Hampshire as a direct wholly-owned subsidiary of
the Company and an indirect wholly-owned subsidiary of the Acquiror. Upon
consummation of the Bank Merger, the separate corporate existence of the
Acquiror New Hampshire Bank shall cease. The directors and executive
officers of the Bank upon consummation of the Bank Merger shall be as set
forth in the Bank Merger Agreement.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Acquiror that, except as
Previously Disclosed:

3.1 CAPITAL STRUCTURE

The authorized capital stock of the Company consists of 6,000,000 shares
of Company Common Stock and 500,000 shares of Company Preferred Stock. As of
the date hereof, there are 4,064,156 shares of Company Common Stock issued
and outstanding, no shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock

<PAGE>

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 by virtue of the
Company Stock Option Agreement, 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 State of New Hampshire with full
corporate power and authority to own or lease all of its properties and
assets and to carry on its business as now conducted and is duly licensed or
qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of property or the conduct of 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 bank holding
company under the BHCA and the regulations of the FRB thereunder. The
Company has heretofore delivered to the Acquiror true and complete copies of
the Articles of Agreement and Bylaws of the Company as in effect as of the
date hereof.

3.3 OWNERSHIP OF THE BANK

The only direct or indirect Subsidiary of the Company is the Bank.
Except for capital stock of the Bank, securities and other interests held in
a fiduciary capacity and beneficially owned by third parties or taken in
consideration of debts previously contracted and by virtue of the Acquiror
Stock Option Agreement, the Company does not own or have the right to
acquire, directly or indirectly, any outstanding capital stock or other
voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization. The
outstanding shares of capital stock of the Bank have been duly authorized and
validly issued, are fully paid and nonassessable, and are directly owned by
the Company free and clear of all liens, claims, encumbrances, charges,
pledges, restrictions or rights of third parties of any kind whatsoever. No
Rights are authorized, issued or outstanding with respect to the capital
stock of the Bank and there are no agreements, understandings or commitments
relating to the right of the Company to vote or to dispose of such capital
stock.

3.4 ORGANIZATION, STANDING AND AUTHORITY OF THE BANK

The Bank is a commercial bank duly organized, validly existing and in
good standing under the laws of the State of New Hampshire. The Bank (i) has
full power and authority to own or lease all of its properties and assets and
to carry on its business as now conducted, and (ii) is duly licensed or
qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of property or the conduct of its business

<PAGE>

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 to the
maximum extent permitted by the FDIA, and the Bank has paid all premiums and
assessments required by the FDIA and the regulations thereunder. The Company
has heretofore delivered or made available to the Acquiror true and complete
copies of the Certificate of Incorporation and Bylaws of the Bank as in
effect as of the date hereof.

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 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 Bank Merger), 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 Agreement or Bylaws of the Company or the
equivalent documents of the Bank, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a
default) under, or give rise to any right of termination, cancellation or
acceleration with respect to, or result in the creation of any lien, charge
or encumbrance upon any property or asset of the Company or the Bank pursuant
to, any material note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Company or
the Bank is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or the Bank.

<PAGE>

of the Company and the Acquiror, (v) the filing of Articles of Merger with
the Secretary of State of New Hampshire pursuant to the NHBCA in connection
with the Merger and (vi) the filing of a certificate issued by the Bank
Commissioner approving the Bank Merger with the Secretary of State of New
Hampshire, and except for such filings, authorizations or approvals which are
Previously 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 Bank Merger Agreement and the consummation by the Bank of
the transactions contemplated thereby.

(d) As of the date hereof, neither the Company nor the Bank is aware of
any reasons relating to the Company or the Bank (including without limitation
Community Reinvestment Act compliance) why all consents and approvals shall
not be 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 Bank
Merger Agreement and (ii) the continuation by the Acquiror after the
Effective Time of the business of each of the Acquiror and the Company as
such business is carried on immediately prior to the Effective Time, free of
any conditions or requirements which, in the reasonable opinion of the
Company, could have a Material Adverse Effect on the Acquiror or the Company
or materially impair the value of the Company and the Bank to the Acquiror.

3.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS

(a) Since January 1, 1993, the Company has timely filed with the
Commission all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities
Laws and did not 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, each of the Company and the Bank has duly
filed with the FRB, the FDIC and the Bank Commissioner, as the case may be,
in correct form the reports required to be filed under applicable laws and
regulations and such reports were in all material respects complete and
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 FRB, the FDIC or the Bank Commissioner, 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.

<PAGE>

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, 1994, 1993 and 1992 and the consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years ended December 31, 1994, 1993 and 1992, are accompanied by the
audit reports of Ernst & Young LLP, 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 5.7 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 the Bank.

(c) Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of the Company as of
June 30, 1995 (including related notes) and (ii) of liabilities incurred
since June 30, 1995 in the ordinary course of business, neither the Company
nor the Bank has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.

3.8 MATERIAL ADVERSE CHANGE

Since June 30, 1995, (i) the Company and the Bank have conducted their
respective businesses in the ordinary and usual course (excluding the
incurrence of expenses in connection with this Agreement and the transactions
contemplated hereby) and (ii) no event has occurred or circumstance arisen
that, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on the Company.

3.9 ENVIRONMENTAL MATTERS

(a) To the best of the Company's knowledge, the Company and the Bank
are in compliance with all Environmental Laws, except for any violations of
any Environmental

<PAGE>

Law which would not, singly or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor the Bank has received any
communication alleging that the Company or the Bank is not in such compliance
and, to the best knowledge of the Company, there are no present circumstances
that would 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 the Bank 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 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 the Bank or against any person or entity whose liability for any
Environmental Claim the Company or the Bank has or may have retained or
assumed either contractually or by operation of law, except such which would
not have a Material Adverse Effect on the Company.

(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any
properties owned by it or the Bank as of the date hereof or which secure
loans of the Bank as of the date hereof.

3.10 TAX MATTERS

(a) The Company and the Bank have timely filed all federal, state and
local (and, if applicable, foreign) income, franchise, bank, excise, real
property, personal property and other tax returns required by applicable law
to be filed by them (including, without limitation, estimated tax returns,
income tax returns, information returns and withholding and employment tax
returns) and have paid, or where payment is not required to have been made,
have set up an adequate reserve or accrual for the payment of, all taxes
required to be paid in respect of the periods covered by such returns and, as
of the Effective Time, will have paid, or where payment is not required to
have been made, will have set up an adequate reserve or accrual for the
payment of, all taxes for any subsequent periods ending on or prior to the
Effective Time. Neither the Company nor the Bank will have any material
liability for any such taxes in excess of the amounts so paid or reserves or
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 the Bank are complete and accurate in all
material respects. Neither the Company nor the Bank is delinquent in the
payment of any tax, assessment or governmental charge, and except as
Previously Disclosed neither of them has requested any extension of time
within

<PAGE>

which to file any tax returns in respect of any fiscal year or portion
thereof which have not since been filed. Except as Previously Disclosed, the
federal, state and local income tax returns of the Company and the Bank have
been examined by the applicable tax authorities (or are closed to examination
due to the expiration of the applicable statute of limitations) and no
deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or otherwise) against the Company
or the Bank as a result of such examinations or otherwise which have not been
settled and paid. There are currently no agreements in effect with respect
to the Company or the Bank to extend the period of limitations for the
assessment or collection of any tax. As of the date hereof, no audit,
examination or 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, none of the Company or the Bank (i)
is a party to any agreement providing for the allocation or sharing of taxes,
(ii) is required to include in income any adjustment pursuant to Section
481(a) of the Code by reason of a voluntary change in accounting method
initiated by the Company or the Bank (nor does the Company have any knowledge
that the Internal Revenue Service has proposed any such adjustment or change
of accounting method) or (iii) has filed a consent pursuant to Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply.

3.11 LEGAL PROCEEDINGS

There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the Company or the Bank or against any asset, interest or
right of the Company or the Bank, or against any officer, director or
employee of any of them that in any such case, if decided adversely, would
have a Material Adverse Effect on the Company. Neither the Company nor the
Bank is a party to any order, judgment or decree which has or could
reasonably be expected to have a Material Adverse Effect on the Company.

3.12 COMPLIANCE WITH LAWS

(a) Each of the Company and the Bank 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 the Bank is in violation of its respective
Articles of Agreement, Certificate of Incorporation 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

<PAGE>

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 the Bank has received any notice or
communication from any federal, state or local governmental authority
asserting that the Company or the Bank 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 the Bank 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 or bank 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 the Bank 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, welfare or employee benefit plan or
agreement maintained for the benefit of employees or former employees of the
Company or the Bank (the "Company Employee Plans"), and the Company has
previously furnished or made available to the 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 filed with any

<PAGE>

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, the Bank, any pension plan maintained by
either of them and qualified under Section 401 of the Code or, to the best of
the Company's knowledge, any 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 the Bank. To the best of the Company's
knowledge, no reportable event under Section 4043(b) of ERISA has occurred
with respect to any such pension plan.

(c) Neither the Company nor the Bank participates in or has incurred
any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).

(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (a
"Company Pension Plan") which is intended to qualify under Section 401 of the
Code to the effect that such plan is qualified under Section 401 of the Code
and the trust associated with such employee pension plan is tax exempt under
Section 501 of the Code. No such letter has been revoked or, to the best of
the Company's knowledge, is threatened to be revoked and the Company does not
know of any ground on which such revocation may be based. Neither the
Company nor the Bank has any liability under any such plan that is not
reflected on the consolidated statement of financial condition of the Company
at June 30, 1995 included in the Company Financial Statements, other than
liabilities incurred in the ordinary course of business in connection
therewith subsequent to the date thereof.

(e) To the best of the Company's knowledge, no 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.

<PAGE>

(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 the Bank 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 the Bank (other than deposits,
federal funds purchased and securities sold under agreements to repurchase)
or the guarantee by the Company or the Bank of any obligation, (ii) any
agreement, arrangement or commitment relating to the employment of a
consultant or the employment, election or retention in office of any present
or former director, officer or employee of the Company or the Bank, (iii) any
agreement, arrangement or understanding 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 the Bank 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 the Bank is obligated to
indemnify any director, officer, employee or agent of the Company or the
Bank; (v) any agreement, arrangement or understanding to which the Company or
the Bank is a party or by which any of the same is bound which limits the
freedom of the Company or the Bank to compete in any 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 FRB, the FDIC, the Bank
Commissioner or any other regulatory agency, or (vii) any other agreement,
arrangement or understanding which would be required to be filed as an
exhibit to the Company's Annual Report on Form 10-K under the Exchange Act
and which has not been so filed.

(b) Neither the Company nor the Bank is in default or in
non-compliance, which default or non-compliance could reasonably be expected
to have a Material Adverse Effect on the Company, under any contract,
agreement, commitment, 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.

<PAGE>

3.16 BROKERS AND FINDERS

Except as Previously Disclosed, neither the Company nor the Bank, nor
any of their respective directors, officers or employees, has employed any
broker or finder or incurred any liability for any broker or finder fees or
commissions in connection with the transactions contemplated hereby.

3.17 INSURANCE

Each of the Company and the Bank 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.

3.18 PROPERTIES

All real and personal property owned by the Company or the Bank or
presently used by either 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 the Bank in the ordinary course of business
consistent with their past practices. The Company has good and marketable
title free and clear of all liens, encumbrances, charges, defaults or
equities (other than equities of 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 June 30, 1995 included in the Company Financial Statements or acquired
after such date, except (i) liens for current taxes not yet due or payable
(ii) pledges to secure deposits and other liens incurred in the ordinary
course of its banking business, (iii) such imperfections of title, easements
and 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 June 30, 1995 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 the Bank is
held pursuant to leases or licenses which are valid and enforceable in
accordance with their respective terms and such leases will not terminate or
lapse prior to the Effective Time.

3.19 LABOR

No work stoppage involving the Company or the Bank is pending or, to the
best knowledge of the Company, threatened. Neither the Company nor the Bank is
involved in, or threatened with or affected by, any labor dispute, arbitration,
lawsuit or administrative proceeding involving the employees of the Company or
the Bank which could have a Material Adverse Effect on the Company. Employees
of the Company and the Bank are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of the Company's knowledge, there

<PAGE>

have been no efforts to unionize or organize any employees of the Company or
the Bank during the past five years.

3.20 REQUIRED VOTE

(a) The affirmative vote of the holders of a majority 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
(assuming the accuracy of the representation and warranty of the Acquiror
contained in the second sentence of Section 4.3 hereof).

(b) A majority of the Continuing Directors (as defined in the Articles
of Agreement of the Company) has approved the Merger and this Agreement such
that the provisions of Article VII of the Articles of Agreement of the
Company requiring the approval of certain transactions by the affirmative
vote of holders representing two-thirds of the capital stock of the Company
shall be inapplicable to this Agreement and the transactions contemplated
hereby.

3.21 ACCOUNTING FOR THE MERGER; REORGANIZATION

As of the date hereof, neither the Company nor the Bank has any reason
to believe that the Merger will fail to qualify (i) for pooling-of-interests
accounting treatment under generally accepted accounting principles or (ii)
as a reorganization under Section 368(a) of the Code.

3.22 DISCLOSURES

None of the representations and warranties of the Company or any of the
written information or documents 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.

<PAGE>

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR

The Acquiror represents and warrants to the Company that, except as
Previously Disclosed:

4.1 CAPITAL STRUCTURE

The authorized capital stock of the Acquiror consists of 30,000,000
shares of Acquiror Common Stock and 5,000,000 shares of Acquiror Preferred
Stock. As of September 30, 1995, there were 16,918,120 shares of Acquiror
Common Stock issued and outstanding, 550,100 shares of Acquiror Common Stock
were held as treasury stock and not outstanding and there were no shares of
Acquiror Preferred Stock issued and outstanding. All outstanding shares of
Acquiror Common Stock have been duly 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, now or hereafter, (ii) shares of
Acquiror Common Stock issuable pursuant to the Acquiror Rights Agreement and
(iii) by virtue of this Agreement and the Acquiror Stock Option Agreement.

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 Sub, Acquiror Maine Bank and Acquiror New
Hampshire Bank as its only Significant Subsidiaries. Except for capital
stock of the Acquiror Subsidiaries, stock in the FHLB of Boston and the
Federal Reserve Bank of Boston, securities and other interests held in a
fiduciary capacity or taken in consideration of debts previously contracted
and by virtue of this Agreement and the Company Stock Option Agreement, the
Acquiror does not own or have the right to acquire, directly or indirectly,
any outstanding capital

<PAGE>

stock or other voting securities or ownership interests of any corporation,
bank, savings association, partnership, joint venture or other organization.
The outstanding shares of capital stock of each of the Acquiror Subsidiaries
which is a Significant Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable (except as otherwise provided with
respect to the capital stock of the Acquiror Maine Bank and the Acquiror New
Hampshire Bank by the MRSA and the National Bank Act, respectively) and are
directly or indirectly owned by the Acquiror free and clear of all liens,
claims, encumbrances, charges, pledges, restrictions or rights of third
parties of any kind whatsoever. No Rights are authorized, issued or
outstanding with respect to the capital stock or other ownership interests of
any Acquiror Subsidiary which is a Significant Subsidiary and there are no
agreements, understandings or commitments relating to the right of the
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 of each such institution,
the SAIF to the maximum extent permitted by the FDIA, and each such entity
has paid all premiums and assessments required by the FDIA and the
regulations thereunder. The Acquiror has heretofore delivered or made
available to the Company true and complete copies of the Articles of
Incorporation and Bylaws of it, Acquiror Sub and Acquiror New Hampshire Bank.

4.5 AUTHORIZED AND EFFECTIVE AGREEMENT

(a) Each of the Acquiror and the Acquiror Sub has all requisite
corporate power and authority to enter into this Agreement and (subject to
receipt of all necessary governmental approvals and the approval of the
Acquiror's shareholders of this Agreement) to perform all of its obligations
under this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action in respect thereof on
the part of the Acquiror and the Acquiror Sub, except for the approval of
this Agreement by the Acquiror's shareholders. This Agreement has been duly
and 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 in accordance with its
terms,

<PAGE>

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 Bank Merger), 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 Acquiror New Hampshire Bank, (ii) except as
Previously Disclosed, violate, conflict with or result in a breach of any
term, condition or provision of, or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or 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 Acquiror New Hampshire
Bank 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 Acquiror New Hampshire Bank is a party, or by
which any of their respective properties or assets may be bound or affected,
or (iii) subject to receipt of all required governmental and shareholder
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Acquiror, Acquiror Sub or Acquiror New Hampshire
Bank.

(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the FDIC, the OCC, the
NHBTCI, the Bank Commissioner and the Superintendent, (ii) the filing and
effectiveness of the Form S-4 with the Commission, (iii) compliance with
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 New Hampshire pursuant to the NHBCA in
connection with the Merger and (vi) the filing of a certificate issued by the
Bank Commissioner approving the Bank Merger with the Secretary of State of
New Hampshire, and except for such filings, authorizations or approvals as
are Previously 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 Bank Merger Agreement and
the consummation by the Acquiror New Hampshire Bank of the transactions
contemplated thereby.

(d) As of the date hereof, neither the Acquiror nor Acquiror Sub is aware
of any reasons relating to the Acquiror or any of its Subsidiaries (including
without limitation 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

<PAGE>

contemplated by this Agreement and the Bank Merger Agreement and (ii) the
continuation by the Acquiror after the Effective Time of the business of each
of the Acquiror and the Company as such business is carried on immediately
prior to the Effective Time, free of any conditions or requirements which, in
the reasonable opinion of the Acquiror, could have a Material Adverse Effect
on the Acquiror or the Company or materially impair the value of the Company
and the Bank to the Acquiror.

4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS

(a) Since January 1, 1993, the Acquiror has timely filed with the
Commission all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respect with the Securities
Laws and did not 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 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 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.

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, 1994, 1993 and 1992 and the consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years ended December 31, 1994, 1993 and 1992, are accompanied by the
audit reports of KPMG Peat Marwick LLP, independent public accountants with
respect to the Acquiror. The Acquiror Financial Statements referred to
herein, as well as the Acquiror Financial Statements to be delivered pursuant
to Section 5.7 hereof, fairly present or will fairly present, as the case may
be, the consolidated financial condition of the Acquiror as of the respective
dates set forth therein, and the consolidated results of operations,
shareholders' equity and cash flows of the Acquiror for the respective
periods or as of the respective dates set forth therein.

(b) Each of the Acquiror Financial Statements referred to in Section
4.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted

<PAGE>

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
June 30, 1995 (including related notes) and (ii) of liabilities incurred
since June 30, 1995 in the ordinary course of business, neither the Acquiror
nor any Acquiror Subsidiary has any liabilities, whether 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 June 30, 1995, (i) the Acquiror and the Acquiror Subsidiaries
which are Significant Subsidiaries have conducted their respective businesses
in the ordinary and usual course (excluding the incurrence of expenses in
connection with this Agreement and the transactions contemplated hereby) and
(ii) no event has occurred or circumstance arisen that, individually or in
the aggregate, 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 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) Except as Previously Disclosed, to the best of the Acquiror's
knowledge, there are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim or other claim or action or governmental investigation
that could result in the imposition of any liability arising under any
Environmental Law against the Acquiror or any Acquiror Subsidiary or against
any

<PAGE>

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 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 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

<PAGE>

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 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.

<PAGE>

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, welfare or employee benefit plan or
agreement maintained for the benefit of employees or former employees of the
Acquiror or any Acquiror Subsidiary (the "Acquiror Employee Plans").

(b) None of the Acquiror, any Acquiror Subsidiary, any pension plan
maintained by any of them and qualified under Section 401 of the Code or, to
the best of the Acquiror's knowledge, any fiduciary of such plan has incurred
any material liability to the PBGC or the Internal Revenue Service with
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) (a
"Acquiror Pension Plan") which is intended to qualify under Section 401 of
the Code to the effect that such plan is qualified under Section 401 of the
Code and the trust associated with such employee pension plan is tax exempt
under Section 501 of the Code. No such letter has been revoked or, to the
best of the Acquiror's knowledge, is threatened to be revoked and the
Acquiror does not know of any ground on which such revocation may be based.
Neither the Acquiror nor any Acquiror Subsidiary has any liability under any
such plan that is not reflected on the consolidated statement of financial
condition of the Acquiror at June 30, 1995 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.

<PAGE>

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

<PAGE>

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 material
properties and assets, real and personal, reflected on the consolidated
statement of financial condition of the Acquiror as of June 30, 1995 included
in the Acquiror Financial Statements or acquired after such date, except (i)
liens for current taxes not yet due or payable (ii) pledges to secure
deposits and other liens incurred in the ordinary course of its banking
business, (iii) such imperfections of title, easements and encumbrances, if
any, as are not material in character, amount or extent and (iv) as reflected
on the consolidated statement of financial condition of the Acquiror as of
June 30, 1995 included in the Acquiror Financial Statements. All real and
personal property which is material to the Acquiror's 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 ACCOUNTING FOR THE MERGER; REORGANIZATION

As of the date hereof, neither the Acquiror nor any Acquiror Subsidiary
has any reason to believe that the Merger will fail to qualify (i) for
pooling-of-interests treatment under generally accepted accounting principles
or (ii) as a reorganization under Section 368(a) of the Code.

<PAGE>

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.

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 and the Bank
Merger as promptly as reasonably practicable 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 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

<PAGE>

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 Bank Merger). The
Acquiror and the Company shall have the right to review in advance, and to
the extent practicable each will consult with the other on, in each case
subject to applicable laws relating to the exchange of 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.

(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
Bank Merger 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,

<PAGE>

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
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.

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

<PAGE>

the prior written consent of the Acquiror, the Company and the Bank shall
carry on their respective businesses in the ordinary course consistent with
past practice. The Company will use all reasonable efforts to (x) preserve
its business organization and that of the Bank intact, (y) keep available to
itself and the Acquiror the present services of the employees of the 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, as expressly
contemplated hereby or as Previously Disclosed as of the date hereof, between
the date hereof and the Effective Time, the Company shall not, and shall
cause the Bank not to:

(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in 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 $.18 per share, which shall have the same record and
payment dates as the record and payment dates relating to dividends on
the Acquiror Common Stock (as Previously Disclosed by the Acquiror), it
being the intention of the parties that the shareholders of the Company
receive dividends for any particular quarter on either the Company
Common Stock or the Acquiror Common Stock but not both, provided,
however, that if the Effective Time does not occur prior to the record
date for the dividend which relates to the second quarter of 1996 (on or
about August 2, 1996), the regular per share quarterly dividend on the
Company Common Stock for such quarter (and any subsequent quarterly
dividends prior to the Effective Time) may be increased to up to $.20
per share, and further provided that nothing contained herein shall be
deemed to affect the ability of the Bank to pay dividends on its common
stock to the Company;

(ii) issue any shares of its capital stock, other than pursuant to
the Company Stock Option Agreement, or issue, grant, modify or authorize
any Rights, other than the Company Stock Option 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 Agreement, Certificate of Incorporation
or Bylaws; impose, or suffer the imposition, on any share of stock held
by the Company in the Bank of any material lien, charge or encumbrance
or permit any such lien, charge or 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

<PAGE>

hereof and (ii) such as may be granted in the ordinary course of
business consistent with past practice;

(v) except as Previously Disclosed, enter into or, except as may
be required by law, modify any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, supplemental retirement, 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; or make any contributions
to the Company's defined benefit Pension Plan not in the ordinary course
of business consistent with past practice;

(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
the Bank or guarantee by the Company or the Bank of any such obligation,
except in the case of the Bank for deposits, federal funds purchased and
securities sold under agreements to repurchase in the ordinary course of
business consistent with past practice, (y) any agreement, arrangement
or commitment relating to the employment of an employee, or, except as
contemplated by Section 5.10(b) hereof, amend any such existing
agreement, arrangement or commitment, provided that the Company and the
Bank may employ an employee if necessary to operate the business of the
Company or the Bank in the ordinary course of business consistent with
past practice and if the employment of such employee is terminable by
the Company or the Bank at will without liability, other than as
required by law; or (z) any contract, agreement or understanding with a
labor union;

(vii) change its method of accounting in effect for the year ended
December 31, 1994, 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 year ended December 31, 1994, except as required by
changes in laws or regulations;

(viii) make any capital expenditures in excess of $100,000
individually or $250,000 in the 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;

<PAGE>

(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 (A) for pooling-of-interests accounting treatment under
generally accepted accounting principles or (B) 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.

(b) 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 Company, the Acquiror
and the Acquiror Subsidiaries which are Significant Subsidiaries shall carry
on their respective businesses in the ordinary course consistent with past
practice and use all reasonable efforts to preserve intact their present
business organizations and relationships. Without limiting the generality of
the foregoing, except with the prior written consent of the Company or as
expressly contemplated hereby, between the date hereof and the Effective
Time, the Acquiror shall not, and shall cause each Acquiror Subsidiary which
is a Significant Subsidiary not to:

(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends which are not in excess of $.20 per share of
Acquiror Common Stock, provided, however, that nothing contained herein
shall be deemed to affect the ability of the Acquiror's banking
subsidiaries to pay dividends on their respective common stocks to the
Acquiror;

(ii) issue any shares of its capital stock or issue, grant, modify
or authorize any Rights, other than in each case pursuant to (i) Rights
granted pursuant to the Acquiror Employee Stock Benefit Plans, (ii) the
Acquiror Rights Agreement, (iii) the

<PAGE>

Acquiror Stock Option Agreement or (iv) any acquisition to the extent
permitted under subsection (v) below;

(iii) effect any recapitalization, reclassification, stock split or
like change in capitalization;

(iv) amend its Articles of Incorporation, Charter or other
governing instrument or Bylaws in a manner which would adversely affect
in any manner the terms of the Acquiror Common Stock or the ability of
the Acquiror to consummate the transactions contemplated hereby;

(v) except as Previously Disclosed, make any acquisition
(including acquisitions of branch offices and related deposit
liabilities) or take any other action that individually or in the
aggregate could materially adversely affect the ability of the Acquiror
to consummate the transactions contemplated hereby in a reasonably
timely manner;

(vi) take any action that would prevent or impede the Merger from
qualifying (A) for pooling-of-interests accounting treatment under
generally accepted accounting principles or (B) 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;

(vii) take any action that would result in any of the
representations and warranties of the Acquiror contained in this
Agreement not to be true and correct in any material respect at the
Effective Time; or

(viii) agree to do any of the foregoing.

(c) Neither the Company nor the Acquiror shall, and each of them shall
cause its respective Subsidiaries not to, solicit or encourage inquiries or
proposals with respect to, furnish any information relating to, or
participate in any negotiations or discussions concerning, any acquisition,
lease or purchase of all or a substantial portion of the assets of, or any
equity interest in, such party or any of its Significant Subsidiaries (other
than in the case of the Company with the Acquiror or an affiliate thereof and
in the case of the Acquiror as permitted by Section 5.6(b)(v) hereof),
provided, however, that the Board of Directors of the Company or the
Acquiror, on behalf of the Company and the Acquiror, respectively, 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 laws, and provided further that any such actions may
only be taken by the Board of Directors following expiration of the period
referred to in Section 7.1(g) hereof unless otherwise required by the
fiduciary duties of its members as determined above. Each of the Company and
the

<PAGE>

Acquiror will promptly inform the other party of any such request for
information or of any such negotiations or discussions, as well as instruct
its and its Significant Subsidiaries' directors, officers, representatives
and agents to refrain from taking any action prohibited by this Section
5.6(c).

5.7 CURRENT INFORMATION

During the period from the date of this Agreement to the Effective Time,
each party shall, upon the request of the other party, cause one or more of
its designated 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.

5.8 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 the Bank 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 (i) the Articles of Agreement, Certificate of Incorporation
and Bylaws of the Company and the Bank and (ii) each Director Indemnity
Agreement which has been Previously Disclosed pursuant to Section 3.15
hereof, in each case as in effect on the date hereof.

(b) Any Indemnified Party wishing to claim indemnification under
Section 5.8(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

<PAGE>

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
and (iii) the Indemnifying Party shall not be liable for any settlement
effected without its prior written consent. In the event of any conflict
between this Section 5.8(b) and any of the above-mentioned Director Indemnity
Agreements, the terms of the Director Indemnity Agreement shall control.

(c) The Acquiror shall cause the Company to maintain the Company'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 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 5.8, which obligations are expressly intended to be for the
irrevocable benefit of, and shall be enforceable by, each director and
officer covered hereby.

5.9 CERTAIN DIRECTORS AND OFFICERS

(a) The Acquiror agrees to take all action necessary to appoint or
elect, effective as of the Effective Time, Davis P. Thurber and Paul R. Shea
as directors of the Acquiror. Such persons shall serve until the first
annual meeting of shareholders of the Acquiror following the Effective Time
and until their successors are elected and qualified. The Acquiror shall
include such persons on the list of nominees for director 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 persons shall be nominated for three-year terms, or
if necessary in an individual case to ensure that the number of directors in
each class of directors of the Acquiror is as nearly equal in number as
possible, a two-year term. During the one-year period following the
Effective Time, the Acquiror agrees to consider for election to its Board of
Directors a nominee who

<PAGE>

is a resident of the State of New Hampshire and recommended by the Board of
Directors of the Surviving Corporation.

(b) The Acquiror shall cause the Company and the Bank, as necessary in
accordance with their respective Bylaws, to elect Paul R. Shea as President
and Chief Executive Officer of the Company and the Bank until the earlier of
his retirement and the date he attains age 65.

5.10 BENEFIT PLANS AND ARRANGEMENTS

(a) As soon as administratively practicable after the Effective Time,
the Acquiror shall take all reasonable action so that employees of the
Company and the Bank 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 the Bank who becomes an employee of the Acquiror and subject to
the Acquiror's medical insurance plans shall be excluded 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 5.10(a) shall not require coverage for such
preexisting condition. For purposes of determining eligibility to
participate in and the vesting of benefits under the Acquiror Employee Plans,
the Acquiror shall recognize years of service with the Company and the Bank
as such service is recognized by the Company and the Bank.

(b) Following the Merger, the Acquiror shall, or shall cause the
Surviving Corporation to, assume and satisfy any obligations with respect to,
(i) the Amended and Restated Agreement as to Future Employment between the
Company and each of Davis P. Thurber, Paul R. Shea and Gregory D. Landroche,
as Previously Disclosed pursuant to Section 3.15 hereof and as modified by
the letter agreements dated as of the date hereof among the Acquiror, the
Company and each of Messrs. Thurber, Shea and Landroche, and (ii) the
Company's Executive Excess Benefit Plan as it relates to the rights of
Messrs. Thurber, Shea and Landroche thereunder.

5.11 ACCOUNTANTS' LETTERS

Each of the Company and the Acquiror shall use its reasonable best
efforts to cause to be delivered to the other party, and such other party's
directors and officers who sign the Form S-4, a letter of its respective
independent public accountants, dated (i) the date on which the Form S-4
shall become effective and (ii) a date shortly prior to the Effective Time,
and addressed to such other party, and such directors and officers, in form
and substance customary for "comfort" letters delivered by independent
accountants in accordance with Statement of Accounting Standards No. 72.

<PAGE>

5.12 CERTAIN POLICIES; INTEGRATION

(a) If requested by the Acquiror, on the business day immediately prior
to the Effective Time, the Company shall, consistent with generally accepted
accounting principles, establish such additional 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 of such
accruals and reserves shall not, in and of itself, constitute a breach of any
representation or warranty of the Company contained in this Agreement.
Nothing contained in this Section 5.12(a) shall be deemed to modify the
Company's obligations under the letter agreements referred to in Section
5.10(b)(i) hereof.

(b) During the period from the date of this 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.

5.13 RESTRICTIONS ON RESALE

(a) The Company has Previously Disclosed to the Acquiror, and the
Acquiror has Previously Disclosed to the Company, a schedule of each person
that, to the best of its knowledge, is deemed to be an "affiliate" of the
Company and the Acquiror, respectively (each an "Affiliate"), as that term is
used in Rule 145 under the Securities Act or Accounting Series Releases 130
and 135 of the Commission.

(b) Each of the Company and the Acquiror shall use its reasonable best
efforts to cause each person who may be deemed to be an Affiliate of the
Company and the Acquiror, respectively, to execute and deliver to the
Acquiror on or before the date of the mailing of the Proxy Statement an
agreement in the form of Exhibit D and Exhibit E, respectively.

(c) If requested by an Affiliate of the Company in connection with a
proposed sale of Acquiror Common Stock which in the reasonable judgment of
the Acquiror cannot be effected without jeopardizing the manner in which the
Merger was accounted for under generally accepted accounting principles, the
Surviving Corporation shall use its reasonable best efforts to publish as
promptly as reasonably practicable but in no event later than 90

<PAGE>

days after the end of the first month after the Effective Time in which there
are at least 30 days of post-Merger combined operations (which month may be
the month in which the Effective Time occurs), combined sales and net income
figures as contemplated by and in accordance with the terms of Accounting
Series Release No. 135 of the Commission.

5.14 DISCLOSURE SUPPLEMENTS

From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials 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 hereby cannot be fulfilled on or prior to the termination of
this Agreement, it will promptly notify the other party or parties. Each
party will promptly inform the other party or parties of any facts applicable
to it that would be likely to prevent or materially delay approval of the
Merger or the Bank Merger by any Governmental Entity or third party or which
would otherwise prevent or materially delay completion of the Merger or the
Bank Merger.

ARTICLE VI
CONDITIONS PRECEDENT

6.1 CONDITIONS PRECEDENT - THE ACQUIROR, THE ACQUIROR SUB AND THE COMPANY

The respective obligations of the Acquiror, the Acquiror Sub and the
Company to effect the transactions contemplated by this Agreement shall be
subject to satisfaction of the following conditions at or prior to the
Effective Time.

(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby shall have been duly and 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, and all
corporate and shareholder action necessary to authorize the execution and
delivery of the Bank Merger Agreement and consummation of the transactions
contemplated thereby shall have been duly and validly taken by the Bank and
the Acquiror New Hampshire Bank.

<PAGE>

(b) All approvals and consents for the transactions contemplated hereby
and the Bank Merger Agreement from the FRB, the FDIC, the OCC, the NHBTCI,
the Bank Commissioner, the Superintendent and any other Governmental Entity
the approval or consent of which is required for the consummation of the
Merger, the Bank Merger and the other transactions contemplated hereby shall
have been received and all statutory waiting 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, the Bank Merger and the other transactions
contemplated hereby 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 or the Bank Merger or any of the other
transactions contemplated hereby.

(d) The Form S-4 shall have become effective under the Securities Act,
and the Acquiror shall have received all state securities laws or "blue sky"
permits and other 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) Each of KPMG Peat Marwick LLP, the Acquiror's independent public
accountants, and Ernst & Young LLP, the Company's independent public
accountants, shall have issued a letter dated as of the Effective Time, to
the Acquiror and to the Company, respectively, to the effect that, based on a
review of this Agreement and related agreements (including without limitation
the agreements referred to in Section 5.13(b) hereof) and the facts and
circumstances then known to it (including without limitation the number of
Dissenting Shares, if any, in relation to the number of outstanding shares of
Company Common Stock immediately prior to the Effective Time), the Merger
shall be accounted for as a pooling-of-interests under generally accepted
accounting principles.

<PAGE>

(g) The Acquiror shall have received the written opinion of Elias,
Matz, Tiernan & Herrick L.L.P. to the effect that the Merger will constitute
a reorganization within the meaning of Section 368 of the Code, and the
Company shall have received the written opinion of Wachtell, Lipton, Rosen &
Katz to such effect and to the effect that (i) except for cash 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 transactions contemplated
by this Agreement shall be subject to satisfaction of the following
conditions at or prior to the Effective Time unless waived by the 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.

(c) The Acquiror shall have delivered to the Company a certificate,
dated the date of the Closing and signed by its Chairman and President and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.2(a) and 6.2(b) have been satisfied.

(d) The Company shall have received the written opinions of Elias,
Matz, Tiernan & Herrick L.L.P. and/or of Carol L. Mitchell, Esq., dated the
date of the Closing, that collectively address the matters set forth in
Exhibit F hereto.

(e) The Acquiror and the Acquiror Sub shall have furnished the Company
with such certificates of its respective officers or others and such other
documents to evidence

<PAGE>

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
transactions contemplated by this Agreement shall be subject to satisfaction
of the following conditions at or prior to the Effective Time unless waived
by the Acquiror or the Acquiror Sub pursuant to Section 7.4 hereof.

(a) The representations and warranties of the 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 and the letter agreements referred to in Section 5.10(b)(i) hereof
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 Chairman and President and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.

(d) The Acquiror shall have received the written opinions of Wachtell,
Lipton, Rosen & Katz and/or of Sheehan, Phinney, Bass + Green, P.A., dated
the date of the Closing, that collectively address the matters set forth in
Exhibit G hereto.

(e) The Company shall have furnished the Acquiror with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.3 as such
conditions relate to the Company as the Acquiror may reasonably request.

<PAGE>

ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT

7.1 TERMINATION

This Agreement may be terminated:

(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;

(b) at any time on or prior to the Effective Time, by the Acquiror or
the Acquiror Sub in writing if the Company has, or by the Company in writing
if the Acquiror or the 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 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));

(f) by the Company at any time during the ten-day period commencing
with the Determination Date (as defined below) if the Average Closing Price
(as defined below) shall be less than $16.00, 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 ten-day period). During the five-day
period

<PAGE>

commencing with its receipt of such notice, the Acquiror shall have the
option to increase the consideration to be received by the holders of the
Company Common Stock hereunder by adjusting the Exchange Ratio to equal a
number (calculated to the nearest one-thousandth) obtained by dividing (A)
$32.00 by (B) the 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 period of 20 consecutive
trading days ending on the Determination Date and (ii) the term
"Determination Date" means the date on which the approval of the FRB for
consummation of the Merger is received; and

(g) by the Company or the Acquiror, as applicable, if during the
nine-day period following the date of this Agreement it provides written
notice to the other party to the effect that as a result of the due diligence
review of such other party during such period it reasonably believes that the
condition to the terminating party's obligations set forth in Section 6.2(a)
or Section 6.3(a), as applicable, cannot be satisfied as of the date of this
Agreement and describes to the other party in reasonable detail the basis for
such determination.

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 covenants that
by their terms are to be performed after the Effective Time (including
without limitation the covenants set forth in Sections 5.8, 5.9 and 5.10
hereof), provided that no such representations, warranties or covenants shall
be deemed to be terminated or extinguished so as to deprive the Acquiror, the
Acquiror Sub or the Company (or any director, officer or controlling person
thereof) of any defense at law or in equity which otherwise would be
available against the claims of any person, including, without limitation,
any shareholder or former shareholder of either the Acquiror or the Company.

<PAGE>

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 their respective Boards of Directors.

ARTICLE VIII
MISCELLANEOUS

8.1 EXPENSES

Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by this Agreement,
including fees and expenses of its own financial consultants, accountants and
counsel, except that expenses of printing the Form S-4 and the registration
fee to be paid to the Commission in connection therewith shall be shared
equally between the Company and the Acquiror.

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

<PAGE>

parties hereto, and their respective successors, any rights, remedies,
obligations or liabilities other than as set forth in Sections 5.8, 5.9
(other than the last sentence of paragraph (a) thereof) and 5.10(b) hereof.

8.3 NO ASSIGNMENT

None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.

8.4 NOTICES

All notices or other communications which are 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:

Bank of New Hampshire Corporation
300 Franklin Street
Manchester, New Hampshire 03101
Attn: Davis P. Thurber
Chairman and President
Fax: 603-645-0026

<PAGE>

With a required copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attn: Craig M. Wasserman
Fax: 202-403-2000

and

Sheehan, Phinney, Bass + Green, P.A.
1000 Elm Street
P.O. Box 3701
Manchester, New Hampshire 03105-3701
Attn: Robert B. Field, Jr.
Fax: 603-668-0300

8.5 ALTERNATIVE STRUCTURE

Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, 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 and the Bank set forth herein
(including without limitation restructuring the Bank Merger so that the Bank
merges with and into the Acquiror New Hampshire Bank or delaying the Bank
Merger), provided that (i) the federal income tax consequences of any
transactions created by such modification shall not be other than those set
forth in Section 6.1(g) hereof, (ii) any such modification will not
jeopardize pooling-of-interests accounting treatment, (iii) the consideration
to be paid to the holders of the Company Common Stock is not thereby changed
in kind or reduced in amount as a result of such modification and (iv) such
modification will not materially delay or jeopardize receipt of any required
regulatory approvals or any other condition to the obligations of the
Acquiror and the Acquiror Sub set forth in Sections 6.1 and 6.3 hereof.

8.6 INTERPRETATION

The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.

<PAGE>

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.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their
corporate seal to be hereunto affixed and attested by their officers
thereunto duly authorized, all as of the day and year first above written.

PEOPLES HERITAGE FINANCIAL
Attest: GROUP, INC.

/S/ PETER J. VERRILL By: /S/ WILLIAM J. RYAN
- ---------------------------------- -------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Senior Executive Vice President Title: Chairman, President and
and Chief Financial Officer Chief Executive Officer

FIRST COASTAL BANKS, INC.
Attest:

/S/ JOHN E. MENARIO By: /S/ NORMAN E. BILODEAU
- ---------------------------------- -------------------------------
Name: John E. Menario Name: Norman E. Bilodeau
Title: Director Title: President and Chief
Executive Officer

BANK OF NEW HAMPSHIRE
Attest: CORPORATION

/S/ PAUL R. SHEA By: /S/ DAVIS P. THURBER
- ---------------------------------- -------------------------------
Name: Paul R. Shea Name: Davis P. Thurber
Title: Senior Executive Vice President Title: Chairman and President

<PAGE>

EXHIBIT A
EXHIBIT B
EXHIBIT C

Reference is made to Annexes II, III and IV to the Prospectus/Joint
Proxy Statement of which this Annex I is a part for Exhibits A, B and C to
the Agreement, respectively.

<PAGE>

EXHIBIT D
October ___, 1995

Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540

Ladies and Gentlemen:

1. I will not sell, pledge, transfer or otherwise dispose of the
shares of Acquiror Common Stock or Company Common Stock (both as defined in
the Agreement) owned by me during the period commencing 30 business days
prior to the Effective Time (as defined in the Agreement) (the anticipated
date of which shall be set forth in a notice by the Company to me as soon as
such information is available) and continuing to the date on which financial
results covering at least 30 days combined operations of the Acquiror and the
Company have been published within the meaning of Topic 2-E of the Staff
Accounting Bulletin Series of the Securities and Exchange Commission;
provided, however, that this paragraph shall not prevent me from selling,
transferring or disposing of such number of shares of Acquiror Common Stock
or Company Common Stock as will not, in the reasonable judgment of
accountants to the Acquiror, interfere with or prevent the Merger (as defined
in the Agreement) from being accounted for as a "pooling of interests,"
taking into account the nature, extent and timing of such sale, transfer or
disposition and of similar sales, transfers or dispositions by all other
affiliates of the Acquiror and all other affiliates of the Company.

2. I will comply with paragraph (d) of Rule 145 under the Securities
Act of 1933, as amended, and will not sell, pledge, transfer or otherwise
dispose of any shares of Acquiror Common Stock received by me in exchange for
shares of Company Common Stock pursuant to the Merger (as defined in the
Agreement), except upon the Acquiror's receipt

<PAGE>

Peoples Heritage Financial Group, Inc.
October __, 1995
Page 2

of an opinion of counsel, at the Acquiror's expense, that the proposed
disposition will not violate paragraph (d) of Rule 145.

The transfer agent of each of the Company and the Acquiror shall be
given an appropriate stop transfer order and shall not be required to
register any attempted transfer of shares of Company Common Stock and
Acquiror Common Stock, respectively, unless the transfer has been effected in
compliance with the terms of this letter agreement. In addition, the
certificates evidencing shares of Acquiror Common Stock acquired by me in
exchange for Company Common Stock pursuant to the Merger shall bear a legend
noting the restrictions on transfer set forth in this letter agreement.

Very truly yours,

---------------------------------------
Name:

Agreed and accepted this
___ day of ________ 1995 by
Peoples Heritage Financial Group, Inc.

By: ---------------------------------
Name:
Title:

<PAGE>

EXHIBIT E

October ___, 1995

Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540

Ladies and Gentlemen:

Pursuant to Section 5.13 of the Agreement and Plan of Merger, dated as
of October 25, 1995 (the "Agreement"), among Peoples Heritage Financial
Group, Inc. (the "Acquiror"), First Coastal Banks, Inc. (the "Acquiror Sub")
and Bank of New Hampshire Corporation (the "Company"), I hereby agree to not
sell, pledge, transfer or otherwise dispose of the shares of Acquiror Common
Stock or Company Common Stock (both as defined in the Agreement) owned by me
during the period commencing 30 business days prior to the Effective Time (as
defined in the Agreement) (the anticipated date of which shall be set forth
in a notice by the Company to me as soon as such information is available)
and continuing to the date on which financial results covering at least 30
days combined operations of the Acquiror and the Company have been published
within the meaning of Topic 2-E of the Staff Accounting Bulletin Series of
the Securities and Exchange Commission; provided, however, that this
paragraph shall not prevent me from selling, transferring or disposing of
such number of shares of Acquiror Common Stock or Company Common Stock as
will not, in the reasonable judgment of accountants to the Acquiror,
interfere with or prevent the Merger (as defined in the Agreement) from being
accounted for as a "pooling of interests," taking into account the nature,
extent and timing of such sale, transfer or disposition and of similar sales,
transfers or dispositions by all other affiliates of the Acquiror and all
other affiliates of the Company.

Very truly yours,

----------------------------------------
Name:
Agreed and accepted this
___ day of ________ 1995 by
Peoples Heritage Financial Group, Inc.

By: -------------------------------
Name:
Title:

<PAGE>

EXHIBIT F

[MATTERS TO BE COVERED IN OPINION(S) 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 30,000,000
shares of Acquiror Common Stock, of which ___________ were issued and
outstanding of record as of [the end of the month preceding the closing date]
, 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 New Hampshire 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, 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 Bank Merger 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

<PAGE>

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 Bank Merger 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 Articles of Association and Bylaws to authorize the
execution and delivery of the Bank Merger Agreement and consummation of the
Bank Merger have been taken.

(f) All consents or approvals of or filings or registrations with any
Governmental Entity or, to such counsel's knowledge, any third party 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 Bank
Merger Agreement and consummation of the Bank Merger have been obtained.

(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 and fully paid and
nonassessable.

(h) 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.

<PAGE>

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.

<PAGE>

EXHIBIT G

[MATTERS TO BE COVERED IN OPINION(S) 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 state of New Hampshire, and the Company is
duly registered as a bank holding company under the BHCA.

(b) The authorized capital stock of the Company consists of 6,000,000
shares of Company Common Stock, of which 4,064,156 shares are issued and
outstanding of record as of the date hereof, and 500,000 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 Stock Option
Agreement, there are no Rights authorized, issued or outstanding with respect
to the capital stock of the Company or the Bank.

(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 Bank Merger 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 Bank Merger Agreement.

<PAGE>

(e) All corporate and shareholder actions required to be taken by the
Company by law and the Articles of Agreement 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 Certificate of Incorporation and Bylaws
to authorize the execution and delivery of the Bank Merger Agreement and
consummation of the Bank Merger have been taken.

(f) All consents or approvals of or filings or registrations with any
Governmental Entity or, to such counsel's knowledge, any third party 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 Bank Merger Agreement and consummation of the Bank Merger
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 the Bank is
a party or to which any property of the Company or the Bank 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 the Bank 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 certificates of
governmental officials, certificates or opinions of other counsel to the
Company or the Bank reasonably satisfactory to the Acquiror and, as to
matters of fact, certificates of officers of the Company or the Bank. The
opinion of such counsel need refer only to matters of 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 Acquiror.

<PAGE>

ANNEX II

STOCK OPTION AGREEMENT

Stock Option Agreement, dated as of October 25, 1995 (the "Agreement"), by
and between Bank of New Hampshire Corporation, a New Hampshire corporation
("Issuer"), and Peoples Heritage Financial Group, Inc., a Maine corporation
("Grantee").

WITNESSETH:

WHEREAS, Issuer, Grantee and First Coastal Banks, Inc., a wholly-owned
subsidiary of Grantee, have entered into an Agreement and Plan of Merger, dated
as of October 25, 1995 (the "Plan"), providing for, among other things, the
merger of First Coastal Banks, Inc. with and into Issuer (the "Merger"), with
Issuer as the surviving corporation; and

WHEREAS, as a condition and inducement to Grantee's execution of the Plan
and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and

WHEREAS, as a condition and inducement to Issuer's execution of the Plan
and this Agreement, Grantee has agreed to grant an option to Issuer on terms and
conditions which are substantially identical to those of the Option and this
Agreement with respect to 9.9% of the common stock of Grantee;

NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:

1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.

2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 808,767 shares (as adjusted as set forth herein) (the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of Common Stock, no par value and stated value of $2.50 per share
("Issuer Common Stock"), of Issuer at a purchase price per Option Share (the
"Purchase Price") of $33.50, provided, however, that in no event shall the
number of Option Shares for which the Option is exercisable exceed 19.9% of the
issued and outstanding shares of Issuer 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

<PAGE>

the Plan, and (ii) no preliminary or permanent injunction or other order against
the delivery of shares covered by the Option issued by any court of competent
jurisdiction in the United States shall be in effect, Grantee may exercise the
Option, in whole or in part, at any time and from time to time following the
occurrence of a Purchase Event (as hereinafter defined); provided that the
Option shall terminate and be of no further force and effect upon the earliest
to occur of (A) the Effective Time of the Merger, (B) termination of the Plan in
accordance with the terms thereof prior to the occurrence of a Purchase Event or
a Preliminary Purchase Event, other than a termination of the Plan by Grantee
pursuant to Section 7.1(b)(i) (a "Default Termination"), (C) 12 months after the
termination of the Plan by Grantee pursuant to a Default Termination, and (D) 12
months after termination of the Plan (other than pursuant to a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event; and provided, further, that any purchase of shares upon exercise
of the Option shall be subject to compliance with applicable laws, including
without limitation the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). The term "Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee. The rights set forth in Section 8
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.

(b) As used herein, a "Purchase Event" means any of the following events:

(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.

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<PAGE>

(i) any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the
Securities Act with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 10% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred to
herein as a "Tender Offer" and an "Exchange Offer," respectively); or

(ii) (A) the holders of Issuer Common Stock shall not have approved
the Plan at the meeting of such stockholders held for the purpose of voting
on the Plan, (B) such meeting shall not have been held or shall have been
canceled prior to termination of the Plan, (C) Issuer's Board of Directors
shall have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the Plan or
(D) Issuer shall have terminated the Plan pursuant to Section 7.1(g)
thereof, in each case after it shall have been publicly announced that any
person (other than Grantee or any subsidiary of Grantee) shall have (x)
made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction, (y) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an Exchange
Offer, or (z) filed an application (or given notice), whether in draft or
final form, under the BHC Act, the Bank Merger Act, as amended, or the
Change in Bank Control Act of 1978, as amended, for approval to engage in
an Acquisition Transaction; or

(iii) (A) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would entitle
Grantee to terminate the Plan under Section 7.1(b) thereof (without regard
to the cure period provided for therein unless such cure is promptly
effected without jeopardizing consummation of the Merger pursuant to the
terms of the Plan) or (B) Issuer shall have terminated the Plan pursuant to
Section 7.1(g) thereof, in each case after (x) a bona fide proposal is made
by any person (other than Grantee or any subsidiary of Grantee) to Issuer
or its stockholders to engage in an Acquisition Transaction, (y) any person
(other than Grantee or any subsidiary of Grantee) states its intention to
Issuer or its stockholders to make a proposal to engage in an Acquisition
Transaction if the Plan terminates, or (z) any person (other than Grantee
or any subsidiary of Grantee) shall have filed an application or notice
with any 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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<PAGE>

(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise, and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") or any other Governmental Entity is
required in connection with such purchase, Issuer shall cooperate with Grantee
in the filing of the required notice of application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).

4. PAYMENT AND DELIVERY OF CERTIFICATES.

(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to Issuer at the address of Issuer specified in Section 12(f) hereof.

(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.

(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:

THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED
AS OF OCTOBER 25, 1995. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO
THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN
REQUEST THEREFOR.

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<PAGE>

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 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.

5
<PAGE>

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

6
<PAGE>

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.

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<PAGE>

(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 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

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<PAGE>

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 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

9
<PAGE>

pursuant to Section 8, in whole or in part, or to require that Issuer deliver
from time to time that portion of the Section 8 Repurchase Consideration that it
is not then so prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and each party
shall cooperate with the other in the filing of any such notice or application
and the obtaining of any such approval). If the Federal Reserve Board or any
other Governmental Entity disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Holder. If the Federal Reserve Board or any other Governmental Entity
prohibits the repurchase in part but not in whole, then Holder shall have the
right (i) to revoke the repurchase request or (ii) to the extent permitted by
the Federal Reserve Board or other Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.

Notwithstanding anything herein to the contrary, all of Grantee's rights
under this Section 8 shall terminate on the date of termination of the Option
pursuant to Section 3(a).

(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder during the 60 business days preceding the
Request Date); provided, however, that in the event of a sale of less than all
of Issuer's assets, the Applicable Price shall be the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally-recognized investment banking firm
selected by Holder, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in good
faith by an independent nationally-recognized investment banking firm selected
by Holder and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.

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<PAGE>

(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), Section 7(b)(ii)
or Section 7(b)(iii) shall be consummated.

9. REGISTRATION RIGHTS.

(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities for sale under
any applicable state securities laws.

(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
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

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<PAGE>

obtain all consents or waivers of other parties which are required therefor and
to keep such registration statement effective; provided, however, that Issuer
may delay any registration of Option Shares required pursuant to Section 9(a)
for a period not exceeding 90 days if Issuer shall in good faith determine that
any such registration would adversely affect an offering or contemplated
offering of other securities by Issuer, and Issuer shall not be required to
register Option Shares under the Securities Act pursuant to Section 9(a):

(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase
Event;

(ii) on more than one occasion during any calendar year;

(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the 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 in any registration

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<PAGE>

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

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<PAGE>

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).

(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.

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<PAGE>

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 Section 7), it is the express
intention

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<PAGE>

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:

Bank of New Hampshire Corporation
300 Franklin Street
Manchester, New Hampshire 03101
Attn: Davis P. Thurber
Chairman and President
Fax: 603-645-0026

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<PAGE>

With a required copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attn: Craig M. Wasserman
Fax: 212-403-2000

and

Sheehan, Phinney, Bass + Green, P.A.
1000 Elm Street
P.O. Box 3701
Manchester, New Hampshire 03105-3701
Attn: Robert B. Field, Jr.
Fax: 603-668-0300

(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.

(h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
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.

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<PAGE>

IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.

PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:

/s/ PETER J. VERRILL By: /s/ WILLIAM J. RYAN
- ----------------------------- ------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President Title: Chairman, President
and Chief Executive
Officer

BANK OF NEW HAMPSHIRE
Attest: CORPORATION

/s/ PAUL R. SHEA By: /s/ DAVIS P. THURBER
- ----------------------------- ------------------------------
Name: Paul R. Shea Name: Davis P. Thurber
Title: Senior Executive Title: Chairman and President
Vice President

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<PAGE>

ANNEX III

STOCK OPTION AGREEMENT

Stock Option Agreement, dated as of October 25, 1995 (the "Agreement"), by
and between Peoples Heritage Financial Group, Inc., a Maine corporation
("Issuer"), and Bank of New Hampshire Corporation, a New Hampshire corporation
("Grantee").

WITNESSETH:

WHEREAS, Grantee, Issuer and First Coastal Banks, Inc., a wholly-owned
subsidiary of Issuer, have entered into an Agreement and Plan of Merger, dated
as of October 25, 1995 (the "Plan"), providing for, among other things, the
merger of First Coastal Banks, Inc. with and into Grantee (the "Merger"), with
Grantee as the surviving corporation; and

1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.

2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 1,674,894 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $.01 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $19.75, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 9.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option. Each Option Share issued upon exercise of the
Option shall be accompanied by Acquiror Rights as provided in the Acquiror
Rights Agreement.

<PAGE>

3. EXERCISE OF OPTION.

(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Grantee may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (A) the Effective Time of the Merger,
(B) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default
Termination"), (C) 12 months after the termination of the Plan by Grantee
pursuant to a Default Termination, and (D) 12 months after termination of the
Plan (other than pursuant to a Default Termination) following the occurrence of
a Purchase Event or a Preliminary Purchase Event; and provided, further, that
any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable laws, including without limitation the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The term "Holder" shall mean
the holder or holders of the Option from time to time, and which is initially
Grantee. The rights set forth in Section 8 hereof shall terminate when the
right to exercise the Option terminates (other than as a result of a complete
exercise of the Option) as set forth above.

(b) As used herein, a "Purchase Event" means any of the following events:

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<PAGE>

(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

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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<PAGE>

4. PAYMENT AND DELIVERY OF CERTIFICATES.

4
<PAGE>

PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY ISSUER OF
A WRITTEN REQUEST THEREFOR.

5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:

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<PAGE>

(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 Incorporation 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.

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 9.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.

6
<PAGE>

(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").

(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

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<PAGE>

directors (or persons similarly responsible for the direction of the
business and affairs) of the Substitute Option Issuer.

(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 9.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 9.9% of the aggregate of the shares of Substitute Common Stock but
for the limitation in the first sentence of this Section 7(f), Substitute Option
Issuer shall make a cash payment to Holder equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in the first
sentence of this Section 7(f) over (ii) the value of the Substitute Option after
giving effect to the limitation in the first sentence of this Section 7(f).
This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.

8
<PAGE>

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.

(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;

(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.

9
<PAGE>

or approval of the Federal Reserve Board or any other Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If the Federal
Reserve Board or any other Governmental Entity disapproves of any part of
Issuer's proposed repurchase pursuant to this Section 8, Issuer shall promptly
give notice of such fact to Holder. If the Federal Reserve Board or any other
Governmental Entity prohibits the repurchase in part but not in whole, then
Holder shall have the right (i) to revoke the repurchase request or (ii) to the
extent permitted by the Federal Reserve Board or other Governmental Entity,
determine whether the repurchase should apply to the Option and/or Option Shares
and to what extent to each, and Holder shall thereupon have the right to
exercise the Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of shares covered by
the Option in respect of which payment has been made pursuant to Section
8(a)(ii) and the number of shares covered by the portion of the Option (if any)
that has been repurchased. Holder shall notify Issuer of its determination
under the preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.

Notwithstanding anything herein to the contrary, all of Grantee's rights
under this Section 8 shall terminate on the date of termination of the Option
pursuant to Section 3(a).

10
<PAGE>

reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.

9. REGISTRATION RIGHTS.

11
<PAGE>

(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;

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<PAGE>

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.

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

13
<PAGE>

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.

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<PAGE>

12. MISCELLANEOUS.

15
<PAGE>

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.

If to Grantee:

Bank of New Hampshire Corporation
300 Franklin Street
Manchester, New Hampshire 03101
Attn: Davis P. Thurber
Chairman and President
Fax: 603-645-0026

With a required copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attn: Craig M. Wasserman
Fax: 212-403-2000

and

Sheehan, Phinney, Bass + Green, P.A.
1000 Elm Street
P.O. Box 3701
Manchester, New Hampshire 03105-3701
Attn: Robert B. Field, Jr.
Fax: 603-668-0300

16
<PAGE>

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

17
<PAGE>

IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.

BANK OF NEW HAMPSHIRE
Attest: CORPORATION

PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:

/S/ PETER J. VERRILL By: /S/ WILLIAM J. RYAN
- ----------------------------- ------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President Title: Chairman, President
and Chief Executive
Officer

18
<PAGE>

ANNEX IV

STOCKHOLDER AGREEMENT

STOCKHOLDER AGREEMENT, dated as of October 25, 1995, by and among Peoples
Heritage Financial Group, Inc. (the "Acquiror"), a Maine corporation, and
certain stockholders of Bank of New Hampshire Corporation (the "Company"), a New
Hampshire corporation, named on Schedule I hereto (collectively the
"Stockholders").

WITNESSETH:

WHEREAS, the Acquiror, First Coastal Banks, Inc. (the "Acquiror Sub") and
the Company have entered into an Agreement and Plan of Merger, dated as of the
date hereof (the "Agreement"), which is being executed simultaneously with the
execution of this Stockholder Agreement and provides for, among other things,
the merger of the Acquiror Sub with and into the Company (the "Merger"); and

WHEREAS, in order to induce the Acquiror to enter into the Agreement, each
of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacities as stockholders of the Company;

NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

1. OWNERSHIP OF COMPANY COMMON STOCK. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Company, no par value and stated value
of $2.50 per share ("Company Common Stock"), set forth opposite such
Stockholder's name on Schedule I hereto.

2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and agrees
that:

(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all shares
of Company Common Stock in which such stockholder has the right to vote
(whether owned as of the date hereof or hereafter acquired) in favor of the
Agreement;

(b) except as otherwise expressly permitted hereby, such Stockholder
shall not, prior to the meeting of the Company's stockholders referred to
in Section 2(a) hereof or the earlier termination of the Agreement in
accordance with its terms, sell, pledge, transfer or otherwise dispose of
the Stockholder's shares of Company Common Stock;

(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

<PAGE>

with, or provide any information to, any person, entity or group (other
than the Acquiror or an affiliate thereof) concerning any merger, sale of
substantial assets or liabilities not in the ordinary course of business,
sale of shares of capital stock or similar transactions involving the
Company or any subsidiary of the Company (provided that nothing herein
shall be deemed to affect the ability of any Stockholder to fulfill his
duties as a director or officer of the Company); and

(d) such Stockholder shall use his reasonable best efforts to take or
cause to be taken all action, and to do or cause to be done all things,
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the agreements contemplated by this
Stockholder Agreement.

Each Stockholder further agrees that the Company's transfer agent shall be
given an appropriate stop transfer order and shall not be required to register
any attempted transfer of shares of Company Common Stock, unless the transfer
has been effected in compliance with the terms of this letter agreement.

3. SUCCESSORS AND ASSIGNS. Subject to Section 5.13 of the Agreement and
the terms of the agreement with affiliates of the Company referred to therein, a
Stockholder may sell, pledge, transfer or otherwise dispose of his shares of
Company Common Stock, provided that, with respect to any sale, transfer or
disposition which would occur on or before the meeting of the Company's
stockholders referred to in Section 2(a) hereof, such Stockholder obtains the
prior written consent of the Acquiror and that any acquiror of such Company
Common Stock agree in writing to be bound by the terms of this Stockholder
Agreement.

4. TERMINATION. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.

5. NOTICES. Notices may be provided to the Acquiror and the Stockholders
in the manner specified in Section 8.4 of the Agreement, with all notices to the
Stockholders being provided to them at the Company in the manner specified in
such section.

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.

2
<PAGE>

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.

IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and each of
the Stockholders have caused this Stockholder Agreement to be executed as of the
day and year first above written.

PEOPLES HERITAGE FINANCIAL
GROUP, INC.

By: /S/ WILLIAM J. RYAN
-----------------------------------------
Name: William J. Ryan
Title: Chairman, President and Chief
Executive Officer

COMPANY STOCKHOLDERS:

/S/ SIDNEY THURBER COX
----------------------------------------------
Sidney Thurber Cox

/S/ CONSTANCE T. PRUDDEN
----------------------------------------------
Constance T. Prudden

/S/ DAVIS P. THURBER
----------------------------------------------
Davis P. Thurber

3
<PAGE>

SCHEDULE I

Number of Shares of
Company Common Stock
Name of Stockholder Beneficially Owned
- -------------------------------------- --------------------------
Sidney Thurber Cox 173,680
Constance T. Prudden 100,037
Davis P. Thurber 167,451

4
<PAGE>

ANNEX V
[Keefe, Bruyette & Woods, Inc. letterhead]

January __, 1996

Board of Directors
Bank of New Hampshire Corp.
300 Franklin Street
Manchester, NH 03105

Gentlemen:

You have requested our opinion as investment bankers as to the fairness
from a financial point of view to the shareholders of Bank of New Hampshire
Corporation ("BNHC") of the exchange ratio in the proposed merger (the "Merger")
of First Coastal Banks, Inc. ("First Coastal"), a wholly-owned subsidiary of
Peoples Heritage Financial Group, Inc. ("PHFG"), with and into BNHC pursuant to
the Agreement and Plan of Merger dated as of October 25, 1995 among PHFG, First
Coastal and BNHC (the "Agreement"). Under the terms of the Merger, each
outstanding share of common stock, no par value with a stated value of $2.50 per
share, of BNHC (the "Shares") will be exchanged for 2.0 shares of common stock,
$.01 par value, of PHFG (the "Exchange Ratio"). It is our understanding that
the Merger will be structured as a pooling-of-interests 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, BNHC 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 BNHC 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 BNHC. We have acted
for the Board of Directors of BNHC in rendering this fairness opinion and will
receive a fee from BNHC for our services.

<PAGE>

Board of Directors
January __, 1996
Page 2

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 contained therein relating to the Special
Meeting of BNHC shareholders at which holders of the Shares will be asked to
approve the Merger, Annual Reports to Shareholders and Annual Reports on
Form 10-K of BNHC and PHFG for the five years ended December 31, 1994, certain
interim reports to shareholders and Quarterly Reports on Form 10-Q of BNHC and
PHFG, and certain internal financial analyses and forecasts for BNHC prepared by
management. We also have held discussions with members of the senior management
of BNHC and PHFG regarding the past and current business operations, regulatory
relationships, financial condition and future prospects of their respective
companies. In addition, we have compared certain financial and stock market
information for BNHC and PHFG with similar information for certain other
companies the securities of which are publicly traded, 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 BNHC 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 BNHC
and that such forecasts and projections will be realized in the amounts and in
the time periods currently estimated by such management. We have also assumed
that the aggregate allowances for loan losses for BNHC and PHFG are adequate to
cover such losses. In rendering our opinion, we have not made or obtained any
evaluations or appraisals of the property of BNHC or PHFG, 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 positions and results of operations of
BNHC and PHFG; (ii) the assets and liabilities of BNHC and PHFG; and (iii) the
nature and terms of certain other merger transactions involving banks and bank
holding companies. We have also 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 upon conditions
as they exist and can be evaluated on the date hereof and the information made
available to us through the date hereof.

<PAGE>

Board of Directors
January __, 1996
Page 3

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 Common shareholders of BNHC.

Very truly yours,

KEEFE, BRUYETTE & WOODS, INC.
<PAGE>

ANNEX VI
[M.A. Schapiro & Co., Inc. letterhead]

January __, 1996

Board of Directors
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112

Ladies and Gentlemen:

You have asked us to advise you with respect to the fairness to the
shareholders of Peoples Heritage Financial Group, Inc. ("PHFG"), from a
financial point of view, of the Aggregate Consideration (as defined below) to be
paid by PHFG pursuant to the Agreement and Plan of Merger, dated as of
October 25, 1995 (the "Agreement"), by and among PHFG, First Coastal Banks, Inc.
("First Coastal") and Bank of New Hampshire Corporation ("BNHC"). It is our
understanding that pursuant to the Agreement, First Coastal will be merged with
and into BNHC, with BNHC as the surviving corporation (the "Merger"). Except
for dissenting shares and certain shares held by PHFG, each outstanding share of
common stock, stated value $2.50 per share, of BNHC will be converted into the
right to receive two shares (the "Exchange Ratio") of PHFG's common stock, par
value $0.01 per share (the "Common Stock"), provided that the Exchange Ratio may
be adjusted as set forth in the Agreement. The terms and conditions of the
Merger are more fully set forth in the Agreement. Assuming the accuracy of the
representations and warranties set forth in the Agreement, the Exchange Ratio
will result in the issuance by PHFG of 8,128,330 shares of PHFG Common Stock
(the "Aggregate Consideration") in the Merger.

In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to PHFG and BNHC. We have also
reviewed certain other information, including financial forecasts, provided to
us by PHFG and BNHC and have met with the management and representatives of BNHC
to discuss the business and prospects of BNHC.

We have also considered certain financial and stock market data of PHFG and
BNHC and we have compared that data with similar data for other publicly-held
companies in businesses similar to that of PHFG and BNHC, and we have considered
the financial terms of certain other business combinations which have recently
been effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which we
deemed relevant.

<PAGE>

Peoples Heritage Financial Group, Inc.
January __, 1996
Page 2

In connection with our review, we have not independently verified any of
the foregoing information and have relied on it being complete and accurate in
all material respects. With respect to the financial forecasts, we have assumed
(and have not independently verified) that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of PHFG's
and BNHC's managements and representatives as to the future financial
performance of PHFG and BNHC. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of PHFG or BNHC, nor have
we been furnished with any such evaluations or appraisals. Further, we have
assumed that the Merger will be treated as a pooling of interests transaction
for accounting purposes. Our opinion herein is based upon circumstances
existing and disclosed to us as of the date hereof.

M.A. Schapiro & Co., Inc., as part of its investment banking business, is
continually engaged in the valuation of 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. We have
acted as financial advisor to the Board of Directors of PHFG in connection with
the Merger and will receive a fee for our services.

It is understood that this letter is for the information of the Board of
Directors and is not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus or proxy statement, or in any other written
document used in connection with the offering or sale of securities, nor shall
this letter be used for any other purposes, without M.A. Schapiro's prior
written consent.

Based upon the foregoing and subject to the various assumptions and
limitations set forth herein, it is our opinion that, as of the date hereof, the
Aggregate Consideration is fair from a financial point of view to the
shareholders of PHFG.

Very truly yours,

M.A. SCHAPIRO & CO., INC.
<PAGE>

ANNEX VII

NEW HAMPSHIRE BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS

A. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES

293-A:13.01 DEFINITIONS.-- In this subdivision:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RSA 293-A:13.02 and who exercises that right when and in
the manner required by RSA 293-A:13.20 through 293-A:13.28.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.

293-A:13.02 RIGHT TO DISSENT.-- (a) A shareholder is entitled to
dissent from, and obtain payment of the fair value of his shares in the event
of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(i) If shareholder approval is required for the merger by RSA 293-A:11.03
or the articles of incorporation and the shareholder is entitled to vote on the
merger; or
(ii) If the corporation is a subsidiary that is merged with its parent
under RSA 293-A:11.04.
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale.

<PAGE>

(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares.
(ii) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities.
(iv) Excludes or limits the right of the shares to vote on any matter, or
to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights.
(v) Reduces the number of shares owned by the shareholder to a fraction of
a share if the fractional share so created is to be acquired for cash under RSA
293-A:6.04.
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this subdivision shall not challenge the corporate action creating his
entitlement, unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.

293-A:13.03 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.-- (a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written consent
to the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
(2) He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.

B. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS

293-A:13.20 NOTICE OF DISSENTERS' RIGHTS.-- (a) If proposed corporate
action creating dissenters' rights under RSA 293-A:13.02 is submitted to a vote
at a shareholders' meeting, the meeting notice shall state that shareholders are
or may be entitled to assert dissenters' rights under this subdivision and be
accompanied by a copy of this subdivision.
(b) If corporate action creating dissenters' rights under RSA 293-A:13.02
is taken without a vote of shareholders or by consent pursuant to RSA 293-
A:7.04, the corporation shall notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenters' notice described in RSA 293-A:13.22.

2
<PAGE>

293-A:13.21 NOTICE OF INTENT TO DEMAND PAYMENT.-- (a) If proposed
corporate action creating dissenters' rights under RSA 293-A:13.02 is submitted
to a vote at a shareholders meeting, a shareholder who wishes to assert
dissenters' rights:
(1) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Shall not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this subdivision.

293-A:13.22 DISSENTERS' NOTICE.-- (a) If proposed corporate action
creating dissenters' rights under RSA 293-A:13.02 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of RSA 293-A:13.21.
(b) The dissenters' notice shall be sent no later than 10 days after
corporate action was taken, and shall:
(1) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited.
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received.
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date.
(4) Set a date by which the corporation shall receive the payment demand,
which date shall not be fewer than 30 nor more than 60 days after the date the
notice is delivered.
(5) Be accompanied by a copy of this subdivision.

293-A:13.23 DUTY TO DEMAND PAYMENT.-- (a) A shareholder sent a
dissenters' notice described in RSA 293-A:13.22 shall demand payment, certify
whether he acquired beneficial ownership of the shares before the date required
to be set forth, in the dissenters' notice pursuant to RSA 293-A:13.22 (b) (3),
and deposit his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subdivision.

293-A:13.24 SHARE RESTRICTIONS.-- (a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under RSA 293-A:13.26.

3
<PAGE>

(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.

293-A:13.25 PAYMENT.-- (a) Except as provided in RSA 293-A:13.27, as
soon as the proposed corporate action is taken, or upon receipt of a payment
demand, the corporation shall pay each dissenter who complied with RSA 293-
A:13.23 the amount the corporation estimates to be the fair value of his shares,
plus accrued interest.
(b) The payment shall be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for that
year, a statement of changes in shareholders' equity for that year, and the
latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under RSA 293-
A:13.28; and
(5) A copy of this subdivision.

293-A13.26 FAILURE TO TAKE ACTION.-- (a) If the corporation does not
take the proposed action within 60 days after the date set for demanding payment
and depositing share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under RSA 293-A:13.22 and repeat the payment demand
procedure.

293-A:13.27 AFTER-ACQUIRED SHARES.-- (a) A corporation may elect to
withhold payment required by RSA 293-A:13.25 from a dissenter, unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenter's right to demand payment under RSA 293-A:13.28.

293-A:13.28 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.-- (a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate, less any payment under RSA 293-A:13.25, or reject the
corporation's offer under RSA 293-A:13.27 and demand payment of the fair value
of his shares and interest due, if:

4
<PAGE>

(1) The dissenter believes that the amount paid under RSA 293-A:13.25 or
offered under RSA 293-A:13.27 is less than the fair value of his shares or that
the interest due is incorrectly calculated;
(2) The corporation fails to make payment under RSA 293-A:13.25 within 60
days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within 60 days after the date set for demanding
payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within 30 days after the corporation made or offered payment for his shares.

C. JUDICIAL APPRAISAL OF SHARES

293-A:13.30 COURT ACTION.-- (a) If a demand for payment under RSA 293-
A:13.28 remains unsettled, the corporation shall commence a proceeding within
60 days after receiving the payment demand and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the 60-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decisions on the
question of their value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation; or,
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under RSA 293-
A:13.27.

293-A:13.31 COURT COSTS AND COUNSEL FEES.-- (a) The court in an
appraisal proceeding commenced under RSA 293-A:13.30 shall determine all costs
of the

5
<PAGE>

proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under RSA 293-A:13.28.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of RSA 293-A:13.20 through RSA 293-A:13.28.
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this subdivision.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.

6
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 719 of the MBCA sets forth certain circumstances under which
directors, officers, employees and agents may be indemnified against liability
which they may incur in their capacity as such. Indemnification may be provided
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred; provided that no indemnification
may be provided with respect to any matter where such person shall have been
finally adjudicated (i) not to have acted honestly or in the reasonable belief
that such action was in or not opposed to the best interests of the corporation
or its shareholders, or (ii) with respect to any criminal action, to have had
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a person with respect to any action or matter by or in the right of
the corporation as to which that person is finally adjudicated to be liable to
the corporation unless the court in which the action was brought determines
that, in view of all the circumstances, that person is fairly and reasonably
entitled to indemnity for such amounts as the court deems reasonable. To the
extent such person has been successful on the merits or otherwise in defense of
such action, that person shall be entitled to indemnification. Any
indemnification, unless ordered by a court or required in the corporation's
bylaws, shall be made only as authorized in the specific case upon a
determination by the board of directors that indemnification is proper in the
circumstances and in the best interests of the corporation. Expenses incurred
in defending an action may be paid by the corporation in advance of the final
disposition of that action upon a determination made that the person seeking
indemnification satisfied the standard of conduct required for indemnification
and receipt by the corporation of a written undertaking by or on behalf of such
person to repay that amount if that person is finally adjudicated to not have
met such standard or not be entitled to such indemnification. In addition,
Section 719 of the MBCA provides that a corporation may purchase and maintain
insurance on behalf of directors, officers, employees and agents against
liability whether or not the corporation would have the power to indemnify such
person against liability under such section. See Title 13-A Maine Revised
Statutes Annotated Section 719.

Article VI of the Bylaws of PHFG provides that the directors, officers,
employees and agents of PHFG shall be indemnified to the full extent permitted
by the MBCA. Such indemnity shall extend to expenses, including attorney's
fees, judgments, fines and amounts paid in the settlement, prosecution or
defense of the foregoing actions. Directors and officers also may be
indemnified pursuant to the terms of various employee benefit plans of PHFG. In
addition, PHFG carries a liability insurance policy for its directors and
officers.

<PAGE>

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:

(a) List of Exhibits:

Exhibit No. Exhibit Location
- ----------- ------- --------

2(a) Agreement and Plan of Merger, dated as of October 25,
1995, among PHFG, First Coastal and BNHC,
including the forms of Exhibits A to G thereto (1)

2(b) Stock Option Agreement, dated as of October 25, 1995,
between PHFG (as grantee) and BNHC (as issuer) (1)

2(c) Stock Option Agreement, dated as of October 25, 1995,
between PHFG (as issuer) and BNHC (as grantee) (1)

2(d) Stockholder Agreement, dated as of October 25, 1995,
among PHFG and certain shareholders of BNHC (1)

3(a) Articles of Incorporation of PHFG (2)

3(b) Bylaws of PHFG (2)

4(a) Specimen Common Stock certificate (2)

4(b) Form of Indenture between PHFG and Mellon Bank,
N.A., as trustee (3)

4(c) Form of Debenture due 2000 (3)

5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered *

8 Opinion of Wachtell, Lipton, Rosen & Katz regarding
certain federal income tax consequences

10(a) Severance agreement between PHFG and William J.
Ryan (4)

10(b) Severance agreement between PHFG and John E.
Menario (4)

10(c) Severance agreement between PHFG and Peter J. Verrill (4)

10(d) Severance agreement between PHFG and John W.
Fridlington (4)

II-2
<PAGE>

Exhibit No. Exhibit Location
- ----------- ------- --------

10(e) Severance agreement between PHFG and Henry G.
Beyer (4)

10(f) Supplemental retirement agreement among PHFG, its
subsidiaries and William J. Ryan, dated November 26,
1990 (5)

10(g) Supplemental retirement agreement among PHFG, its
subsidiaries and John E. Menario, dated November 26,
1990 (5)

10(h) Supplemental retirement agreement among PHFG, its
subsidiaries and Peter J. Verrill, dated November 26,
1990 (5)

10(i) Supplemental retirement agreement among PHFG, its
subsidiaries and Henry G. Beyer, dated November 26,
1990 (4)

10(j) Senior Officers' Incentive Compensation Plan, as
amended (2)

10(k) Senior Officers' Deferred Compensation Plan, as
amended (6)

10(l) Directors' Deferred Compensation Plan, as amended (6)

10(m) 1986 Stock Option and Stock Appreciation Rights Plan (2)(7)

10(n) 1986 Employee Stock Purchase Plan (2)(7)

10(o) Restricted Stock Plan for Non-Employee Directors (8)

10(p) 1995 Stock Option Plan for Non-Employee Directors (9)

10(q) Thrift Incentive Plan (10)

10(r) Profit Sharing Employee Stock Ownership Plan (10)

10(s) Stockholders Rights Agreement, dated September 12,
1989, between PHFG and Mellon Securities Trust
Company, as Rights Agent (11)

10(t) Agreement, dated January 1, 1989, by and among PHFG,
PHSB and Robert P. Bahre (6)

21 Subsidiaries of PHFG (4)

II-3
<PAGE>

Exhibit No. Exhibit Location
- ----------- ------- --------

23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P. *
(contained in the opinion included as Exhibit 5)

23(b) Consent of Wachtell, Lipton, Rosen & Katz
(contained in the opinion included as Exhibit 8)

23(c) Consent of KPMG Peat Marwick LLP

23(d) Consent of Ernst & Young LLP

23(e) Consent of M.A. Schapiro & Co., Inc.

23(f) Consent of Keefe, Bruyette & Woods, Inc.

24 Powers of Attorney (included in the signature page to
the initial filing of this Registration Statement) *

99(a) Form of proxy for the PHFG Special Meeting *

99(b) Form of proxy for the BNHC Special Meeting *

99(c) Other PHFG solicitation materials *

99(d) Consent of Davis P. Thurber to be named as prospective
director *

99(e) Consent of Paul R. Shea to be named as prospective
director *
- ----------------------

(1) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on November 3, 1995. In addition, the exhibit is attached as an
Annex to the Prospectus/Joint Proxy Statement included herein.

(2) Exhibit is incorporated by reference to the Form S-4 Registration Statement
(No. 33-20243) filed by PHFG with the SEC on February 22, 1988.

(3) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on February 28, 1995.

(4) Exhibit is incorporated by reference to PHFG's Form 10-K report for the
year ended December 31, 1994, filed with the SEC on March 30, 1995 and amended
on April 28, 1995.

(5) Exhibit is incorporated by reference to PHFG's Form 10-K report for the
year ended December 31, 1990, filed with the SEC on March 23, 1991.

II-4
<PAGE>

(6) Exhibit is incorporated by reference to PHFG's Form 10-K report for the
year ended December 31, 1993, filed with the SEC on March 17, 1994.

(7) An amendment to the 1986 Stock Option and Stock Appreciation Rights Plan is
incorporated by reference to the proxy statement filed by PHFG with the SEC on
March 24, 1994, and an amendment to the Employee Stock Purchase Plan is
incorporated by reference to the proxy statement filed by PHFG with the SEC on
March 24, 1993.

(8) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 16, 1990.

(9) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 24, 1995.

(10) Exhibit is incorporated by reference to the Form S-1 Registration Statement
(No. 33-53236) filed by PHFG with the SEC on November 23, 1992.

(11) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on September 13, 1989.

* Previously filed.

PHFG's management contracts or compensatory plans or arrangements consist
of Exhibit Nos. 10(a)-(r) and Exhibit 10(t) listed above.

(b) Financial Statement Schedules.

No financial statement schedules are filed because the required information
is not applicable or is included in the consolidated financial statements or
related notes.

ITEM 22. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes as follows:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and

II-5
<PAGE>

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;

PROVIDED, HOWEVER, that paragraphs (a) (1) (i) and (a) (1) (ii)
do not apply if the registration statement is on Form S-3 or Form S-8,
and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.

(2) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(3) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.

(4) That every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(5) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

II-6
<PAGE>

(6) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

(7) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b) 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-7
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, State of Maine
on the 2nd day of January 1996.

PEOPLES HERITAGE FINANCIAL GROUP, INC.

By: /S/ WILLIAM J. RYAN
--------------------
William J. Ryan
Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of the directors and/or officers of
Peoples Heritage Financial Group, Inc. whose signature appears below hereby
appoints William J. Ryan and Peter J. Verrill, and each of them severally, as
his or her attorney-in-fact to sign in his or her name and behalf, in any and
all capacities stated below and to file with the Securities and Exchange
Commission any and all amendments, including post-effective amendments, to this
Registration Statement on Form S-4, making such changes in the Registration
Statement as appropriate, and generally to do all such things in their behalf in
their capacities as directors and/or officers to enable Peoples Heritage
Financial Group, Inc. to comply with the provisions of the Securities Act of
1933, and all requirements of the Securities and Exchange Commission.

/S/ ROBERT P. BAHRE * Date: January 2, 1996
- ------------------------------
Robert P. Bahre
Director

/S/ EVERETT W. GRAY * Date: January 2, 1996
- ------------------------------
Everett W. Gray
Director

II-8
<PAGE>

/S/ ANDREW W. GREENE * Date: January 2, 1996
- ------------------------------
Andrew W. Greene
Director

/S/ KATHERINE M. GREENLEAF * Date: January 2, 1996
- ---------------------------------
Katherine M. Greenleaf
Director

/S/ DANA LEVENSON * Date: January 2, 1996
- ---------------------------------
Dana Levenson
Director

/S/ ROBERT A. MARDEN, SR. * Date: January 2, 1996
- ---------------------------------
Robert A. Marden, Sr.
Vice Chairman

/S/ MALCOLM W. PHILBROOK, JR. * Date: January 2, 1996
- ---------------------------------
Malcolm W. Philbrook, Jr.
Director

/S/ PAMELA P. PLUMB * Date: January 2, 1996
- ---------------------------------
Pamela P. Plumb
Vice Chairman

/S/ WILLIAM J. RYAN Date: January 2, 1996
- ---------------------------------
William J. Ryan
Chairman, President and Chief
Executive Officer
(principal executive officer)

II-9
<PAGE>

/S/ CURTIS M. SCRIBNER * Date: January 2, 1996

- ---------------------------------
Curtis M. Scribner
Director

/S/ PETER J. VERRILL Date: January 2, 1996
- ---------------------------------
Peter J. Verrill
Executive Vice President, Chief
Financial Officer and Treasurer
(principal financial and accounting officer)

__________
* By William J. Ryan, attorney-in-fact

II-10
<PAGE>

EXHIBIT INDEX

Exhibit No. Exhibit Location
- ----------- ------- --------

2(a) Agreement and Plan of Merger, dated as of October 25,
1995, among PHFG, First Coastal and BNHC,
including the forms of Exhibits A to G thereto (1)

2(b) Stock Option Agreement, dated as of October 25, 1995,
between PHFG (as grantee) and BNHC (as issuer) (1)

2(c) Stock Option Agreement, dated as of October 25, 1995,
between PHFG (as issuer) and BNHC (as grantee) (1)

2(d) Stockholder Agreement, dated as of October 25, 1995,
among PHFG and certain shareholders of BNHC (1)

3(a) Articles of Incorporation of PHFG (2)

3(b) Bylaws of PHFG (2)

4(a) Specimen Common Stock certificate (2)

4(b) Form of Indenture between PHFG and Mellon Bank,
N.A., as trustee (3)

4(c) Form of Debenture due 2000 (3)

5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. *
regarding legality of securities being registered

8 Opinion of Wachtell, Lipton, Rosen & Katz regarding
certain federal income tax consequences

10(a) Severance agreement between PHFG and William J.
Ryan (4)

10(b) Severance agreement between PHFG and John E.
Menario (4)

10(c) Severance agreement between PHFG and Peter J. Verrill (4)

10(d) Severance agreement between PHFG and John W.
Fridlington (4)

10(e) Severance agreement between PHFG and Henry G.
Beyer (4)

10(f) Supplemental retirement agreement among PHFG, its
subsidiaries and William J. Ryan, dated November 26,
1990 (5)

<PAGE>

Exhibit No. Exhibit Location
- ----------- ------- --------

10(g) Supplemental retirement agreement among PHFG, its
subsidiaries and John E. Menario, dated November 26,
1990 (5)

10(h) Supplemental retirement agreement among PHFG, its
subsidiaries and Peter J. Verrill, dated November 26,
1990 (5)

10(i) Supplemental retirement agreement among PHFG, its
subsidiaries and Henry G. Beyer, dated November 26,
1990 (4)

10(j) Senior Officers' Incentive Compensation Plan, as
amended (2)

10(k) Senior Officers' Deferred Compensation Plan, as
amended (6)

10(l) Directors' Deferred Compensation Plan, as amended (6)

10(m) 1986 Stock Option and Stock Appreciation Rights Plan (2)(7)

10(n) 1986 Employee Stock Purchase Plan (2)(7)

10(o) Restricted Stock Plan for Non-Employee Directors (8)

10(p) 1995 Stock Option Plan for Non-Employee Directors (9)

10(q) Thrift Incentive Plan (10)

10(r) Profit Sharing Employee Stock Ownership Plan (10)

10(s) Stockholders Rights Agreement, dated September 12,
1989, between PHFG and Mellon Securities Trust
Company, as Rights Agent (11)

10(t) Agreement, dated January 1, 1989, by and among PHFG,
PHSB and Robert P. Bahre (6)

21 Subsidiaries of PHFG (4)

23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P. *
(contained in the opinion included as Exhibit 5)

23(b) Consent of Wachtell, Lipton, Rosen & Katz
(contained in the opinion included as Exhibit 8)

23(c) Consent of KPMG Peat Marwick LLP

23(d) Consent of Ernst & Young LLP

2
<PAGE>

Exhibit No. Exhibit Location
- ----------- ------- --------

23(e) Consent of M.A. Schapiro & Co., Inc.

23(f) Consent of Keefe, Bruyette & Woods, Inc.

24 Powers of Attorney (included in the signature page to *
the initial filing of this Registration Statement)

99(a) Form of proxy for the PHFG Special Meeting *

99(b) Form of proxy for the BNHC Special Meeting *

99(c) Other PHFG solicitation materials *

99(d) Consent of Davis P. Thurber to be named as *
prospective director

99(e) Consent of Paul R. Shea to be named as prospective *
director

(2) Exhibit is incorporated by reference to the Form S-4 Registration Statement
(No. 33-20243) filed by PHFG with the SEC on February 22, 1988.

(3) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on February 28, 1995.

(4) Exhibit is incorporated by reference to PHFG's Form 10-K report for the
year ended December 31, 1994, filed with the SEC on March 30, 1995 and amended
on April 28, 1995.

(5) Exhibit is incorporated by reference to PHFG's Form 10-K report for the
year ended December 31, 1990, filed with the SEC on March 23, 1991.

(6) Exhibit is incorporated by reference to PHFG's Form 10-K report for the
year ended December 31, 1993, filed with the SEC on March 17, 1994.

3
<PAGE>

(8) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 16, 1990.

(9) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 24, 1995.

(10) Exhibit is incorporated by reference to the Form S-1 Registration Statement
(No. 33-53236) filed by PHFG with the SEC on November 23, 1992.

(11) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on September 13, 1989.

_________
* Previously filed.

<PAGE>
EXHIBIT 8

Dated the Effective Date
of the Registration Statement

Bank of New Hampshire Corporation
300 Franklin Street
Manchester, New Hampshire 03103

Ladies and Gentlemen:

We have acted as special counsel to Bank of New Hampshire Corporation, a
New Hampshire corporation ("BNHC"), in connection with the proposed merger (the
"Merger") of First Coastal Banks, Inc. ("First Coastal"), a New Hampshire
corporation and a wholly owned subsidiary of Peoples Heritage Financial Group,
Inc., a Maine corporation ("PHFG"), with and into BNHC, upon the terms and
conditions set forth in the Agreement and Plan of Merger (the "Agreement") dated
as of October 25, 1995 by and among BNHC, PHFG, and First Coastal. At your
request, and pursuant to Section 6.1(g) of the Agreement, we are rendering our
opinion concerning the material federal income tax consequences of the Merger
to holders of BNHC Common Stock.

For purposes of the opinion set forth below, we have relied, with the
consent of BNHC and the consent of PHFG, upon the accuracy and completeness of
the statements and representations (which statements and representations we have
neither investigated nor verified) contained, respectively, in the certificates
of the officers of BNHC and of PHFG (copies of which are attached hereto and
which are incorporated herein by reference), and we have assumed that such
certificates will be complete and accurate as of the Effective Time. Any
capitalized term used and not defined herein has the meaning given to it in the
Joint Proxy Statement-Prospectus of BNHC and PHFG dated the date hereof (the
"Joint Proxy Statement-Prospectus").

We have also assumed that the transactions contemplated by the Agreement
will be consummated in accordance with the Agreement and as described in the
Joint Proxy Statement-Prospectus.

Based upon and subject to the foregoing, it is our opinion that, under
presently applicable law:

1. No gain or loss will be recognized by BNHC stockholders who exchange
their BNHC Common Stock solely for PHFG Common Stock in the Merger
(except

<PAGE>
Bank of New Hampshire
Corporation
Page 2

with respect to cash received in lieu of a fractional share interest
in PHFG Common Stock, if any);

2. The tax basis of the PHFG Common Stock received by BNHC stockholders
will equal the tax basis of the BNHC Common Stock for which such
shares of PHFG Common Stock were exchanged; and

3. The holding period of PHFG Common Stock received by BNHC stockholders
in the Merger will include the period during which the shares of BNHC
Common Stock surrendered in exchange therefor were held; provided that
such BNHC Common Stock was held as a capital asset by the holder
thereof at the Effective Time.

This opinion may not be applicable to BNHC stockholders who received their
BNHC Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation or who are not citizens or residents of the United
States.

We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an Exhibit to the Registration Statement on Form S-4
(the "Registration Statement") in respect of the shares of PHFG Common Stock to
be issued in connection with the Merger, and to the reference to this opinion
under the caption "The Merger -Certain Federal Income Tax Consequences" and
elsewhere in the Joint Proxy Statement -Prospectus included therein. In giving
such consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.

Very truly yours,

WACHTELL, LIPTON, ROSEN & KATZ

<PAGE>

EXHIBIT 23(b)

Exhibit 23(b) is contained in the
opinion included as Exhibit 8

<PAGE>
EXHIBIT 23(c)

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Peoples Heritage Financial Group, Inc.

We consent to the use of our report dated January 18, 1995 incorporated
herein by reference and to the reference to our firm under the heading "Experts"
in the Prospectus/Joint Proxy Statement. Our report refers to changes in the
Company's methods of accounting for investments, income taxes and postretirement
benefits.

KPMG Peat Marwick LLP

Boston, Massachusetts
January 2, 1996

<PAGE>

EXHIBIT 23(d)

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus/Joint Proxy Statement
of Peoples Heritage Financial Group, Inc. for the registration of 8,128,330
shares of its common stock and to the incorporation by reference therein of our
report dated January 17, 1995, with respect to the consolidated financial
statements of Bank of New Hampshire Corporation incorporated by reference in
Bank of New Hampshire Corporation's Annual Report (Form 10-K) for the year ended
December 31, 1994, filed with the Securities and Exchange Commission.

Ernst & Young LLP

Manchester, New Hampshire
January 3, 1996

<PAGE>

EXHIBIT 23(e)

January 4, 1996

Board of Directors
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112

Ladies and Gentlemen:

Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of Peoples Heritage Financial Group, Inc. relating to
the merger of First Coastal Banks, Inc. with and into Bank of New Hampshire
Corporation.

We hereby consent to the inclusion of our opinion in the Registration
Statement and to all references to M.A. Schapiro & Co., Inc. contained therein.
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.

Very truly yours,

M.A. SCHAPIRO & CO., INC.

By: /S/ RICHARD J. KELLY
------------------------------------------
Richard J. Kelly
Director of Investment Banking

<PAGE>

EXHIBIT 23(f)

January 3, 1996

We hereby consent to the use in this Registration Statement on Form S-4 of
our letter to the Board of Directors of Bank of New Hampshire Corporation
included as Annex V to the Prospectus/Joint Proxy Statement forming a part of
this Registration Statement on Form S-4 and to all references to our firm in
such Prospectus/Joint Proxy Statement. In giving such consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.

KEEFE, BRUYETTE & WOODS, INC.

By: /S/ ROBERT J. STAPLETON
-----------------------------------------
Robert J. Stapleton
Director of Investment Banking