<PAGE> 1
As filed with the Securities and Exchange Commission on July 3, 1996
Registration No.
----------
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
PEOPLES HERITAGE FINANCIAL GROUP, INC.
------------------------------------------------------
(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
--------------
(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
--------------
(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. David D. Hindle Peter W. Coogan, Esq.
Elias, Matz, Tiernan & Herrick L.L.P. President and Chief Foley, Hoag & Eliot LLP
734 15th Street, N.W. Executive Officer One Post Office Square
Washington, D.C. 20005 Family Bancorp Boston, Massachusetts 02109
(202) 347-0300 153 Merrimack Street (617) 832-1000
Haverhill, Massachusetts 01830
(508) 374-1911
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
Effective Time as described in the accompanying Prospectus/Joint Proxy
Statement.
-----------------------
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. / /
-----------------------
Calculation of Registration Fee
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================================================================================================================
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Registered(1) Offering Price Per Aggregate Offering Amount of
Registered Share or Unit(2) Price(2) Registration Fee(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.01 per share 5,572,001 shares $24.63 $137,238,384 $47,323.58
- ----------------------------------------------------------------------------------------------------------------
Preferred Stock
purchase rights(3) 5,572,001 rights N/A N/A N/A
================================================================================================================
</TABLE>
(1) This Registration Statement covers the maximum number of shares of
common stock of the Registrant and related Preferred Stock purchase
rights issuable upon consummation of the merger of Family Bancorp
("Family") into Peoples Heritage Merger Corp., a wholly-owned
subsidiary of the Registrant.
(2) Estimated solely for the purpose of calculation of the registration
fee. Pursuant to Rules 457(f)(2) and 457(c) under the Securities Act of
1933, the registration fee is based on the average of the high and low
prices of the Family Common Stock as reported on the Nasdaq Stock
Market's National Market on June 27, 1996, and computed based on the
maximum number of shares (4,422,223) that may be exchanged for the
securities being registered.
(3) Preferred Stock purchase rights will be distributed without charge with
respect to each share of Common Stock of the Registrant registered
hereby.
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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<PAGE> 2
PEOPLES HERITAGE FINANCIAL GROUP, INC.
CROSS-REFERENCE SHEET
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ITEM OF FORM S-4 LOCATION IN PROSPECTUS
---------------- ----------------------
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1. Forepart of Registration Statement Facing Page; Cross Reference Sheet;
and Outside Front Cover Page of Outside Front Cover Page of
Prospectus Prospectus/Joint Proxy Statement
2. Inside Front and Outside Back Cover Inside Front Cover Page of Prospectus/
Pages of Prospectus Joint Proxy Statement; Table of
Contents; Available Information;
Incorporation of Certain Documents by
Reference
3. Risk Factors, Ratio of Earnings to Summary; Market for Common Stock
Fixed Charges and Other Information and Dividends; Comparative Per 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 Company The Merger
Being Acquired
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Not Applicable
Counsel
9. Disclosure of Commission's Position Not Applicable
on Indemnification for Securities Act
Liabilities
10. Information with Respect to S-3 Incorporation of Certain Documents by
Registrants Reference; Summary
11. Incorporation of Certain Information Incorporation of Certain Documents by
by Reference Reference
12. Information with Respect to S-2 or S- Not Applicable
3 Registrants
13. Incorporation of Certain Information Not Applicable
by Reference
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ITEM OF FORM S-4 LOCATION IN PROSPECTUS
---------------- ----------------------
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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 by
Companies Reference; Summary
16. Information with Respect to S-2 or S- Not Applicable
3 Companies
17. Information with Respect to Not Applicable
Companies other than S-2 or S-3
Companies
18. Information if Proxies, Consents or Summary; The Special Meetings; The
Authorizations are to be Solicited Merger; Incorporation of Certain
Documents by Reference
19. Information if Proxies, Consents or Not Applicable
Authorizations are not to be Solicited,
or in an Exchange Offer
</TABLE>
<PAGE> 4
PEOPLES HERITAGE FINANCIAL GROUP, INC.
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207) 761-8500
_________ ___, 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 ________ ___, 1996 at ______________________________, Portland, Maine (the
"Special Meeting"). This is a very important meeting regarding your investment
in PHFG.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated as of May 30, 1996
(the "Agreement"), by and among PHFG, Peoples Heritage Merger Corp. ("PHMC"), a
newly-formed, wholly-owned subsidiary of PHFG, and Family Bancorp ("Family"), a
Massachusetts corporation, pursuant to which, among other things, Family will be
merged with and into PHMC (the "Merger"). If the Agreement is approved and the
Merger is consummated, each outstanding share of Family Common Stock will be
converted into the right to receive 1.26 shares of PHFG Common Stock, subject to
possible adjustment under certain circumstances, plus cash in lieu of any
fractional share interest.
Your Board of Directors has determined the Merger to be fair to and in
the best interests of PHFG and its shareholders and has unanimously approved the
Agreement and the transactions contemplated thereby, including the Merger. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE AGREEMENT.
Enclosed are a Notice of Special Meeting of Shareholders and a
Prospectus/Joint Proxy Statement which describes the Merger, its effects and the
background of the transaction. A copy of the Agreement is included as Annex I to
the enclosed Prospectus/ Joint Proxy Statement. You are urged to read these
materials carefully.
It is very important that your shares be represented at the Special
Meeting. Even if you plan to be present at the Special Meeting, you are
requested to complete, date, sign, and return the proxy card in the enclosed
postage-paid envelope as soon as possible. If you decide to attend the Special
Meeting, you may vote your shares in person whether or not you have previously
submitted a proxy.
On behalf of the Board, I thank you for your attention to this
important matter.
Very truly yours,
William J. Ryan
Chairman, President and
Chief Executive Officer
<PAGE> 5
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 ________ ___, 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 ________ ___, 1996 at
__________________________, Portland, Maine for the following purpose:
To consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Agreement"), by and among PHFG,
Peoples Heritage Merger Corp. ("PHMC"), a newly-formed, wholly-owned
subsidiary of PHFG, and Family Bancorp ("Family"), which provides,
among other things, for (i) the merger of Family with and into PHMC
(the "Merger") and (ii) the conversion of each share of common stock of
Family outstanding immediately prior to the Merger (other than any
dissenting shares under Massachusetts law and certain shares held by
PHFG) into the right to receive 1.26 shares of PHFG common stock,
subject to possible adjustment under certain circumstances, plus cash
in lieu of any fractional share interest.
Pursuant to the Bylaws of PHFG, the Board of Directors has fixed the
close of business on ________ ___, 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
________ ___, 1996
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.
<PAGE> 6
FAMILY BANCORP
153 MERRIMACK STREET
HAVERHILL, MASSACHUSETTS 01830
(508) 374-1911
________ ___, 1996
Dear Shareholder,
You are cordially invited to attend a Special Meeting of Shareholders
of Family Bancorp ("Family") at 9:00 a.m., Eastern Time, on ________ ___, 1996
at ____________, _______, Massachusetts (the "Special Meeting"). This is a very
important meeting regarding your investment in Family.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated as of May 30, 1996
(the "Agreement"), by and among Peoples Heritage Financial Group, Inc. ("PHFG"),
a Maine corporation, Peoples Heritage Merger Corp. ("PHMC"), a Maine corporation
and a newly-formed, wholly-owned subsidiary of PHFG, and Family, pursuant to
which, among other things, Family will be merged with and into PHMC (the
"Merger"). If the Agreement is approved and the Merger is consummated, each
outstanding share of Family Common Stock will be converted into the right to
receive 1.26 shares of PHFG Common Stock, subject to possible adjustment under
certain circumstances, plus cash in lieu of any fractional share interest.
Following the Merger, Family Bank, FSB will be a wholly-owned subsidiary of
PHFG.
Your Board of Directors has determined the Merger to be fair to and in
the best interests of Family and its shareholders and has unanimously approved
the Agreement and the transactions contemplated thereby, including the Merger.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE AGREEMENT.
Enclosed are a Notice of Special Meeting of Shareholders and a
Prospectus/Joint Proxy Statement which describes the Merger, its effects and the
background of the transaction. A copy of the Agreement is included as Annex I to
the enclosed Prospectus/Joint Proxy Statement. You are urged to read these
materials carefully.
It is very important that your shares be represented at the Special
Meeting. BECAUSE THE MERGER REQUIRES THE APPROVAL OF THE HOLDERS OF TWO THIRDS
OF THE OUTSTANDING FAMILY COMMON STOCK, FAILURE TO RETURN A PROPERLY EXECUTED
PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE AGREEMENT. Accordingly, even if you plan to be present at the
Special Meeting, you are requested to complete, date, sign, and return the proxy
card in the enclosed postage-paid envelope as soon as possible. If you decide to
attend the Special Meeting, you may vote your shares in person whether or not
you have previously submitted a proxy.
On behalf of the Board, I thank you for your attention to this
important matter.
Very truly yours,
David D. Hindle
President and Chief Executive Officer
<PAGE> 7
FAMILY BANCORP
153 MERRIMACK STREET
HAVERHILL, MASSACHUSETTS 01830
(508) 374-1911
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on ________ ___, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Special Meeting") of Family Bancorp ("Family") will be held at 9:00 a.m.,
Eastern Time, on ________ ___, 1996 at __________________, _____, Massachusetts
for the following purpose:
To consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Agreement"), by and among
Peoples Heritage Financial Group, Inc. ("PHFG"), Peoples Heritage
Merger Corp. ("PHMC"), a newly-formed, wholly-owned subsidiary of PHFG,
and Family, which provides, among other things, for (i) the merger of
Family with and into PHMC (the "Merger") and (ii) the conversion of
each share of common stock of Family outstanding immediately prior to
the Merger (other than any dissenting shares under Massachusetts law
and certain shares held by PHFG) into the right to receive 1.26 shares
of PHFG common stock, subject to possible adjustment under certain
circumstances, plus cash in lieu of any fractional share interest.
Pursuant to the Bylaws of Family, the Board of Directors has fixed the
close of business on ________ ___, 1996 as the record date for the determination
of shareholders entitled to notice of and to vote at the Special Meeting. Only
holders of common stock of Family of record at the close of business on that
date will be entitled to notice of and to vote at the Special Meeting or any
adjournment or adjournments thereof.
If the Agreement and the transactions contemplated thereby are approved
by shareholders at the Special Meeting and the Merger is consummated by Family,
any shareholder of record as of the record date for the Special Meeting (i) who
delivers to Family, before the shareholder vote on the Agreement, a written
objection to the Merger stating that he or she intends to demand payment for his
or her shares through the exercise of his or her statutory appraisal rights;
(ii) whose shares are not voted in favor of approving the Agreement; and (iii)
who demands in writing payment for his or her shares within 20 days after the
date of the notice that the Merger has become effective is mailed to the
shareholders, shall be entitled to receive payment for his or her shares and an
appraisal of the value thereof. Family, its successor and any such shareholder
shall in such case have the rights and duties and shall follow the procedures
set forth in Sections 85 through 98 of Chapter 156B of the Massachusetts
Business Corporation Law, which are described under "The Merger - Dissenters'
Rights" in the accompanying Prospectus/Joint Proxy Statement and a copy of which
are attached as Annex VII to such Prospectus/Joint Proxy Statement.
THE BOARD OF DIRECTORS OF FAMILY HAS DETERMINED THE MERGER TO BE FAIR
TO AND IN THE BEST INTERESTS OF FAMILY AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
By Order of the Board of Directors
David D. Hindle
President and Chief Executive Officer
Haverhill, Massachusetts
________ ___, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. FAILURE TO RETURN A
PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE AGREEMENT. ACCORDINGLY, EVEN IF YOU PLAN TO BE
PRESENT AT THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY.
ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR
TO THE EXERCISE THEREOF.
<PAGE> 8
PROSPECTUS PROXY STATEMENT
PEOPLES HERITAGE FINANCIAL PEOPLES HERITAGE FINANCIAL
GROUP, INC. GROUP, INC.
------ and
Common Stock FAMILY BANCORP
(Par Value $.01 Per Share) ------
Special Meetings of Shareholders to be
held on _______ ___, 1996
----------
This Prospectus/Joint Proxy Statement is being furnished in connection
with the solicitation of proxies by the Board of Directors of Peoples Heritage
Financial Group, Inc. ("PHFG") and the Board of Directors of Family Bancorp
("Family") to be used at special meetings of shareholders of PHFG and Family,
respectively, to be held on ________ ___, 1996 (the "PHFG Special Meeting" and
the "Family Special Meeting," respectively, and together the "Special
Meetings"). The purpose of the Special Meetings is to consider and vote upon an
Agreement and Plan of Merger, dated as of May 30, 1996, by and among PHFG,
Peoples Heritage Merger Corp. ("PHMC"), a newly-formed, wholly-owned subsidiary
of PHFG, and Family (the "Agreement"), which provides, among other things, for
the merger of Family with and into PHMC (the "Merger").
Upon consummation of the Merger, each share of common stock of Family,
par value $0.10 per share ("Family Common Stock") (other than (i) any dissenting
shares under Massachusetts law and (ii) any shares held by PHFG or a subsidiary
thereof other than in a fiduciary capacity or in satisfaction of a debt
previously contracted) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive 1.26
shares of PHFG Common Stock (as hereinafter defined), subject to possible
adjustment under certain circumstances, plus cash in lieu of any fractional
share interest, as described in this Prospectus/Joint Proxy Statement. See
"Summary," "The Merger" and Annex I.
This Prospectus/Joint Proxy Statement also constitutes a prospectus of
PHFG relating to the shares of common stock of PHFG, par value $.01 per share
(together with the PHFG Rights, as hereinafter defined, attached thereto, the
"PHFG Common Stock") issuable to holders of Family Common Stock upon
consummation of the Merger. Based on ________ shares of Family Common Stock
outstanding on the date hereof and outstanding options to purchase ______ of
such shares as of the same date, a maximum of 5,572,001 shares of PHFG Common
Stock will be issuable upon consummation of the Merger.
----------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/JOINT
PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus/Joint Proxy Statement is ________ ___, 1996.
<PAGE> 9
AVAILABLE INFORMATION
Each of PHFG and Family is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Reports, proxy statements and other information filed by
PHFG and Family can be inspected and copied at Room 1024 of the SEC's office at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional Office
in New York (7 World Trade Center, Suite 1300, New York, New York 10048), and
copies of such material can be obtained from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Each
of the PHFG Common Stock and the Family Common Stock is quoted on the Nasdaq
Stock Market's National Market ("NASDAQ"). Consequently, reports, proxy
statements and other information relating to PHFG and Family also may be
inspected at the office of the National Association of Securities Dealers, Inc.
("NASD") at 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus/Joint Proxy Statement does not contain all of the
information set forth in the Registration Statement on Form S-4, of which this
Prospectus/Joint Proxy Statement is a part, and exhibits thereto (together with
the amendments thereto, the "Registration Statement"), which has been filed by
PHFG with the SEC under the Securities Act of 1933, as amended, and the rules
and regulations thereunder (the "Securities Act"), certain portions of which
have been omitted pursuant to the rules and regulations of the SEC and to which
reference is hereby made for further information.
THIS PROSPECTUS/JOINT PROXY STATEMENT INCORPORATES DOCUMENTS OF PHFG
AND FAMILY BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
ALL SUCH DOCUMENTS WITH RESPECT TO PHFG ARE AVAILABLE WITHOUT CHARGE (OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR ORAL REQUEST FROM: PEOPLES
HERITAGE FINANCIAL GROUP, INC., P.O. BOX 9540, ONE PORTLAND SQUARE, PORTLAND,
MAINE 04112-9540, ATTENTION: BRIAN ARSENAULT (TELEPHONE NUMBER (207) 761-8517).
ALL SUCH DOCUMENTS WITH RESPECT TO FAMILY ARE AVAILABLE WITHOUT CHARGE (OTHER
THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR ORAL REQUEST FROM:
FAMILY BANCORP, 153 MERRIMACK STREET, HAVERHILL, MASSACHUSETTS 01830, ATTENTION:
GEORGE E. FAHEY (TELEPHONE NUMBER (508) 374-1911). IN ORDER TO ENSURE TIMELY
DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ________ ___, 1996.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/JOINT PROXY
STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY PHFG OR FAMILY. NEITHER THE DELIVERY OF
THIS PROSPECTUS/JOINT PROXY STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES TO
WHICH THIS PROSPECTUS/JOINT PROXY STATEMENT RELATES SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF PHFG OR FAMILY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS
PROSPECTUS/JOINT PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR SOLICITATION TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL.
2
<PAGE> 10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by PHFG (File No. 0-16947) and Family
(File No. 0- 17252) with the SEC pursuant to the Exchange Act are hereby
incorporated by reference in this Prospectus/Joint Proxy Statement:
(1) PHFG's Annual Report on Form 10-K for the year ended December
31, 1995;
(2) PHFG's Quarterly Report on Form 10-Q for the three months
ended March 31, 1996;
(3) PHFG's Current Reports on Form 8-K, dated April 3, June 5,
June 21 and July 2, 1996;
(4) Family's Annual Report on Form 10-K for the year ended
December 31, 1995;
(5) Family's Quarterly Report on Form 10-Q for the three months
ended March 31, 1996; and
(6) Family's Current Report on Form 8-K, dated June 7, 1996.
All documents and reports filed by PHFG and Family pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the Special Meetings also are hereby incorporated herein by reference
into this Prospectus/ Joint Proxy Statement and shall be deemed a part hereof
from the date of filing of such documents or reports. Any statement contained
herein, in any supplement hereto or in a document or report incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus/Joint
Proxy Statement to the extent that a statement contained herein, in any
supplement hereto or in any subsequently filed document or report which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Prospectus/Joint Proxy Statement or any supplement hereto.
3
<PAGE> 11
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..................................... 14
Comparative Per Share Data................................................ 16
Selected Consolidated Financial Data of PHFG.............................. 18
Selected Consolidated Financial Data of Family............................ 20
Selected Pro Forma Consolidated Financial Data............................ 22
General Information....................................................... 24
The Special Meetings...................................................... 24
Time and Place.......................................................... 24
Matters to be Considered................................................ 24
Shares Outstanding and Entitled to Vote; Record Date.................... 24
Votes Required.......................................................... 25
Voting and Revocation of Proxies........................................ 25
Solicitation of Proxies................................................. 26
The Merger................................................................ 26
General................................................................. 26
Background of the Merger................................................ 27
Reasons for the Merger; Recommendations of the Boards of Directors...... 30
Opinions of Financial Advisors.......................................... 32
Exchange of Family Common Stock Certificates............................ 42
Assumption of Family Stock Options...................................... 43
Representations and Warranties.......................................... 44
Conditions to the Merger................................................ 44
Regulatory Approvals.................................................... 46
Business Pending the Merger............................................. 47
Branch Sale............................................................. 49
No Solicitation......................................................... 50
Effective Time of the Merger; Termination and Amendment................. 50
Interests of Certain Persons in the Merger.............................. 52
Certain Employee Matters................................................ 54
Resale of PHFG Common Stock............................................. 55
Certain Federal Income Tax Consequences................................. 55
Accounting Treatment of the Merger...................................... 57
Expenses of the Merger.................................................. 57
Stock Option Agreements................................................. 57
Stockholder Agreement................................................... 60
Dissenters' Rights...................................................... 61
Pro Forma Combined Consolidated Financial Information..................... 62
Certain Regulatory Considerations......................................... 69
Description of PHFG Capital Stock......................................... 71
PHFG Common Stock....................................................... 71
PHFG Preferred Stock.................................................... 71
PHFG Rights............................................................. 72
Other Provisions........................................................ 73
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4
<PAGE> 12
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Transfer Agent.......................................................... 74
Comparison of the Rights of Shareholders.................................. 74
Authorized Capital Stock................................................ 74
Issuance of Capital Stock............................................... 75
Voting Rights........................................................... 75
Classification and Size of Board of Directors........................... 76
Director Vacancies and Removal of Directors............................. 76
Director Duties......................................................... 77
Director Conflict of Interest Transactions.............................. 77
Exculpation of Directors................................................ 78
Special Meetings of Shareholders........................................ 78
Shareholder Nominations................................................. 78
Shareholder Proposals................................................... 79
Shareholder Action without a Meeting.................................... 79
Shareholder's Right to Examine Books and Records........................ 80
Amendment of Governing Instruments...................................... 80
Mergers, Consolidations and Sales of Assets............................. 81
Business Combinations with Certain Persons.............................. 81
State Anti-takeover Statutes............................................ 82
Dissenters' Rights of Appraisal......................................... 83
Shareholder Rights Plans................................................ 84
Certain Beneficial Owners of PHFG Common Stock............................ 84
Security Ownership of Management........................................ 84
Security Ownership of Certain Beneficial Owners......................... 86
Certain Beneficial Owners of Family Common Stock.......................... 86
Security Ownership of Management........................................ 86
Security Ownership of Certain Beneficial Owners......................... 88
Legal Opinion............................................................. 88
Experts................................................................... 88
Proposals for the 1997 Annual Meetings.................................... 89
</TABLE>
Annexes:
Annex I - Agreement and Plan of Merger, dated as of May 30, 1996, by and
among PHFG, PHMC and Family
Annex II - Stock Option Agreement, dated as of May 30, 1996, between Family
(as issuer) and PHFG (as grantee)
Annex III - Stock Option Agreement, dated as of May 30, 1996, between PHFG
(as issuer) and Family (as grantee)
Annex IV - Stockholder Agreement, dated as of May 30, 1996, between PHFG
and certain stockholders of Family
Annex V - Opinion of McConnell, Budd & Downes, Inc.
Annex VI - Opinion of Keefe, Bruyette & Woods, Inc.
Annex VII - Sections 85 through 98 of Chapter 156B of the Massachusetts
Business Corporation Law
5
<PAGE> 13
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
________ ___, 1996 at ____________________, Portland, Maine, and the Family
Special Meeting will be held at the same time and on the same date at
___________________, ________, Massachusetts. Only the holders of record of
outstanding shares of PHFG Common Stock and Family Common Stock at the close of
business on ________ ___, 1996 (the "Record Date") are entitled to notice of and
to vote at the PHFG Special Meeting and the Family Special Meeting,
respectively. On the Record Date, ________ shares of PHFG Common Stock and
________ shares of Family Common Stock were outstanding and entitled to be voted
at the PHFG Special Meeting and the Family Special Meeting, respectively.
At the Special Meetings, shareholders of PHFG and Family will consider
and vote upon a proposal to approve the Agreement. A majority of the votes cast
at the PHFG Special Meeting by holders of PHFG Common Stock, voting in person or
by proxy, on the proposal to approve the Agreement is necessary to approve the
Agreement on behalf of PHFG. The affirmative vote of the holders of two thirds
of the outstanding shares of Family Common Stock, voting in person or by proxy,
is necessary to approve the Agreement on behalf of Family. Because approval of
the Agreement on behalf of Family will be based on the number of shares
outstanding, rather than the number of shares voting, the failure to vote,
either in person or by proxy, or the abstention from voting, by a shareholder of
Family will have the same effect as a vote against the Agreement. Under
applicable stock exchange rules, brokers who hold shares in street name for
customers are prohibited from giving a proxy to vote such customers' shares with
respect to approval of the Agreement in the absence of specific instructions
from such customers. Accordingly, such broker nonvotes also will have the same
effect as votes against approval of the Agreement.
As of the Record Date, the directors and executive officers of PHFG and
their affiliates in the aggregate beneficially owned ________ shares, or ____%,
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 Family and their affiliates in the aggregate
beneficially owned ________ shares, or ____%, of the outstanding Family Common
Stock. In connection with the execution of the Agreement, PHFG and certain
shareholders of Family entered into an agreement pursuant to which, among other
things, such shareholders agreed to vote their shares of Family Common Stock
(which amount to _____% of the shares of such stock outstanding as of the Record
Date) in favor of the Agreement. See "Certain Beneficial Owners of Family Common
Stock" and "The Merger - Stockholder Agreement."
6
<PAGE> 14
PARTIES TO THE MERGER
PHFG and PHMC. PHFG is a Maine-chartered, multi-bank holding company
registered under the Bank Holding Company Act of 1956, as amended (the "BHCA").
As used in this Prospectus/Joint Proxy Statement, the term "PHFG" refers to such
corporation and, where the context requires, its subsidiaries.
PHFG conducts business from its headquarters in Portland, Maine and 110
offices located throughout the States of Maine and New Hampshire. At March 31,
1996, PHFG had consolidated assets of $4.3 billion, consolidated deposits of
$3.3 billion and consolidated shareholders' equity of $362.2 million. Based on
total assets at March 31, 1996, PHFG is the largest independent bank holding
company headquartered in the State of Maine and the fifth largest independent
bank holding company headquartered in New England.
PHFG offers a broad range of commercial and consumer banking services
and products and trust and investment advisory services through two wholly-owned
banking subsidiaries: Peoples Heritage Bank ("PHB") and Bank of New Hampshire
("BNH"). PHB is a Maine-chartered savings bank which operates 61 offices
throughout Maine and, through subsidiaries, engages in mortgage banking,
financial planning and equipment leasing activities. At March 31, 1996, PHB had
consolidated assets of $2.5 billion, consolidated deposits of $1.9 billion and
consolidated shareholder's equity of $189.1 million. BNH is a New
Hampshire-chartered commercial bank which operates 49 offices throughout New
Hampshire. At March 31, 1996, BNH had consolidated assets of $1.7 billion,
consolidated deposits of $1.5 billion and consolidated shareholder's equity of
$138.4 million. Each of PHB and BNH is a member of the Bank Insurance Fund
("BIF") administered by the Federal Deposit Insurance Corporation ("FDIC").
PHMC is a Maine corporation which is wholly-owned by PHFG. PHMC was
formed in May 1996 to facilitate PHFG's acquisition of Family and prior to
consummation of the Merger will conduct no activities other than of an
organizational nature and as required by the Agreement.
Since January 1, 1995, PHFG has completed one acquisition which has
been accounted for under the pooling-of-interests method of accounting and three
acquisitions that have been accounted for under the purchase method of
accounting. See "Other Recent Acquisitions of PHFG" below.
The principal executive offices of PHFG are located at One Portland
Square, Portland, Maine 04112-9540, and its telephone number is (207) 761-8500.
Family. Family is a Massachusetts-chartered savings and loan holding
company registered under the Home Owners' Loan Act, as amended ("HOLA"). As used
in this Prospectus/Joint Proxy Statement, the term "Family" refers to such
corporation and, where the context requires, its subsidiaries.
Family offers a broad range of commercial and retail financial
services, including transaction accounts, savings deposits, residential and
commercial mortgages and other commercial and consumer loans, through Family
Bank, FSB ("Family Bank"), a wholly-owned subsidiary of Family. At March 31,
1996, Family had consolidated assets of $887.4
7
<PAGE> 15
million, consolidated deposits of $736.6 million and consolidated shareholders'
equity of $68.8 million.
Family Bank operates 17 banking offices in the Merrimack Valley area of
Greater Haverhill and Greater Lowell, Massachusetts and six offices in southern
New Hampshire. Family Bank became a federally-chartered savings bank regulated
by the Office of Thrift Supervision ("OTS") in 1995 when Family combined its two
formerly state-chartered savings banks to allow its customers to bank at its
offices in either Massachusetts or New Hampshire. Family Bank is a member of the
BIF administered by the FDIC.
The principal executive offices of Family are located at 153 Merrimack
Street, Haverhill, Massachusetts, and its telephone number is (508) 374-1911.
THE MERGER
In accordance with the terms of and subject to the conditions set forth
in the Agreement, Family will be merged with and into PHMC, with PHMC as the
surviving corporation of the Merger. The Agreement provides that at the
effective time of the Merger, each outstanding share of Family Common Stock
(other than (i) any dissenting shares under Massachusetts law and (ii) any
shares held by PHFG or a subsidiary thereof other than in a fiduciary capacity
or in satisfaction of a debt previously contracted) will be converted into the
right to receive 1.26 shares of PHFG Common Stock (the "Exchange Ratio"),
subject to possible adjustment under certain circumstances.
No fractional shares of PHFG Common Stock will be issued in the Merger.
In lieu thereof, each holder of shares of Family Common Stock entitled to a
fraction of a share of PHFG Common Stock shall be entitled to receive an amount
of cash determined by multiplying such holder's fractional interest by the
closing price of a share of PHFG Common Stock on NASDAQ on the business day
preceding the effective time of the Merger. See "The Merger."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF PHFG AND FAMILY
PHFG. The Board of Directors of PHFG (the "PHFG Board") has determined
the Merger to be fair to and in the best interests of PHFG and its shareholders
and has unanimously approved the Agreement and the transactions contemplated
thereby, including the Merger. ACCORDINGLY, THE PHFG BOARD UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS OF PHFG VOTE "FOR" APPROVAL OF THE AGREEMENT.
Family. The Board of Directors of Family (the "Family Board") has
determined the Merger to be fair to and in the best interests of Family and its
shareholders and has unanimously approved the Agreement and the transactions
contemplated thereby, including the Merger. ACCORDINGLY, THE FAMILY BOARD
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
See "The Merger - Reasons for the Merger; Recommendations of the Boards
of Directors."
8
<PAGE> 16
OPINIONS OF FINANCIAL ADVISORS
McConnell, Budd & Downes, Inc. ("MB&D"), Family's financial advisor,
has delivered to the Board of Directors of Family (the "Family Board") its oral
opinion of May 30, 1996, and its written opinion dated the date of this
Prospectus/Joint Proxy Statement, each to the effect that, as of the date of
such opinions, the Exchange Ratio was fair, from a financial point of view, to
the holders of Family Common Stock. Keefe, Bruyette & Woods, Inc. ("Keefe
Bruyette"), PHFG's financial advisor, has delivered to the Board of Directors of
PHFG (the "PHFG Board") its oral opinion of May 28, 1996, and its written
opinion dated the date of this Prospectus/Joint Proxy Statement, each to the
effect that, as of the date of such opinions, the Exchange Ratio was fair, from
a financial point of view, to the holders of PHFG Common Stock.
For information on the assumptions made, matters considered and limits
of the reviews by MB&D and Keefe Bruyette, see "The Merger - Opinions of
Financial Advisors." Shareholders are urged to read in their entirety the
opinions of MB&D and Keefe Bruyette, which are attached as Annexes V and VI to
this Prospectus/Joint Proxy Statement, respectively.
REGULATORY APPROVALS
Consummation of the Merger is subject to the prior receipt of all
required approvals and consents of the Merger by all applicable federal and
state regulatory authorities, including the Board of Governors of the Federal
Reserve System ("FRB"), the OTS, the Superintendent of the Bureau of Banking of
the State of Maine ("Superintendent") and the Massachusetts Board of Bank
Incorporation ("Massachusetts Board"), the approval of which may not be granted
until it has received notice from the Massachusetts Housing Partnership Fund
("MHPF") that PHFG and the MHPF have made the arrangements required by
Massachusetts law. Applications have been or will be filed with such regulatory
authorities for approval of the Merger. There can be no assurance that the
necessary regulatory approvals will be obtained or as to the timing or
conditions of such approvals. See "The Merger - Regulatory Approvals."
CONDITIONS TO THE MERGER
The obligations of PHFG, PHMC and Family to consummate the Merger are
subject to, among other things, the following conditions: (i) the Agreement
shall have been approved by the requisite votes of the shareholders of PHFG and
Family; (ii) all necessary regulatory approvals pertaining to the Merger,
without restrictions or conditions which would materially impair the value of
Family to PHFG, shall have been received; (iii) no court or governmental or
regulatory authority shall have taken any action which prohibits, restricts or
makes illegal the Merger; (iv) the Registration Statement shall be effective;
(v) the shares of PHFG Common Stock to be issued in connection with the Merger
shall have been approved for quotation on NASDAQ; and (vi) each of PHFG and
Family shall have received an opinion of its respective counsel with respect to
certain income tax considerations under the Internal Revenue Code of 1986, as
amended (the "Code"). In addition, the obligation of each of PHFG and Family to
consummate the Merger is subject to the accuracy of the other party's
representations and warranties as of certain dates, the performance by the other
party of its obligations under the Agreement in all material
9
<PAGE> 17
respects and the other party's delivery of an officer's certificate and legal
opinions covering certain matters, and the obligation of PHFG to consummate the
Merger is subject to a requirement that any dissenting shares of Family Common
Stock under Massachusetts law constitute not more than 10% of the outstanding
shares of Family Common Stock prior to the Effective Time and the receipt of
"comfort" letters from the independent public accountants of Family as of
specified dates. See "The Merger - Conditions to the Merger." Substantially all
of the conditions to consummation of the Merger (except for required shareholder
and regulatory approvals) may be waived at any time by the party for whose
benefit they were created, and the Agreement may be amended at any time by
written agreement of the parties, except that no waiver or amendment occurring
after approval of the Agreement by the shareholders of PHFG or Family shall
change the amount or form of the consideration which Family's shareholders are
entitled to receive in the Merger.
EFFECTIVE TIME OF THE MERGER
The Merger shall become effective upon the filing of articles of merger
with the Secretary of State of the State of Maine and the Secretary of State of
the Commonwealth of Massachusetts, unless a different date and time is specified
as the effective time in such articles of merger (the "Effective Time"). The
articles of merger will be filed only after the receipt of all requisite
regulatory approvals of the Merger, approval of the Agreement by the requisite
votes of the shareholders of PHFG and Family and the satisfaction or waiver of
all other conditions to the Merger set forth in the Agreement.
TERMINATION; POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
The Agreement may be terminated, either before or after approval by
shareholders of PHFG or Family, under certain circumstances, including without
limitation if the Merger is not consummated on or before May 30, 1997. In
addition, if the average daily closing prices of a share of PHFG Common Stock
during the Pricing Period (as defined) is less than $15.00 per share, Family
will have the option to terminate the Agreement unless PHFG subsequently agrees
to increase the Exchange Ratio in a manner specified in the Agreement. Under the
Agreement, the term "Pricing Period" means the period of ten consecutive trading
days following the Determination Date, and the term "Determination Date" means
the earlier of (x) the date on which the last regulatory approval required to
consummate the Merger is obtained and (y) December 1, 1996. See "The Merger -
Effective Time of the Merger; Termination and Amendment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Family has received an opinion from Foley, Hoag & Eliot LLP to the
effect that, assuming the Merger is consummated, a Family shareholder who
receives shares of PHFG Common Stock in exchange for shares of Family Common
Stock upon consummation of the Merger will recognize no gain or loss as a result
of the Merger, except in respect of cash received in lieu of a fractional share
interest. For a description of these and additional federal income consequences
of the Merger, including the federal income tax consequences of exercising
dissenters' rights and receiving cash in lieu of any fractional share interest
in PHFG Common Stock, see "The Merger - Certain Federal Income Tax
Consequences."
10
<PAGE> 18
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON
THE PARTICULAR CIRCUMSTANCES OF EACH FAMILY SHAREHOLDER, EACH SUCH SHAREHOLDER
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE FEDERAL AND ANY
APPLICABLE FOREIGN, STATE AND LOCAL INCOME TAX AND OTHER TAX CONSEQUENCES OF THE
MERGER IN HIS OR HER PARTICULAR CIRCUMSTANCES.
ACCOUNTING TREATMENT OF THE MERGER
Peoples Heritage intends to account for the Merger under the purchase
method for accounting and financial reporting purposes. See "The Merger -
Accounting Treatment of the Merger."
ASSUMPTION OF FAMILY STOCK OPTIONS
Options to purchase Family Common Stock outstanding on the date of the
Agreement which are not exercised and do not expire in accordance with their
terms prior to the Effective Time will be converted into options to purchase
shares of PHFG Common Stock in accordance with the provisions of the Agreement.
See "The Merger - Assumption of Family Stock Options."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Pursuant to the Agreement, PHFG agreed (i) to take such action as is
necessary to cause one existing non-employee director of Family designated by
Family and acceptable to PHFG to be elected as a director of PHFG as of the
Effective Time and to nominate such person for re-election as a director of PHFG
upon expiration of his initial term as a director of PHFG; (ii) to honor various
contractual obligations of Family as of the date of the Agreement, including (x)
the employment agreements among Family, Family Bank and each of David D. Hindle,
President and Chief Executive Officer, George E. Fahey, Executive Vice President
and Chief Financial Officer, Ronald G. Trombley, Senior Vice President, David J.
LaFlamme, Senior Vice President, and Bruce Fenn, III, Senior Vice President, (y)
the supplemental executive retirement plan between the Company and each of the
above-named executive officers of Family and (z) the split-dollar insurance
agreements between Family Bank and each of Messrs. Hindle, Fahey, LaFlamme and
Trombley; and (iii) to continue rights to indemnification and liability
insurance for directors and officers of Family and Family Bank for specified
periods. Assuming the Merger were to be consummated as of December 31, 1996, the
aggregate amount of the lump sum severance payments due to Messrs. Hindle,
Fahey, Trombley, LaFlamme and Fenn pursuant to his respective employment
agreement would be approximately $550,000, $343,000, $348,000, $306,000 and
$278,000, respectively, and the aggregate amount of the lump sum payments due to
such persons in satisfaction of the accrued benefits under his respective
supplemental executive retirement agreement would be $_____, $_____, $_____,
$_____ and $______, respectively. Other than as set forth above, no director or
executive officer of Family has any direct or indirect material interest in the
Merger, except insofar as ownership of Family Common Stock and options to
acquire Family Common Stock might be deemed such an interest. See "The Merger -
Interests of Certain Persons in the Merger."
11
<PAGE> 19
DESCRIPTION OF PHFG COMMON STOCK
Subject to the rights of the holders of any class of preferred stock of
PHFG if and when outstanding, the holders of PHFG Common Stock possess exclusive
voting rights in PHFG, are entitled to such dividends as may be declared from
time to time by the Board of Directors of PHFG and would be entitled to receive
all assets of PHFG available for distribution in the event of any liquidation,
dissolution or winding up of PHFG. Holders of PHFG Common Stock do not have any
preemptive rights with respect to any shares which may be issued by PHFG in the
future. Upon receipt by PHFG of certificates evidencing the shares of Family
Common Stock surrendered in exchange for PHFG Common Stock pursuant to the
Merger, each share of PHFG Common Stock offered hereby will be fully paid and
non-assessable. See "Description of PHFG Capital Stock."
DIFFERENCES IN SHAREHOLDERS' RIGHTS
PHFG is a Maine corporation subject to the provisions of the Maine
Business Corporation Act ("MBCA"), and Family is a Massachusetts corporation
subject to the provisions of the Massachusetts Business Corporation Law
("MBCL"). Upon consummation of the Merger, shareholders of Family will become
shareholders of PHFG and their rights as shareholders of PHFG will be governed
by PHFG's Articles of Incorporation and Bylaws and the MBCA. The rights of
shareholders of PHFG differ in certain respects from the rights of shareholders
of Family. See "Comparison of the Rights of Shareholders."
RESALE OF PHFG COMMON STOCK
The shares of PHFG Common Stock to be issued in connection with the
Merger will be freely tradeable by the holders of such shares, except for those
shares held by persons who may be deemed to be "affiliates" of PHFG or Family
under applicable federal securities laws. See "The Merger - Resale of PHFG
Common Stock."
STOCK OPTION AGREEMENTS
As an inducement and a condition to PHFG's entering into the Agreement,
PHFG and Family also entered into a Stock Option Agreement, dated as of May 30,
1996 (the "Family Stock Option Agreement"), pursuant to which Family granted
PHFG an option (the "Family Option") to purchase, upon the occurrence of certain
events (none of which has occurred as of the date hereof to the best of the
knowledge of PHFG and Family), up to 832,000 shares of Family Common Stock,
representing 19.9% of the outstanding shares of Family Common Stock, at a price
of $20.50 per share, subject to adjustment in certain circumstances and
termination within certain periods. As an inducement and a condition to Family's
entering into the Agreement, PHFG and Family also entered into a Stock Option
Agreement, dated as of May 30, 1996 (the "PHFG Stock Option Agreement," and
together with the Family Option Agreement, the "Stock Option Agreements"),
pursuant to which PHFG granted Family an option (the "PHFG Option") to purchase,
upon the occurrence of certain events (none of which has occurred as of the date
hereof to the best of the knowledge of PHFG and Family), up to 1,500,000 shares
of PHFG Common Stock, representing approximately 6.0% of the outstanding shares
of PHFG Common Stock, at a price of $19.75 per share, subject to adjustment in
certain circumstances and termination within certain periods. The Stock Option
Agreements are intended to increase the
12
<PAGE> 20
likelihood that the Merger will be consummated in accordance with the terms of
the Agreement and may have the effect of discouraging competing offers to the
Merger. Copies of the Family Stock Option Agreement and the PHFG Stock Option
Agreement are included as Annexes II and III to this Prospectus/Joint Proxy
Statement, respectively, and reference is made thereto for the complete terms
thereof. See "The Merger - Stock Option Agreements."
STOCKHOLDER AGREEMENT
In connection with the execution of the Agreement, PHFG entered into a
Stockholder Agreement, dated as of May 30, 1996, with the directors of Family
and senior executive officers of Family and Family Bank in their capacities as
shareholders of Family. Pursuant to the Stockholder Agreement, a copy of which
is included as Annex IV hereto, each of such shareholders agreed, among other
things, to vote his or her shares of Family Common Stock in favor of the
Agreement. See "The Merger - Stockholder Agreement."
DISSENTERS' RIGHTS
Under Massachusetts law, holders of Family Common Stock have the right
to dissent from the Merger and, if the Merger is consummated and all
requirements of Massachusetts law are satisfied by holders seeking to exercise
dissenters' rights, to receive payment equal to the fair value of their shares
of Family Common Stock. The procedures which must be followed in connection with
the exercise of dissenters' rights by dissenting shareholders are described
herein under "The Merger - Dissenters' Rights" and in Sections 85 through 98 of
Chapter 156B of the MBCL, a copy of which are attached as Annex VII to this
Prospectus/Joint Proxy Statement. Failure to take any required step in
connection with the exercise of such rights may result in termination or waiver
thereof.
Holders of PHFG Common Stock do not have rights under the MBCA or
otherwise to dissent from the Merger and obtain the fair value of their shares
of PHFG Common Stock.
OTHER RECENT ACQUISITIONS OF PHFG
On April 2, 1996, PHFG acquired all of the outstanding shares of
capital stock of Bank of New Hampshire Corporation ("BNHC"), a New
Hampshire-based bank holding company for BNH, by exchanging two shares of PHFG
Common Stock for each outstanding share of BNHC Common Stock. The acquisition of
BNHC was accounted for as a pooling of interests for accounting and financial
reporting purposes and, as a result, all financial information relating to PHFG
contained herein reflects the combined financial position and results of
operations of PHFG and BNHC as if the acquisition of BNHC had taken place prior
to the periods covered by such financial information. For additional information
in this regard, reference is made to the supplemental consolidated financial
statements and related financial information of PHFG contained in the Report on
Form 8-K filed by PHFG on July 2, 1996. The supplemental consolidated financial
statements of PHFG included in the Form 8-K have been prepared to give
retroactive effect to the acquisition of BNHC on April 2, 1996. Generally
accepted accounting principles proscribe giving effect to a consummated
business combination accounted for by the pooling of interests method in
financial statements that do not include the date of consummation. These
financial statements do not extend through the date of consummation; however,
they will become the historical consolidated financial statements of PHFG after
financial statements covering the date of consummation of the business
combination are issued.
Subsequent to the acquisition of BNHC, PHFG merged its other New
Hampshire-based banking subsidiary - The First National Bank of Portsmouth
("FNBP") - into BNH under the pooling-of-interests method of accounting
effective June 28, 1996.
13
<PAGE> 21
Since January 1, 1995, PHFG also has effected several acquisitions
under the purchase method of accounting which in the aggregate are not
considered to be significant within the meaning of Regulation S-X of the SEC.
These acquisitions are briefly noted below.
On February 16, 1996, PHFG purchased five branch offices of Fleet Bank
NH which are located in central and southern New Hampshire and which were
divested by Fleet Bank NH in connection with the merger of Fleet Financial
Group, Inc. and Shawmut National Corporation. The purchase resulted in PHFG's
acquisition of approximately $218.3 million of loans, including $178.6 million
of single-family residential mortgage loans, and its assumption of $160.9
million of deposits.
On July 1, 1995, PHFG acquired all of the outstanding shares of capital
stock of Bankcore, Inc. ("Bankcore"), a New Hampshire-based bank holding company
for North Conway Bank, and immediately thereafter North Conway Bank was merged
into FNBP. At the time of acquisition, Bankcore had $132.8 million of total
assets and shareholders' equity of $17.8 million.
On June 15, 1995, PHFG purchased all the branches and associated
deposits, as well as certain loans, of Fleet Bank of Maine located in Aroostook
County, Maine. Five of the seven purchased branches were combined with existing
branches of PHB. The purchase resulted in the transfer of $17.1 million of loans
to PHFG and its assumption of $46.1 million of deposits.
MARKET FOR COMMON STOCK AND DIVIDENDS
Each of the PHFG Common Stock and the Family Common Stock is traded on
NASDAQ under the symbol "PHBK" and "FMLY," respectively. As of the Record Date,
there were ________ shares of PHFG Common Stock outstanding, which were held by
approximately _____ shareholders of record, and there were ________ shares of
Family Common Stock outstanding, which were held by approximately ______
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.
14
<PAGE> 22
The following table sets forth during the periods indicated the high
and low prices of the PHFG Common Stock and the Family Common Stock as reported
on NASDAQ and the dividends declared per share of PHFG Common Stock and Family
Common Stock.
<TABLE>
<CAPTION>
PHFG Family(1)
------------------------------- ----------------------------------------
Market Price Market Price
---------------------- Dividends -------------------------- Dividends
Declared Declared
1996 High Low Per Share High Low Per Share
- ---------------------- ------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $22.75 $19.00 $.14 $23.50 $17.50 $.10
Second Quarter 22.25 19.375 .17 25.50 14.33 .12
Third Quarter (through
------ --)
1995
- ----------------------
First Quarter 14.00 11.75 .09 15.50 11.50 .083
Second Quarter 16.75 12.375 .12 15.67 14.33 .10
Third Quarter 20.50 15.25 .12 18.33 14.67 .10
Fourth Quarter 22.875 18.25 .13 18.75 16.83 .10
1994
- ----------------------
First Quarter 12.50 10.125 .01 13.50 10.33 .083
Second Quarter 14.00 10.125 .05 16.33 11.17 .083
Third Quarter 15.00 12.25 .08 16.00 12.67 .083
Fourth Quarter 15.125 10.375 .09 13.67 11.00 .083
</TABLE>
- ---------------
(1) Amounts reflect a three-for-two split of the outstanding Family
Common Stock on November 27, 1995.
Set forth below is information regarding the price per share of PHFG
Common Stock and Family Common Stock on May 30, 1996, the last trading day
preceding public announcement of the Agreement. The historical prices are as
reported on NASDAQ.
<TABLE>
<CAPTION>
Historical Market
Value Per Share
---------------------------------------
Equivalent Market Value
Date PHFG Family Per Share of Family(1)
- ------------------------------------ ----------------- ----------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
May 30, 1996 $19.75 $22.25 $24.89
</TABLE>
- ---------------
(1) Equivalent market value per share of Family Common Stock represents
the historical market value per share of PHFG Common Stock multiplied by the
Exchange Ratio.
15
<PAGE> 23
Shareholders are advised to obtain current market quotations for the
PHFG Common Stock and the Family Common Stock. Because the consideration to be
provided to shareholders of Family in connection with the Merger is based on a
fixed number of shares of PHFG Common Stock, shareholders of Family are not
assured of receiving a specific market value of PHFG Common Stock (and thus a
specific market value for their shares of Family Common Stock) at the Effective
Time. The market price of the PHFG Common Stock at the Effective Time may be
higher or lower than the market price at the time the Agreement was executed, at
the date of mailing of this Prospectus/Joint Proxy Statement or at the time of
the Special Meetings.
COMPARATIVE PER SHARE DATA
The following table sets forth certain supplemental per share, pro
forma combined per share and pro forma equivalent per share information with
respect to the PHFG Common Stock and the Family Common Stock at the dates and
for the periods indicated, giving effect to the Merger using the purchase method
of accounting and reflecting PHFG's planned repurchase of approximately 2.6
million shares of PHFG Common Stock in connection with the acquisition of
Family. See "The Merger-Accounting Treatment of the Merger" and "Pro Forma
Combined Consolidated Financial Information."
The selected per share data set forth below should be read in
conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of PHFG and Family, including the related
notes, incorporated herein by reference, the supplemental consolidated
financial statements, including the related notes, of PHFG incorporated herein
by reference and the unaudited pro forma combined consolidated financial
information appearing elsewhere herein. See "Available Information,"
"Incorporation of Certain Documents by Reference" and "Pro Forma Combined
Consolidated Financial Information." The data set forth below is not
necessarily indicative of the results of the future operations of PHFG upon
consummation of the Merger or the actual results that would have been achieved
had the Merger been consummated prior to the periods indicated.
16
<PAGE> 24
<TABLE>
<CAPTION>
PHFG Common Stock Family Common Stock
------------------------------- --------------------------------
Pro Forma Pro Forma
Historical Combined(1) Historical(2) Equivalent(3)
----------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Income per share:
Three months ended March 31, 1996 $0.50 $0.48 $0.50 $0.60
Year ended December 31, 1995 1.80 1.71 1.90 2.16
Dividends declared per share:
Three months ended March 31, 1996 0.14 0.14(4)(5) 0.10 0.18(5)
Year ended December 31, 1995 0.46 0.46(4) 0.383 0.58
Book value per share:
March 31, 1996 14.40 14.81 16.84 18.66
December 31, 1995 14.16 14.59 16.83 18.38
Tangible book value per share:
March 31, 1996 12.80 11.87 15.41 14.96
December 31, 1995 13.25 12.26 15.34 15.45
</TABLE>
- ---------------
(1) Reflects (i) estimated purchase accounting adjustments to be recorded in
connection with the Merger, consisting of mark-to-market valuation adjustments
for significant tangible net assets acquired and adjustments for intangible
assets established, and the resultant amortization/accretion of all such
adjustments over appropriate future periods, and (ii) the effects of PHFG's
planned acquisition of approximately 2.6 million shares of PHFG Common Stock in
connection with the acquisition of Family.
(2) Amounts reflect a three-for-two split of the outstanding Family Common
Stock on November 27, 1995.
(3) Represents the PHFG pro forma combined amounts multiplied by the Exchange
Ratio.
(4) Assumes no change in the PHFG historical dividends declared per share.
(5) The current annualized dividend rate per share of PHFG Common Stock, based
upon the most recent quarterly dividend rate of $0.17 per share payable on May
10, 1996, would be $0.68. On a pro forma equivalent basis per share of Family
Common Stock, such current annualized PHFG dividend per share of Family Common
Stock would be $0.86.
17
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL DATA OF PHFG
(Dollars in Thousands, Except Per Share Data)
The following selected supplemental consolidated financial data for the
five years ended December 31, 1995 is derived in part from the audited
supplemental consolidated financial statements of PHFG which give retroactive
effect to PHFG's acquisition of BNHC in April 1996; and the following selected
consolidated financial data for the three months ended March 31, 1996 and 1995
is derived from unaudited supplemental consolidated financial statements which
give retroactive effect to the same. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which PHFG considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the three months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for any other interim period or the entire year
ending December 31, 1996. The selected consolidated financial data set forth
below should be read in conjunction with, and is qualified in its entirety by,
the supplemental consolidated financial statements of PHFG, including the
related notes, incorporated herein by reference. See "Available Information"
and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
December 31,
March 31, ------------------------------------------------------------
BALANCE SHEET DATA: 1996 1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total assets $4,257,912 $4,058,126 $3,737,906 $3,624,641 $3,523,094 $3,750,333
Debt and equity securities, net(1) 767,539 766,648 719,194 717,467 557,787 548,226
Total loans, net(2) 2,956,910 2,717,608 2,575,902 2,368,348 2,425,020 2,603,780
Goodwill and other intangibles 40,100 22,792 20,713 22,758 22,310 26,470
Deposits 3,347,427 3,197,138 2,885,845 2,939,826 2,948,549 3,198,366
Borrowings 497,720 456,932 505,347 359,935 288,024 308,469
Shareholders' equity 362,155 354,925 304,439 287,438 249,862 216,462
Nonperforming assets(3) 53,922 56,752 78,339 120,076 185,733 253,857
Allowance for loan and lease losses 65,533 60,975 63,675 67,385 71,223 88,067
Book value per share 14.40 14.16 12.26 11.61 10.73 13.20
Tangible book
value per share 12.80 13.25 11.42 10.69 9.77 11.59
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-------------------- -------------------------------------------------------------
OPERATIONS DATA: 1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income $ 80,754 $ 71,833 $ 305,849 $ 256,597 $ 243,452 $ 272,596 $ 343,316
Interest expense 35,615 30,727 134,895 108,002 112,305 150,458 224,739
--------- --------- --------- --------- --------- --------- ---------
Net interest income 45,139 41,106 170,954 148,595 131,147 122,138 118,577
Provision for loan losses 450 1,030 4,230 3,374 14,047 32,025 71,480
--------- --------- --------- --------- --------- --------- ---------
Net interest income
after provision for loan
losses 44,689 40,076 166,724 145,221 117,100 90,113 47,097
--------- --------- --------- --------- --------- --------- ---------
Net securities gains (losses) 504 (95) 116 (254) 1,183 2,859 1,520
Net gains on sales of
consumer loans -- -- -- 33 2,576 -- --
Other noninterest income 8,965 7,192 31,301 27,847 24,842 26,747 21,310
Noninterest expense 34,582 32,143 130,280 125,137 122,391 125,091 116,610
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income
tax expense (benefit) and
cumulative effect of a change in
accounting principle 19,576 15,030 67,861 47,710 23,310 (5,372) (46,683)
Income tax expense (benefit) 6,970 4,969 23,375 13,662 799(4) 1,510 (15,095)
Cumulative effect on years prior
to 1992 of a change in accounting
principle -- -- -- -- -- 1,100(5) --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) $ 12,606 $ 10,061 $ 44,486 $ 34,048 $ 22,511 $ (5,782) $ (31,588)
========= ========= ========= ========= ========= ========= =========
Net income (loss) per share $ 0.50 $ 0.41 $ 1.80 $ 1.37 $ 0.95 $ (0.36) $ (1.95)
Dividends per share $ 0.14 $ 0.09 $ 0.46 $ 0.23 $ 0.01 $ 0.00 $ 0.00
</TABLE>
18
<PAGE> 26
<TABLE>
<CAPTION>
At or For the
Three Months Ended
March 31, At or For the Year Ended December 31,
------------------ -------------------------------------------------
OTHER DATA(6): 1996 1995 1995 1994 1993 1992 1991
------ ----- ----- ----- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets 1.24% 1.10% 1.16% 0.94% 0.64% (0.16)% (0.83)%
Return on average equity(7) 14.20 13.04 13.53 11.42 8.57 (2.69) (14.22)
Average equity to average
assets(7) 8.76 8.46 8.55 8.21 7.50 5.98 5.85
Interest rate spread(8) 4.19 4.35 4.20 4.01 3.76 3.41 3.56
Net interest margin(8) 4.79 4.87 4.79 4.44 4.11 3.71 3.43
Tier I leverage capital ratio
at end of period 7.95 7.86 8.33 7.96 7.63 7.00 5.73
Dividend payout ratio 27.38 21.90 25.42 16.45 1.44 0.00 0.00
Nonperforming loans as a percent
of total loans at end of period(3) 1.36 2.18 1.53 2.13 3.18 4.36 6.11
Nonperforming assets as a percent
of total assets at end of
period(3) 1.27 1.97 1.40 2.10 3.31 5.29 6.77
Allowance for loan and lease
losses as a percent of
nonperforming loans
at end of period 159.96 103.95 143.40 113.17 86.95 65.39 53.50
Banking offices 111 97 106 96 98 100 103
</TABLE>
- ---------------
(1) All securities were classified as available for sale at March 31, 1996 and
December 31, 1995.
(2) Does not include loans held for sale.
(3) Nonperforming assets consist of nonperforming loans, other real estate
owned and repossessions, net of related reserves where appropriate.
Nonperforming loans consist of non-accrual loans, accruing loans 90 days or more
overdue and troubled debt restructurings.
(4) PHFG's results of operations for 1993 reflect the elimination of the
valuation allowance relating to deferred income tax assets of $6.5 million.
(5) Reflects the adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," effective January 1, 1992.
(6) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(7) Average equity excludes the effect of unrealized gains or losses on
securities available for sale.
(8) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of interest-
bearing liabilities (which do not include non-interest bearing demand accounts),
and net interest margin represents net interest income as a percent of average
interest-earning assets, in each case calculated on a fully-taxable equivalent
basis.
19
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA OF FAMILY
(Dollars in Thousands, Except Per Share Data)
The following selected historical consolidated financial data for the five
years ended December 31, 1995 is derived in part from the audited consolidated
financial statements of Family. The historical consolidated financial data for
the three months ended March 31, 1996 and 1995 is derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which Family considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the three months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for any other interim period or the entire year
ending December 31, 1996. The selected historical consolidated financial data
set forth below should be read in conjunction with, and is qualified in its
entirety by, the historical consolidated financial statements of Family,
including the related notes, incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
December 31,
March 31, --------------------------------------------------------
BALANCE SHEET DATA: 1996 1995 1994 1993 1992 1991
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total assets $887,387 $892,167 $817,746 $712,133 $651,224 $666,984
Debt and equity securities, net(1) 354,721 351,437 291,461 289,315 238,464 228,061
Total loans, net(2) 443,791 451,199 449,760 350,386 312,842 354,570
Goodwill 5,865 6,073 6,761 977 1,167 1,357
Deposits 736,646 734,017 709,697 589,723 575,269 589,813
Borrowings 67,926 75,533 46,161 41,123 17,500 26,892
Shareholders' equity 68,843 68,696 53,547 56,801 48,559 40,820
Nonperforming assets(3) 11,016 12,733 13,495 15,090 19,693 28,885
Allowance for loan losses 6,506 6,427 6,714 6,481 6,701 7,864
Book value per share(4) 16.84 16.83 13.35 14.23 12.39 10.43
Tangible book
value per share(4) 15.41 15.34 11.66 13.99 12.09 10.08
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996 Year Ended December 31,
-------------------- ---------------------------------------------------------
OPERATIONS DATA: 1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest and dividend income $ 15,653 $ 14,359 $ 59,984 $ 49,293 $ 43,895 $ 48,444 $ 47,064
Interest expense 7,573 6,221 27,732 20,070 19,317 25,337 30,713
-------- -------- -------- -------- -------- -------- --------
Net interest income 8,080 8,138 32,252 29,223 24,578 23,107 16,351
Provision for loan losses 250 250 1,150 600 1,500 2,567 4,750
-------- -------- -------- -------- -------- -------- --------
Net interest income
after provision for loan
losses 7,830 7,888 31,102 28,623 23,078 20,540 11,601
-------- -------- -------- -------- -------- -------- --------
Net securities gains (losses) 202 (14) 979 (1,117) 1,878 1,334 3,143
Other noninterest income 1,295 1,309 5,202 3,755 6,218 6,382 3,439
Noninterest expense 5,880 6,028 23,702 21,023 20,076 21,216 20,930
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income
tax expense (benefit),
extraordinary item and
cumulative effect of a change
in accounting principle 3,447 3,155 13,581 10,238 11,098 7,040 (2,747)
Income tax expense (benefit) 1,335 1,244 5,582 4,001 4,389 2,335 (1,470)
Extraordinary item net of
income taxes -- -- -- -- -- -- 561
Cumulative effect on years
prior to 1992 of a change in
accounting principle(5) -- -- -- -- -- 2,901 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ 2,112 $ 1,911 $ 7,999 $ 6,237 $ 6,709 $ 7,606 $ (716)
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share(4) $ 0.50 $ 0.45 $ 1.90 $ 1.49 $ 1.63 $ 1.87 $ (0.18)
Dividends per share(4) $ 0.10 $ 0.083 $ 0.383 $ 0.333 $ 0.10 $ -- $ --
</TABLE>
20
<PAGE> 28
<TABLE>
<CAPTION>
At or For the
Three Months Ended
March 31, At or For the Year Ended December 31,
-------------------- ---------------------------------------------
OTHER DATA(6): 1996 1995 1995 1994 1993 1992 1991
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets 0.95% 0.94% 0.95% 0.85% 1.01% 1.16% (0.13)%
Return on average equity 12.22 13.60 12.91 11.43 12.85 16.87 (1.77)
Average equity to average
assets 7.81 6.94 7.40 7.45 7.88 6.87 7.54
Interest rate spread(7) 3.40 3.83 3.62 3.83 3.64 3.44 2.69
Net interest margin(7) 3.90 4.25 4.10 4.21 3.97 3.77 3.18
Leverage (core) capital ratio
at end of period(8) 6.48 6.59 6.38 6.31 6.12 6.97 5.62
Dividend payout ratio 20.00 18.44 20.16 22.35 6.13 -- --
Nonperforming loans as a percent
of total loans at end of period(3) 1.54 1.78 2.03 1.75 2.43 1.95 2.97
Nonperforming assets as a percent
of total assets at end of
period(3) 1.24 1.65 1.43 1.65 2.12 3.02 4.33
Allowance for loan losses as a
percent of nonperforming loans
at end of period 93.49 80.16 69.09 83.90 74.58 93.09 72.81
Banking offices 23 23 23 23 17 17 18
</TABLE>
- ---------------
(1) All securities were classified as available for sale at March 31, 1996 and
December 31, 1995.
(2) Does not include loans held for sale.
(3) Nonperforming assets consist of nonperforming loans, other real estate
owned and repossessions, net of related reserves where appropriate.
Nonperforming loans consist of non-accrual loans, accruing loans 90 days or
more overdue, troubled debt restructurings and other impaired loans.
(4) Amounts reflect a three-for-two split of the outstanding Family Common Stock
on November 27, 1995.
(5) Reflects the adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," effective January 1, 1992.
(6) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(7) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing demand
accounts), and net interest margin represents net interest income as a percent
of average interest-earning assets, in each case calculated on a fully-taxable
equivalent basis.
(8) Applicable to Family Bank and, as a result, does not include capital held
directly by Family.
21
<PAGE> 29
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 Family at the dates and for the periods indicated,
giving effect to the Merger using the purchase method of accounting and
reflecting PHFG's planned repurchase of approximately 2.6 million shares of PHFG
Common Stock in connection with the acquisition of Family. See "The
Merger-Accounting Treatment of the Merger" and "Pro Forma Combined Consolidated
Financial Information."
The selected consolidated financial data set forth below should be read in
conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of PHFG and Family, including the related
notes, incorporated by reference herein, the supplemental consolidated financial
statements of PHFG, including the related notes, incorporated by reference
herein, and the other unaudited pro forma combined condensed consolidated
financial information appearing elsewhere herein. See "Available Information,"
"Incorporation of Certain Documents by Reference" and "Pro Forma Combined
Consolidated Financial Information." The data set forth below is not necessarily
indicative of the results of the future operations of PHFG upon consummation of
the Merger or the actual results that would have been achieved had the Merger
been consummated prior to the periods indicated.
<TABLE>
<CAPTION>
March 31,
BALANCE SHEET DATA: 1996(1)
-------------
<S> <C>
Total assets $5,135,561
Debt and equity securities, net 1,077,660
Total loans, net(2) 3,403,481
Goodwill and other intangibles 81,886
Deposits 4,082,160
Borrowings 567,725
Shareholders' equity 413,154
Nonperforming assets(3) 64,495
Allowance for loan and lease losses 72,039
Book value per share 14.81
Tangible book
value per share 11.87
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
OPERATIONS DATA: 1996 1995
------------------ ------------
<S> <C> <C>
Interest and dividend income $ 95,415 $361,865
Interest expense 43,167 162,544
-------- --------
Net interest income 52,248 199,321
Provision for loan losses 700 5,380
-------- --------
Net interest income after
provision for loan losses 51,548 193,941
Net securities gains 706 1,095
Other noninterest income 10,109 35,901
Noninterest expense 41,061 156,380
Income before income -------- --------
tax expense 21,302 74,556
Income tax expense 7,902 27,344
-------- --------
Net income $ 13,400 $ 47,212
======== ========
Net income per share $ 0.48 $ 1.71
Dividends per share $ 0.14 $ 0.46
</TABLE>
22
<PAGE> 30
<TABLE>
<CAPTION>
At or For the At or For the
Three Months Ended Year Ended
March 31, December 31,
OTHER DATA(4): 1996 1995
------------------ --------------
<S> <C> <C>
Return on average assets 1.09% 1.01%
Return on average equity(5) 13.20 12.66
Average equity to average assets(5) 8.23 7.90
Interest rate spread(6) 4.06 4.11
Net interest margin(6) 4.60 4.63
Tier I leverage capital ratio
at end of period 6.81 7.34
Dividend payout ratio 28.83 27.24
Nonperforming loans as a percent
of total loans at end of period(3) 1.37 1.56
Nonperforming assets as a percent
of total assets at end of
period(3) 1.26 1.38
Allowance for loan losses as a
percent of nonperforming loans
at end of period 151.71 133.15
Full service banking offices 134 129
</TABLE>
- ---------------
(1) The consolidated balance sheet data at March 31, 1996 reflects an estimated
$4.96 million of one-time reorganization and restructuring costs related to the
Merger. The effect of the one time charges has been reflected in the
consolidated balance sheet data but not in the consolidated operations and
other financial data because it is nonrecurring.
(2) Does not include loans held for sale.
(3) Nonperforming assets consist of nonperforming loans, other real estate
owned and repossessions, net of related reserves where appropriate.
Nonperforming loans consist of non-accrual loans, accruing loans 90 days or
more overdue and troubled debt restructurings.
(4) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(5) Average equity excludes the effect of unrealized gains or losses on
securities available for sale.
(6) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing demand
accounts), and net interest margin represents net interest income as a percent
of average interest-earning assets, in each case calculated on a fully-taxable
equivalent basis.
23
<PAGE> 31
GENERAL INFORMATION
This Prospectus/Joint Proxy Statement is being furnished to the holders
of PHFG Common Stock and Family Common Stock in connection with the solicitation
of proxies by the Boards of Directors of PHFG and Family for use at the PHFG
Special Meeting and the Family Special Meeting, respectively, and at any
adjournment or adjournments thereof. This Prospectus/Joint Proxy Statement also
serves as a prospectus of PHFG in connection with the issuance of PHFG Common
Stock to holders of Family Common Stock upon consummation of the Merger.
All information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to PHFG has been supplied by PHFG,
and all information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to Family has been supplied by
Family.
This Prospectus/Joint Proxy Statement and the other documents enclosed
herewith are first being mailed to shareholders of PHFG and Family on or about
______ __, 1996.
THE SPECIAL MEETINGS
TIME AND PLACE
The PHFG Special Meeting will be held at 9:00 a.m., Eastern Time, on
______ ___, 1996 at ____________, Portland, Maine. The Family Special Meeting
will be held at 9:00 a.m., Eastern Time, on ________ ___, 1996 at ___________,
__________, Massachusetts.
MATTERS TO BE CONSIDERED
At the Special Meetings, shareholders of PHFG and Family will consider
and vote upon a proposal to approve the Agreement. Pursuant to applicable law
and the articles of incorporation and bylaws of PHFG and the articles of
organization and bylaws of Family, respectively, no other business may properly
come before the PHFG Special Meeting and the Family Special Meeting and any
adjournment or adjournments thereof.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on ________ ___, 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 ________ shares of PHFG Common Stock outstanding and entitled
to vote. Each share of PHFG Common Stock entitles the holder thereof to one vote
at the PHFG Special Meeting on all matters properly presented thereat.
The close of business on ________ ___, 1996 has been fixed by the
Family Board as the Record Date for the determination of holders of Family
Common Stock entitled to notice of and to vote at the Family Special Meeting and
any adjournment or adjournments thereof. At the close of business on the Record
Date, there were ________ shares of Family
24
<PAGE> 32
Common Stock outstanding and entitled to vote. Each share of Family Common Stock
entitles the holder thereof to one vote at the Family Special Meeting on all
matters properly presented thereat.
VOTES REQUIRED
A quorum, consisting of the holders of a majority of the issued and
outstanding shares of PHFG Common Stock or Family Common Stock, as the case may
be, must be present in person or by proxy before any action may be taken at the
PHFG Special Meeting or the Family Special Meeting, as the case may be. A
majority of the votes cast at the PHFG Special Meeting by holders of PHFG Common
Stock, voting in person or by proxy, on the proposal to approve the Agreement is
necessary to approve the Agreement on behalf of PHFG, and the affirmative vote
of the holders of two thirds of the outstanding shares of Family Common Stock,
voting in person or by proxy, is necessary to approve the Agreement on behalf of
Family.
The proposal to adopt the Agreement is considered a "non-discretionary
item" whereby brokerage firms may not vote in their discretion on behalf of
their clients if such clients have not furnished voting instructions.
Abstentions and such broker "non-votes" at the PHFG Special Meeting and the
Family Special Meeting will be considered in determining the presence of a
quorum at the PHFG Special Meeting and the Family Special Meeting, respectively,
but will not be counted as a vote cast with respect to the Agreement.
Abstentions and broker "non-votes" will have no effect on the voting with
respect to the proposal to adopt the Agreement at the PHFG Special Meeting.
However, because the proposal to adopt the Agreement is required to be approved
by the holders of two thirds of the outstanding shares of Family Common Stock,
abstentions and broker "non-votes" will have the same effect as a vote against
this proposal at the Family Special Meeting.
VOTING AND REVOCATION OF PROXIES
Each copy of this Prospectus/Joint Proxy Statement mailed to holders of
PHFG Common Stock and Family Common Stock is accompanied by a form of proxy for
use at the PHFG Special Meeting or the Family Special Meeting, as the case may
be. Any shareholder executing a proxy may revoke it at any time before it is
voted by (i) filing with the Secretary of PHFG (in the case of a PHFG
shareholder) or the Secretary of Family (in the case of a Family shareholder) at
the address of PHFG or Family set forth on its respective Notice of Special
Meeting of Shareholders, written notice of such revocation; (ii) executing a
later-dated proxy; or (iii) attending the PHFG Special Meeting or the Family
Special Meeting, as applicable, and giving notice of such revocation in person.
Attendance at the applicable Special Meeting will not, in and of itself,
constitute revocation of a proxy.
Each proxy returned to PHFG or Family (and not revoked) by a holder of
PHFG Common Stock and Family Common Stock, respectively, will be voted in
accordance with the instructions indicated thereon. If no instructions are
indicated, the proxy will be voted for approval of the Agreement.
It is not expected that any matter other than those referred to herein
will be brought before either of the Special Meetings. If other matters are
properly presented, however, the persons named as proxies will vote in
accordance with their judgment with respect to such
25
<PAGE> 33
matters. The parties may propose one or more adjournments of the PHFG Special
Meeting or the Family Special Meeting, as the case may be, in order to permit
further solicitation of proxies in favor of the Agreement. No proxy which is
voted against the proposal to approve the Agreement, however, will be voted in
favor of any such adjournment.
SOLICITATION OF PROXIES
Each of PHFG and Family will bear its costs of mailing this
Prospectus/Joint Proxy Statement to its shareholders, as well as all other costs
incurred by it in connection with the solicitation of proxies from its
shareholders on behalf of its Board of Directors, except that PHFG and Family
will share equally the cost of printing this Prospectus/Joint Proxy Statement.
In addition to solicitation by mail, the directors, officers and employees of
each company and its subsidiaries may solicit proxies from shareholders of such
company by telephone, telegram or in person without compensation other than
reimbursement for their actual expenses. Arrangements also will be made with
brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and PHFG or Family, as the case may be, will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
PHFG and Family have retained ________ and _________, respectively,
professional proxy solicitation firms, to assist PHFG and Family, respectively,
in the solicitation of proxies. The fee payable to such firms in connection with
the Merger is $______ and $______ in the case of PHFG and Family, 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.
GENERAL
In accordance with the terms of and subject to the conditions set forth
in the Agreement, Family will be merged with and into PHMC, with PHMC as the
surviving corporation of the Merger. Upon consummation of the Merger, PHMC shall
succeed to all the rights, obligations and properties of Family, the separate
corporate existence of which shall cease as a result of the Merger.
The Agreement provides that at the Effective Time each outstanding
share of Family Common Stock (other than (i) any dissenting shares under the
MBCL and (ii) any shares held by PHFG or a subsidiary thereof other than in a
fiduciary capacity or in satisfaction of a debt previously contracted) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive 1.26 shares of PHFG Common Stock, subject
to possible adjustment under certain circumstances, plus cash in lieu of any
fractional share interest.
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No fractional shares of PHFG Common Stock shall be issued in the Merger
to holders of shares of Family Common Stock. Each holder of shares of Family
Common Stock who otherwise would have been entitled to a fraction of a share of
PHFG Common Stock shall receive in lieu thereof, at the time of surrender of the
certificate or certificates representing such holder's shares of Family Common
Stock, an amount of cash (without interest) determined by multiplying the
fractional share interest to which such holder would otherwise be entitled by
the closing per share price of the PHFG Common Stock on NASDAQ on the business
day preceding the Effective Time.
Each of the PHFG Board and the Family Board has unanimously approved
the Agreement and the transactions contemplated thereby and believes that the
Merger is fair to and in the best interests of PHFG and Family, respectively,
and its respective shareholders. ACCORDINGLY, THE BOARD OF DIRECTORS OF EACH OF
PHFG AND FAMILY UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF PHFG AND FAMILY,
RESPECTIVELY, VOTE "FOR" APPROVAL OF THE AGREEMENT.
BACKGROUND OF THE MERGER
Over the past several years, the Family Board and its senior executive
officers have regularly reviewed Family's strategic alternatives with the
assistance of Family's financial advisor. These reviews have focused on
assessing Family's opportunities for increasing long-term shareholder value,
including opportunities for enhancing earnings internally and for growth through
possible strategic acquisitions or affiliations with other financial
institutions. Family's successful acquisitions of Lowell Institution for
Savings from the FDIC in 1991 and Plaistow Bank and Trust Company in 1994
("Plaistow") were two results of Family's long-term strategic planning process.
In 1995, the first full year of operations that included Plaistow,
Family enjoyed record earnings of approximately $8.0 million. Although gratified
by this success and optimistic about its ability to maintain this level of
earnings, Family recognized that its ability to continually produce increasing
earnings growth in the future would be difficult for a number of reasons,
including intense competition for loans in Family's market, the fact that
Family's operating expenses had already been reduced to a level below peer
averages and the reduced availability of small in-market banks that might be
acquisition targets.
In early 1996, after an extensive review of the banking environment,
Family's management and Board concluded that, while Family was poised to
continue earning a good return for its shareholders, it was appropriate to
explore whether a strategic combination with another financial institution might
have the potential for creating even greater shareholder value. Exploring
possible strategic alliances seemed especially advisable following the late 1995
announcements of two significant New Hampshire bank acquisitions (including
PHFG's acquisition of BNHC), which resulted in increasing attention being
focused on Merrimack Valley financial institutions as potential acquisition
targets.
Given PHFG's recent acquisition activity in New Hampshire (contiguous
to Family's New Hampshire franchise), its financial strength, and its community
banking focus, it appeared to Family that PHFG might have a strong strategic
interest in Family's franchise and that an affiliation with PHFG might be
possible on terms that would enhance long-term, shareholder value. Therefore,
after consulting with members of the Family Board's Mergers and Acquisitions
Committee, Family's President, David Hindle, scheduled a meeting for January 16,
1996 with PHFG's President, William Ryan. At that meeting, Mr. Hindle and
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Mr. Ryan spoke in general terms about the two companies' business philosophies,
their complementary geographic and product franchises and the rationale for a
potential business combination between them. At that meeting, Mr. Ryan indicated
that PHFG was interested in moving into northern Massachusetts and that,
although there were other possible targets in Family's market, Family appeared
to be the most attractive vehicle for an entrance into northern Massachusetts
for a variety of reasons, including Family's geographic franchise and earnings
performance.
Following the initial meeting between the two presidents, the Family
Board met on January 19, 1996 to discuss strategic alternatives available to
Family, including the pursuit of potential acquisition targets, adopting a
"wait and see" attitude toward the consolidation activity in the New England
market, pursuing a "merger of equals" with another similarly-sized institution
or exploring a strategic affiliation with a larger institution such as PHFG.
After much discussion of various options available to Family, the Family Board
agreed that it made sense to keep the lines of communication open with PHFG,
with the understanding that PHFG was not in a position to engage in serious
negotiations at that time in light of its pending acquisition of BNHC. To that
end, Mr. Hindle and Mr. Ryan continued their informal discussions at two
subsequent meetings, on February 22, 1996 and March 14, 1996.
During this period, Family's management, with the assistance of MB&D,
its financial advisor, continued to consider whether or not there were other
possible strategic partners that seemed as potentially attractive as PHFG from
a shareholder, employee, and strategic "fit" perspective. After determining
that only New England-based financial institutions would be likely to have a
strategic interest in an $890 million institution headquartered in the
Merrimack Valley, Family compiled a list of New England institutions that
appeared to have the financial capability to pursue a combination with Family.
State laws limiting total deposits in Massachusetts and New Hampshire appeared
to place certain large financial institutions at a disadvantage as potential
partners. Of those few institutions remaining on the list, Family and its
advisors made judgments (based on publicly-available information) about the
apparent depth of financial capacity, the apparent strategic logic of an
entrance into Family's markets and the apparent cultural "fit" with Family's
community banking philosophy. Based upon this analysis, Family confirmed its
earlier judgment that PHFG appeared to be the most logical potential partner,
and would be most likely to be in a position to enter into a strategic alliance
on terms that would be attractive to Family's shareholders, employees,
customers and community.
At a meeting of the Family Board on March 25, 1996, representatives of
MB&D and Foley, Hoag & Eliot (Family's legal counsel) made presentations to the
Family Board outlining various factors to be considered in evaluating various
strategic alternatives, including remaining an independent entity, seeking to
acquire smaller institutions, seeking a merger of equals and entering into a
strategic combination with a larger institution. Family's financial advisor also
reviewed with the Family Board an analysis of PHFG and the other New England
financial institutions that appeared to have the financial capacity to consider
a transaction with Family. After the presentations and lengthy discussions, the
Family Board authorized Mr. Hindle to seek a nonbinding expression of interest
from PHFG, outlining the proposed terms of a possible business combination.
On March 28, 1996, Family received a letter from PHFG which indicated
PHFG's interest in discussing a transaction with Family and proposed in general
terms the structure of a possible transaction and potential plans for
integrating the combined companies. The
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March 28 letter summarized the informal discussions that Mr. Hindle and Mr. Ryan
had held, but did not constitute an offer or propose any financial terms of a
possible transaction. The March 28 letter included a Confidentiality Agreement,
which the parties signed as of April 3, 1996.
During the month of April, Family and PHFG were occupied with other
matters, including preparing for their respective annual shareholders meetings,
and as a result the parties held no further meetings until May 3, 1996. At the
May 3 meeting, Family and PHFG exchanged and discussed certain confidential
financial information to enable the parties to further assess the viability of a
business combination between them. Over the next several days, officers of PHFG
and Family continued to exchange confidential financial and operational data.
On May 15, 1996, PHFG sent a letter to Family setting forth a proposed
exchange ratio and other terms of a possible combination. Over the next several
days, senior management and financial advisors of each of Family and PHFG
continued to discuss the financial and other terms of the proposed merger,
including the Exchange Ratio, and issues relating to the management and
operations of the parties following the Merger. During this period the Exchange
Ratio was determined on the basis of arms'-length negotiations between the
parties.
On May 22, 1996, the Family Board met to discuss the terms of the
proposal. Mr. Hindle reviewed with the Family Board the reasons for and the
potential benefits of the Merger, and Family's financial and legal advisors made
further presentations about the terms of the proposal, the available
alternatives and the factors to be considered. After a lengthy discussion, the
Family Board authorized management to move forward to negotiate the terms of a
definitive Merger Agreement for presentation to the Family Board at a meeting
the following week.
Over the next week, the parties and their representatives conducted due
diligence with respect to the other's financial condition and other relevant
matters. Also during that week, the parties and their legal counsel negotiated
the terms of the definitive Agreement and the Stock Option Agreements. Family
representatives met with Family's legal and financial advisors on May 27, 1996
to discuss a draft Agreement and the provisions requiring further negotiation.
After discussing various provisions with PHFG representatives by phone and
circulating written comments by fax, the parties and their legal and financial
advisors met on May 28 to negotiate the remaining issues in the Agreement.
On May 29, 1996, Mr. Hindle met with each of the Family directors
individually to deliver drafts of the Agreement for their review and to inform
them of the status of the negotiations.
At a meeting on May 30, 1996, the Family Board met to consider the
Agreement in final form. The Family Board heard detailed reports on the results
of the due diligence on the financial condition and operations of PHFG,
including its recently-acquired subsidiary, Bank of New Hampshire. Family's
legal counsel reviewed the terms of the Agreement, the Stock Option Agreements
and the Stockholders Agreement. Representatives of MB&D made a detailed
presentation regarding the financial terms of the Merger, and advised the Family
Board that, in the opinion of MB&D, and based on facts known to MB&D at that
date, the Exchange Ratio was fair, from a financial point of view, to the Family
shareholders
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as of that date, and that absent significant change in the two companies'
financial condition or in the market for their securities, MB&D anticipated that
it would be prepared to issue a similar written opinion as of the date of the
proxy statement mailed to shareholders of Family to solicit approval of the
Agreement. After several hours of discussion, the Family Board unanimously voted
to approve the Agreement and the Stock Option Agreements and the transactions
contemplated thereby.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Family. In reaching its determination to approve and adopt the
Agreement and the transactions contemplated thereby, the Family Board considered
a number of factors, including, without limitation, the following:
(i) the Family Board's belief, based on the analysis of and
presentation to the Family Board by MB&D of Family's strategic
alternatives, that the Merger represented an attractive strategic
alternative to Family for enhancing shareholder value;
(ii) the Family Board's review of the banking environment in
which Family is now, and in the future would be, competing, including,
but not limited to, the significant consolidation and increasingly
competitive climate in the banking and financial services markets, both
in the United States as a whole and in New England in particular, and
the prospect for further changes in these markets;
(iii) the Family Board's view of the increasing importance of
the economies of scale and of access to greater financial resources to
a bank's ability to capitalize on opportunities in the banking and
financial services markets;
(iv) the Family Board's review, with the assistance of
management and MB&D, of the financial condition, results of operations,
business and overall prospects of PHFG, as well as of management's best
estimates of Family's prospects;
(v) the financial presentation of MB&D and the opinion of MB&D
as to the fairness from a financial point of view of the Exchange Ratio
to Family and its shareholders (see "The Merger - Opinions of Financial
Advisors - Family");
(vi) the anticipated cost savings and operating efficiencies
available to the combined institution from the Merger;
(vii) the Family Board's belief that the terms of the
Agreement are attractive in that the agreement allows Family
shareholders to become shareholders in a combined institution with a
strong competitive position in the Maine, New Hampshire and northern
Massachusetts markets while permitting the continued existence of
Family Bank and the "Family Bank" name;
(viii) the Family Board's belief that the Merger provides an
opportunity for the shareholders of Family to receive an increase in
dividends;
(ix) the Family Board's assessment that affiliation with a
community-based institution would put Family in a good position to be
able to continue its high level
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of personal service to its customers and the Massachusetts and New
Hampshire communities that it serves;
(x) the expected effects of the Merger on Family's other
constituencies, including its senior management and other employees and
the communities served by Family and Family Bank;
(xi) the Family Board's awareness and assessment of the
potential that the Merger could be expected to provide more Family
employees with continued employment and other benefits than certain
other potential business combinations might have provided (see "The
Merger - Interests of Certain Persons in the Merger");
(xii) the expectation that the Merger will generally be a
tax-free transaction to Family and its shareholders (see "The Merger -
Certain Federal Income Tax Consequences"); and
(xiii) the nature of, and likelihood of obtaining, the
regulatory approvals that would be required with respect to the Merger.
The foregoing discussion of the information and factors discussed by
the Board of Directors is not meant to be exhaustive but is believed to include
all material factors considered by Family's Board. The Board did not quantify or
attach any particular weight to the various factors that it considered in
reaching its determination that the Merger is in the best interests of Family
and its shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE FAMILY BOARD HAS DETERMINED THE
MERGER TO BE FAIR TO AND IN THE BEST INTERESTS OF FAMILY AND ITS SHAREHOLDERS
AND HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER. ACCORDINGLY, THE FAMILY BOARD UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
PHFG. In reaching its determination to approve and adopt the Merger
Agreement and the transactions contemplated thereby, the PHFG Board considered a
number of factors, including, without limitation, the following:
(i) the PHFG Board's review, with the assistance of management
and of Keefe Bruyette, of the financial condition, results of
operations, business and overall prospects of Family;
(ii) the fact that Family's strong banking franchise is
contiguous to PHFG's existing banking franchise in New Hampshire and
that the Merger would result in PHFG having a significant presence in
important markets in northern Massachusetts;
(iii) the enhanced ability of the combined entity to compete
against larger competitors;
(iv) the financial presentations of senior management and
Keefe Bruyette and the opinion of Keefe Bruyette as to the fairness of
the Exchange Ratio from a
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financial point of view to the PHFG shareholders (see "The Merger -
Opinions of Financial Advisors - PHFG");
(v) the anticipated cost savings and operating efficiencies
available to the combined institution from the Merger;
(vi) the expectation that the Merger will be a tax-free
transaction to PHFG and its subsidiaries;
(vii) the nature of, and likelihood of obtaining, the
regulatory approvals that would be required with respect to the Merger;
and
(viii) the estimated effects of a program to repurchase
approximately 2.6 million shares of PHFG Common Stock in connection
with the acquisition of Family (see "Pro Forma Combined Consolidated
Financial Information").
The foregoing discussion of the information and factors discussed by
the Board of Directors is not meant to be exhaustive but is believed to include
all material factors considered by PHFG's Board. The Board did not quantify or
attach any particular weight to the various factors that it considered in
reaching its determination that the Merger is in the best interests of PHFG and
its shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE PHFG BOARD HAS DETERMINED THE
MERGER TO BE FAIR TO AND IN THE BEST INTERESTS OF PHFG AND ITS SHAREHOLDERS AND
HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER. ACCORDINGLY, THE PHFG BOARD UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
Family. MB&D has delivered to the Family Board its written opinion, as
of the date of this Prospectus/Joint Proxy Statement, that the Exchange Ratio is
fair, from a financial point of view, to Family's shareholders. MB&D has acted
as financial advisor to Family since July 1995 in connection with Family's
ongoing strategic planning process, including the evaluation of strategic and
business plans, the evaluation of hypothetical affiliation opportunities and a
variety of general corporate finance issues. In addition, one of the members of
MB&D's Corporate Finance Department served as Family's financial advisor for
over three years prior to his affiliation with MB&D.
MB&D advised Family during the negotiation process leading up to the
execution of the Agreement and provided Family with various analyses as to the
range of financially feasible exchange ratios that might be received in a
hypothetical transaction. Representatives of MB&D met with the executive
management and the Family Board on a number of occasions in connection with the
preparation and analysis of Family's strategy. Family consulted with MB&D in
connection with its negotiation of the Exchange Ratio.
MB&D was retained based on its qualifications and experience in the
financial analysis of banking and thrift institutions, knowledge of the
Massachusetts and New England banking markets and its experience with merger and
acquisition transactions involving
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banking institutions. Members of the Corporate Finance Department of MB&D have
advised financial institution clients on more than 50 successfully completed
mergers or acquisitions of financial institutions, many of those in the New
England marketplace.
The full text of the opinion of MB&D, which sets forth assumptions
made, matters considered and limits on the review undertaken by MB&D, is
attached hereto as Annex V. Family's shareholders are urged to read the opinion
in its entirety. MB&D's opinion is directed only to the Exchange Ratio and does
not constitute a recommendation to any holder of Family Common Stock as to how
such holder should vote on the Agreement. The summary of the opinion of MB&D set
forth in this Prospectus/Joint Proxy Statement was provided to Family by MB&D
and is qualified in its entirety by reference to the full text of the opinion
itself. MB&D's opinion was necessarily based upon conditions as they existed and
should be evaluated on the date hereof and the information made available to
MB&D through the date hereof.
In arriving at its opinion, MB&D (i) reviewed the Agreement and this
Prospectus/Joint Proxy Statement in substantially the form to be sent to Family
shareholders; (ii) reviewed publicly available business and financial
information with respect to both Family and PHFG and certain internal financial
information and financial projections prepared by the managements of Family and
PHFG; (iii) held discussions with members of the senior management and Family
Board concerning the past and current results of operations of Family, its
current financial condition and management's opinion of its future prospects;
(iv) reviewed the historical reported price and record of trading volume for the
Family Common Stock and the PHFG Common Stock; (v) held discussions with the
senior management of PHFG concerning the current and past results of operations
of PHFG, its current financial condition and management's opinion of its future
prospects; (vi) considered the current state of and future prospects for the
economies of Massachusetts, Maine and New Hampshire generally and the relevant
market areas for Family and PHFG in particular; (vii) reviewed the specific
acquisition analysis models employed by MB&D to evaluate potential business
combinations of banking companies; (viii) reviewed the reported financial terms
of certain recent business combinations in the banking industry; and (ix)
performed such other studies and analyses as MB&D considered appropriate under
the circumstances associated with this particular transaction. No limitations
were imposed by the Family Board upon MB&D with respect to the investigations
made or procedures followed by MB&D in rendering its opinions.
MB&D's opinion takes into account its assessment of general economic,
market and financial conditions and its experience in other transactions, as
well as its experience in securities valuation and its knowledge of the banking
industry generally. For purposes of reaching its opinion, MB&D has assumed and
relied upon the accuracy and completeness of the information provided to it by
Family and PHFG, and does not assume any responsibility for the independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of either Family or PHFG. With respect to the
financial projections reviewed by MB&D in the course of rendering its opinion,
MB&D has assumed that such projections have been reasonably prepared to reflect
the best currently available estimates and judgment of the management of each of
Family and PHFG as to the most likely future performance of their respective
companies.
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The following is a summary of material analyses employed by MB&D in
connection with rendering its written opinion. Given that it is a summary, it
does not purport to be a complete and comprehensive description of all the
analyses performed, or an enumeration of all the matters considered by MB&D in
arriving at its opinion. The preparation of a fairness opinion is a complicated
process, involving a determination as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, such an opinion is not readily susceptible
to a summary description. In arriving at its fairness opinion, MB&D did not
attribute any particular weight to any one specific analysis or factor
considered by it and made qualitative as well as quantitative judgments as to
the significance of each analysis and factor. Therefore, MB&D believes that its
analyses must be considered as a whole and believes that attributing undue
weight to any single analysis or factor considered could create a misleading or
incomplete view of the process leading to the formation of its opinion. In its
analyses, MB&D has made certain assumptions with respect to banking industry
performance, general business and economic conditions and other factors, many of
which are beyond the control of management of either Family or PHFG. Any
estimates which are referred to in MB&D's analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
vary significantly from those set forth.
(a) Analysis of the Anticipated Merger and the Exchange Ratio in
Relation to PHFG. The consideration of the Exchange Ratio, valued at the closing
price of the Family Common Stock, $22.25, on the day prior to the announcement
of the Agreement (May 30, 1996), and the closing price of the PHFG Common Stock,
$19.75, on the day prior to the announcement of the Agreement, as well as the
30-day average closing price of the PHFG Common Stock, $20.51, on the day prior
to the announcement of the Agreement, represents the following transaction
multiples:
Transaction value: $24.89 per share of Family Common Stock based upon
the PHFG Common Stock closing price on May 30, 1996 and $25.84 based upon the
30-day average closing price for the PHFG Common Stock for the period ended May
30, 1996.
Multiple of earnings based upon the May 30, 1996 PHFG Common Stock
single-day closing price: (i) 12.76 times Family's annualized earnings per share
for the 12 months ended March 31, 1996; (ii) 13.10 times Family's earnings per
share for 1995 and (iii) 11.91 times Family's budgeted earnings per share for
1996.
Multiple of earnings based upon the 30-day average closing price for
the PHFG Common Stock for the period ended May 30, 1996: (i) 13.25 times
Family's annualized earnings per share for the 12 months ended March 31, 1996;
(ii) 13.60 times Family's earnings per share for 1995 and (iii) 13.89 times
Family's budgeted earnings per share for 1996.
Multiple of tangible book value based upon the May 30, 1996 PHFG Common
Stock single-day closing price: 1.61 times Family's tangible book value per
share as of March 31, 1996.
Multiple of tangible book value based upon the 30-day average closing
price for the PHFG Common Stock for the period ended May 30, 1996: 1.68 times
Family's tangible book value per share as of March 31, 1996.
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Multiple of book value based upon the May 30, 1996 PHFG Common Stock
single-day closing price: 1.48 times Family's book value per share as of March
31, 1996.
Multiple of book value based upon the 30-day average closing price for
the PHFG Common Stock for the period ended May 30, 1996: 1.53 times Family's
book value per share as of March 31, 1996.
Multiple of market value based upon the May 30, 1996 PHFG Common Stock
single-day closing price: The approximate $24.89 in market value of the
consideration for each share of Family Common Stock based upon the PHFG Common
Stock closing price on the day prior to the announcement of the Agreement
represents a 12% premium over the closing price of a share of Family Common
Stock reported on NASDAQ on May 30, 1996 and a 26% premium over the six-month
average closing price of the Family Common Stock.
Multiple of market value based upon the 30-day average closing price
for the PHFG Common Stock for the period ended May 30, 1996: The approximate
$25.84 in market value of the consideration per share of Family Common Stock
based upon the 30-day average closing price of the PHFG Common Stock represents
a 16% premium to the closing price of the Family Common Stock reported on NASDAQ
on May 30, 1996 and a 30% premium over the six-month average closing price of
the Family Common Stock.
(b) Specific Acquisition Analysis. MB&D employs a number of proprietary
analysis models to examine hypothetical transactions involving banking and/or
thrift companies. The models use forecast earnings data, selected current period
balance sheet and income statement data, current market and trading information
and a number of assumptions as to interest rates for borrowed funds, opportunity
costs of funds, discount rates, dividend streams, effective tax rates and
transaction structures (the alternative or combinative uses of common equity,
cash, debt or other securities to fund a transaction). The models distinguish
between purchase and pooling accounting treatments and inquire into the likely
economic feasibility of a given hypothetical transaction, at a given price level
or specified exchange rate and employing a specified transaction structure. The
models also permit an examination of pro forma capital adequacy.
In connection with the Agreement, MB&D evaluated the Exchange Ratio in
an all common stock purchase accounting transaction based on PHFG's stated
intent to repurchase approximately 2.6 million shares of PHFG Common Stock in
connection with the acquisition of Family. Based upon the financial projections
of the respective managements and after consideration of the potential for the
realization of reasonable expense savings which are expected by PHFG and Family
to result from the consolidation of selected operational functions of Family and
PHFG, little or no ongoing earnings dilution is projected to result from the
contemplated transaction. MB&D anticipates that if the potential for cost
savings is realized, the transaction will become accretive to the projected
future stand-alone earnings per share of PHFG. Such accretion may be further
enhanced as identified product cross-selling opportunities and other revenue
enhancement options are pursued.
(c) Discounted Cash Flow Analysis. MB&D also completed two discounted
cash flow analyses to permit the conceptual examination of the present
discounted values of potential future results employing selected assumptions and
discount rates.
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In the first discounted cash flow analysis, MB&D discussed with the
management of Family a projection of hypothetical earnings per share results for
calendar years 1996, 1997 and 1998 of $2.09, $2.35 and $2.71, respectively, with
subsequent earnings equal to a return on assets of 1.25%, and employed a
hypothetical dividend pay-out ratio assumption which depicted average annual
pay-outs as a percentage of earnings increasing gradually from a level of 22% to
40% over a five-year period and a long-term growth rate of 4.0%. MB&D then
assumed that the control sale price/earnings ratio at the end of a five-year
period would approximate 12.5 times earnings, and in a separate exercise, a
price to tangible book value ratio of 160%. Given the five-year time horizon and
a discount rate of 12.5%, these cash flow calculations resulted in a range of
present discounted values of cash flows of $21.38 to $23.99, which can be
compared to the nominal present value of the proposed Exchange Ratio of
approximately $25.84 based upon the trailing 30-day average closing price of the
PHFG Common Stock and $24.89 based upon the closing price of the PHFG Common
Stock on the day before announcement of the Agreement.
In the second discounted cash flow analysis, MB&D employed an earnings
annuity concept in which it assumed that future earnings for Family would result
in a return on average equity of 1.25% in the twelve months subsequent to March
31, 1996 for the five following years, with average asset growth equal to 4.0%
in the twelve months subsequent to March 31, 1996 for the five following years,
and that the dividend pay-out ratio would increase to 30% for the five-year
period. MB&D employed a discount rate for all cash flows of 12.5% and a
long-term growth rate of earnings in years six and beyond of 4.0% annually.
Given a five-year time horizon, this resulted in a present discounted value of
the resulting cash flows of $24.69, which can be compared to the nominal present
value of the proposed Exchange Ratio of approximately $25.84 based upon the
trailing 30-day average closing price of the PHFG Common Stock and $24.89 based
upon the closing price of the PHFG Common Stock on the day before announcement
of the Agreement.
It is important to note that the discount factors employed embody both
the concept of a riskless time value of money and risk factors that reflect the
uncertainty of the forecast cash flows and terminal price/earnings multiples.
Use of higher discount rates would result in lower discounted present values.
Conversely, use of lower discount rates would result in higher discounted
present values. MB&D advised the Family Board that although discounted cash flow
analysis is a widely used valuation methodology, it relies on numerous
assumptions, including discount rates, terminal values, earnings and asset
growth, as well as dividend payout ratios. Any or all of these assumptions may
vary from actual future performance and results.
MB&D also considered the fact that Family shareholders would
substantially increase their prospect for annual dividends based upon current
and projected dividend streams of both Family and PHFG. Based upon an
annualization of the quarterly dividend payout rate of PHFG as of May 30, 1996,
Family shareholders would receive an equivalent dividend per share of Family
Common Stock of $0.86 per year based on the Exchange Ratio, which represents a
79% increase in the annualized dividend of $0.48 per share of Family Common
Stock being paid by Family at May 30, 1996.
(d) Analysis of Other Comparable Transactions. MB&D is reluctant to
place excessive emphasis on "comparables analysis" as a valuation methodology
due to what it considers to be inherent limitations of the application of the
results to specific cases. It has observed
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<PAGE> 44
that such analysis as employed by some industry observers and financial advisors
frequently fails to adequately take into consideration such factors as material
differences in the underlying capitalization of the comparable institutions
which are being acquired; differences in the historic earnings (or loss)
patterns recorded by the compared institutions which can depict a very different
trend than might be implied by examining only recent financial results; failure
to exclude non-recurring profit or loss items from the last twelve months'
earnings streams of target companies, which can distort apparent earnings
multiples; differences in the form or forms of consideration used to complete
the transaction; differences between the planned method of accounting for the
completed transaction; and such less accessible factors as the relative
population, business and economic demographics of the acquired entities' markets
as compared or contrasted to such factors for the markets in which comparable
entities are doing business. Comparables analysis also rarely seems to take into
consideration the degree of facilities overlap between the acquirer's market and
that of the target or the absence of such overlap and the resulting cost savings
differentials between otherwise apparently comparable transactions. MB&D
consequently believes that comparables analysis has limitations.
Nevertheless, between March and May of 1996, MB&D reviewed a universe
of 27 publicly announced transactions in the financial institutions industry in
which either a bank or a thrift (or their respective holding companies) engaged
in the acquisition of another financial institution. These transactions were
announced after August 1, 1994 and prior to May 30, 1996. All of the examined
transactions involved entities doing business in New England.
The 27 transactions reviewed by MB&D are as follows: Hubco Inc.'s
acquisition of Hometown Bancorp.; CFX Corporation's acquisition of Milford Co-op
Bank; Hubco Inc.'s acquisition of Lafayette American Bank and Trust Company; CFX
Corporation's acquisition of The Safety Fund Corporation; NE Community Bancorp's
acquisition of Manchester State Bank; Citizens Financial Group, Inc.'s
acquisition of First NH Banks, Inc.; Bank of Boston Corporation's acquisition of
BayBanks, Inc.; PHFG's acquisition of BNHC; Chittenden Corp.'s acquisition of
Flagship Bank & Trust; Community Bankshares' acquisition of Centerpoint Bank;
Center Financial Corp.'s acquisition of Great Country Bank; Albank Financial
Corp.'s acquisition of Marble Financial Corp.; Webster Financial Corp.'s
acquisition of Shelton Bancorp; The Co-operative Bank of Concord's acquisition
of Bank of Braintree; Bank of New York Co.'s acquisition of Putnam Trust Co.;
BayBanks, Inc.'s acquisition of Cornerstone Financial; Main Street Community
Bancorp's acquisition of Lexington Savings Bank; PHFG's acquisition of Bankcore,
Inc.; Fleet Financial Group, Inc.'s acquisition of Shawmut National Corporation;
BayBanks, Inc.'s acquisition of NFS Financial Corp.; Peterborough Savings Bank's
acquisition of Horizon Banks; Chittenden Corp.'s acquisition of Bank of Western
Massachusetts; First NH Banks, Inc.'s acquisition of Great Bay Bankshares, Inc.;
CFX Corporation's acquisition of Orange Savings Bank; Citizens Financial Group,
Inc.'s acquisition of Quincy Savings Bank; Shawmut National Corporation's
acquisition of Northeast Federal Corp.; and Fleet Financial Group, Inc.'s
acquisition of NBB Bancorp, Inc. From this universe, MB&D selected 12
transactions involving the acquisition of thrift institutions as being most
representative of the PHFG/Family transaction.
The 12 transactions selected as most representative were: CFX
Corporation's acquisition of Milford Co-op Bank; Center Financial Corp.'s
acquisition of Great Country
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<PAGE> 45
Bank; Albank Financial Corp.'s acquisition of Marble Financial Corp.; Webster
Financial Corp.'s acquisition of Shelton Bancorp; The Co-operative Bank of
Concord's acquisition of Bank of Braintree; Main Street Community Bancorp's
acquisition of Lexington Savings Bank; BayBanks, Inc.'s acquisition of NFS
Financial Corp.; First NH Banks, Inc.'s acquisition of Great Bay Bankshares,
Inc.; CFX Corporation's acquisition of Orange Savings Bank; Citizens Financial
Group, Inc.'s acquisition of Quincy Savings Bank; Shawmut National Corporation's
acquisition of Northeast Federal Corp.; and Fleet Financial Group, Inc.'s
acquisition of NBB Bancorp, Inc.
Within this group of 12 transactions, the median multiple of tangible
book value paid by the acquiror was 152.5%, the maximum multiple paid was
199.3% and the minimum multiple was 95.6%. These statistics can be compared to
multiples of tangible book value for the acquisition of Family based upon the
values on the day before announcement of the Agreement, which amount to 167.7%
based upon the nominal present value of the Exchange Ratio of approximately
$25.84 based upon the trailing 30-day average closing price of the PHFG Common
Stock on the day before announcement of the Agreement and 161.5% based upon the
nominal present value of the Exchange Ratio of approximately $24.89 based upon
the closing price of the PHFG Common Stock on the day before announcement of
the Agreement.
With respect to trailing 12 months earnings multiples for this same
data sample of 12 transactions, the median price/earnings multiple paid was
12.75 and the maximum multiple was 16.74, while the minimum multiple was 9.95.
These statistics can be compared to 12 months earnings multiples for the
acquisition of Family based upon the indicated values on the day before
announcement of the Agreement, which amount to 13.25 based upon the nominal
present value of the Exchange Ratio of approximately $25.84 based upon the
trailing 30-day average closing price of the PHFG Common Stock on the day before
the announcement of the Agreement and 12.76 based upon the nominal present value
of the Exchange Ratio of approximately $24.89 based upon the closing price of
the PHFG Common Stock on the day before announcement of the Agreement.
Pursuant to a letter agreement with Family dated May 30, 1996, MB&D
will receive a fee of 1.0% of the value of the Merger consideration received by
the shareholders of Family for services rendered to Family in conjunction with
the proposed Merger. The fee represents compensation for services rendered in
connection with the analysis of the transaction, participation in the
negotiations between the parties and for the rendering of its opinions. Family
paid MB&D $75,000 upon signing the letter agreement with MB&D, $200,000
following the execution of the Agreement and an additional $275,000 upon receipt
of MB&D's opinion included in this Prospectus/Joint Proxy Statement. MB&D will
be paid any additional amounts needed to bring the total compensation received
to 1.0% of the transaction value at the time of closing of the transaction, or
$1.1 million, whichever is less, provided that MB&D will receive no less than
$880,000 in the event the Merger is consummated. Based upon a hypothetical
transaction value of $120 million at consummation, MB&D would receive
compensation of $1.1 million. In addition, Family has agreed to reimburse MB&D
for its reasonable out-of-pocket expenses incurred in connection with the
Merger. Family also has agreed to indemnify MB&D and its directors, officers and
employees against certain losses, claims, damages and liabilities relating to or
arising out of MB&D's engagement, including liabilities under the federal
securities laws.
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<PAGE> 46
PHFG. In the ordinary course of business Keefe Bruyette provides
financial advisory and investment banking services to PHFG. In recent years
these services have included acting as a financial advisor in connection with
certain acquisitions by PHFG and as a financial advisor and a standby
underwriter in connection with a public offering of PHFG Common Stock.
Keefe Bruyette was selected to act as PHFG's financial advisor in
connection with the acquisition of Family based upon its qualifications,
expertise and reputation. Keefe Bruyette specializes in the securities of
banking enterprises and regularly engages in the valuation of banking businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
In the ordinary course of business, Keefe Bruyette may from time to
time have long or short positions in, and buy or sell, debt and equity
securities or options on securities of PHFG and Family.
On May 28, 1996, at the meeting at which the PHFG Board approved and
adopted the Agreement and the transactions contemplated thereby, Keefe Bruyette
rendered its oral opinion to the PHFG Board that, as of such date, the Exchange
Ratio was fair to the shareholders of PHFG from a financial point of view. That
opinion was updated as of 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 May 28, 1996 opinion by performing procedures to
update certain of such analyses and by reviewing the assumptions on which such
analyses were based and the factors considered in connection therewith. No
limitations were imposed by the PHFG Board upon Keefe Bruyette with respect to
the investigations made or procedures followed by Keefe Bruyette in rendering
its opinions.
Keefe Bruyette's opinion is addressed to the Board of Directors of PHFG
and does not constitute a recommendation as to how any shareholder of PHFG
should vote with respect to the Merger.
THE FULL TEXT OF THE OPINION OF KEEFE BRUYETTE, WHICH SETS FORTH A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROSPECTUS/JOINT PROXY
STATEMENT AS ANNEX VI AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS ARE
URGED TO READ THE OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF THE OPINION
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In rendering its opinion, Keefe Bruyette (i) reviewed the Agreement,
Annual Report to Shareholders of PHFG and Annual Reports on Form 10-K of PHFG
and Family for the year ended December 31, 1995, certain interim reports to
shareholders and Quarterly Reports on Form 10-Q of PHFG and Family and certain
internal financial analyses and forecasts prepared by PHFG management; (ii) held
discussions with members of senior management of PHFG regarding the past and
current business operations, regulatory relationships, financial condition and
future prospects of PHFG; (iii) compared certain financial and stock market
information for PHFG and Family with similar information for certain
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<PAGE> 47
other companies the securities of which are publicly traded; (iv) reviewed the
financial terms of certain recent business combinations in the banking and
thrift industries; and (v) performed such other studies and analyses as it
considered appropriate.
In conducting its review and arriving at its opinions, Keefe Bruyette
relied upon and assumed the accuracy and completeness of all of the financial
and other information provided to it or publicly available and Keefe Bruyette
did not assume any responsibility for independently verifying any of such
information. Keefe Bruyette relied upon the management of PHFG as to the
reasonableness and achievability of the financial and operating forecasts and
projections (and the assumptions and bases therefor) provided to it, and Keefe
Bruyette assumed that such forecasts and projections reflect the best currently
available estimates and judgments of PHFG and that such forecasts and
projections will be realized in the amounts and in the time periods currently
estimated by PHFG management. Keefe Bruyette also assumed that the aggregate
allowances for loan losses for PHFG and Family are adequate to cover such
losses. In rendering its opinion, Keefe Bruyette did not make or obtain any
evaluations or appraisals of the property of PHFG or Family, nor did it examine
any individual credit files.
The following is a summary of the material financial analyses employed
by Keefe Bruyette in connection with providing its oral opinion of May 28, 1996
and does not purport to be a complete description of all analyses employed by
Keefe Bruyette.
(a) Summary of the Family Transaction. Keefe Bruyette calculated the
imputed per share value of the PHFG offer to holders of Family Common Stock
based on an Exchange Ratio of 1.26 shares of PHFG Common Stock for each share of
Family Common Stock and a PHFG Common Stock price of $19.88, which was the
closing price of a share of PHFG Common Stock on NASDAQ on May 24, 1996. The
resulting per share value of $25.04 was compared to Family's March 31, 1996
stated book value per share of $16.84 to render a multiple of 1.49 times book
value per share, its March 31, 1996 stated tangible book value per share of
$15.41 to render a multiple of 1.63 times tangible book value per share, its
trailing twelve months earnings per share of $1.95 to render a multiple of 12.84
times twelve months trailing earnings per share, its estimated 1996 earnings per
share of $2.05 as published by the Keefe Bruyette Research Department to render
a multiple of 12.22 times estimated future earnings per share and its stock
price of $24.00 as of May 24, 1996 to render a market premium of 4.34%. Keefe
Bruyette also calculated a deposit premium of 7.04% by dividing the premium paid
over tangible equity by the total deposits of Family as of March 31, 1996.
(b) Contribution Analysis. Keefe Bruyette analyzed the relative
contribution of each of Family and PHFG to certain balance sheet and income
statement items, including assets, deposits, shareholders' equity and estimated
earnings. Keefe Bruyette then compared the relative contribution of such balance
sheet and income statement items, with the pro forma ownership percentage of
approximately 18.0% for Family shareholders based on the Exchange Ratio. This
does not give effect to the planned repurchase by PHFG of approximately 2.6
million shares of PHFG Common Stock in connection with the acquisition of
Family. See "Pro Forma Combined Consolidated Financial Information." The
contribution analysis showed that under the PHFG proposal, Family would
contribute approximately 17.25% of the combined assets, 17.98% of the combined
deposits, 16.71% of the combined tangible equity and 12.93% of the estimated
1996 combined net income.
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<PAGE> 48
(c) Comparable Transaction Analysis. Keefe Bruyette analyzed certain
comparable merger and acquisition transactions for financial institutions based
upon the acquisition price relative to stated book value, stated tangible book
value, latest twelve months earnings and projected earnings for the next fiscal
year. The information analyzed was compiled by Keefe Bruyette from both internal
sources and a data firm that monitors and publishes transaction summaries and
descriptions of mergers and acquisitions in the financial services industry. The
analysis included a review and comparison of the average book value multiples
and median earnings multiples represented by a sample of recently completed or
announced transactions, as segmented into: (a) all year to date May 28, 1996
announced transactions in which the selling institution was a thrift; (b) all
transactions announced in 1995 in which the selling institution was a thrift
located in New England; (c) transactions announced between January 1994 and May
1996 in which the seller was a thrift located in New England with assets greater
than $500 million and less than $5 billion; and (d) transactions announced
between January 1994 and May 1996 in which the seller was a commercial bank
located in New England with assets greater than $500 million and less than $5
billion. The following thrift acquisitions comprised group (c): Bank of Boston
Corporation acquisition of Boston Bancorp; BayBanks, Inc. acquisition of NFS
Financial Corporation; Citizens Financial Group, Inc. acquisition of Quincy
Savings Bank; Shawmut National Corporation acquisition of Northeast Federal
Corp.; Fleet Financial Group, Inc. acquisition of NBB Bancorp, Inc.; and Bank of
Boston Corporation acquisition of Pioneer Financial Cooperative Bank. The
following bank transactions comprised group (d): Hubco, Inc. acquisition of
Lafayette American Bank and Trust Company; PHFG acquisition of BNHC; Bank of New
York Co. acquisition of Putnam Trust Co.; and KeyCorp, Inc. acquisition of Casco
Northern Corporation from Bank of Boston Corporation.
Based on stock price of PHFG of $19.88, the value to be issued in PHFG
Common Stock was $25.04 per share of Family Common Stock. The relative multiples
and implied transaction values for each of the comparable transaction groups are
provided in the following table:
<TABLE>
<CAPTION>
Average
Price/
Average Median Estimated
Average Price/ Price/ 1996
Price/ Tangible Last Four Earnings
Book Value Book Value Quarters Per Share
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
(a) Year to Date Nationwide Thrift Deals 145.50% 150.00% $19.50 NA
Implied Value per share of Family Common Stock $ 24.50 $ 23.12 38.03 NA
(b) All New England Thrift Transactions 1995 150.40% 150.40% 12.80 NA
Implied Value per share of Family Common Stock $ 25.33 $ 23.18 24.96 NA
(c) New England Comparable Thrift Transactions 174.15% 177.56% 14.77 $13.20
Implied Value per share of Family Common Stock $ 29.33 $ 27.36 28.80 27.06
(d) New England Comparable Bank Transactions 218.28% 224.19% 15.39 14.25
Implied Value per share of Family Common Stock $ 36.76 $ 34.55 30.01 29.21
</TABLE>
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<PAGE> 49
The high and low implied value per share of Family Common Stock set
forth in the above table is $38.03 and $23.12, respectively, and the average
implied value per share of Family Common Stock with and without banking
transactions set forth in the above table was $28.73 and $27.17, respectively.
(d) Financial Impact Analysis. Keefe Bruyette analyzed the estimated
financial impact of the Merger on PHFG based on various projections provided by
management of PHFG, estimated purchase accounting adjustments provided by
management of PHFG and the planned repurchase by PHFG of approximately 2.6
million shares of PHFG Common Stock in connection with the acquisition of
Family. For additional information in this regard, see "Pro Forma Combined
Consolidated Financial Information."
The preparation of a fairness opinion is a complex process and is not
necessarily amenable to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying Keefe Bruyette's opinion. In arriving at its fairness determination,
Keefe Bruyette considered the results of all such analyses. None of the
financial institutions selected for use in developing comparisons is identical
to PHFG and none of the other acquisitions evaluated by Keefe Bruyette is
identical to the Merger. Accordingly, Keefe Bruyette indicated to the PHFG Board
that analyses of the results described above are not purely mathematical, but
rather involve complex considerations and judgments concerning differences in
operating and financial characteristics, including, among other things,
differences in revenue composition and earnings performance among PHFG, Family
and the selected companies and acquisitions reviewed. The analyses were prepared
by Keefe Bruyette solely for the purpose of preparing its opinion of May 28,
1996 to the PHFG Board as to the fairness of the Exchange Ratio to the
shareholders of PHFG, and do not purport to be appraisals or necessarily reflect
the prices at which PHFG or its securities may actually be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses.
The fairness opinion of Keefe Bruyette was provided to PHFG as part of
its services under a retainer agreement between PHFG and Keefe Bruyette,
pursuant to which PHFG pays to Keefe Bruyette an annual retainer of $50,000,
plus reasonable expenses, and in anticipation of Keefe Bruyette's involvement in
the repurchase program which PHFG intends to implement in connection with the
acquisition of Family. See "Pro Forma Combined Consolidated Financial
Information." Pursuant to the retainer agreement between PHFG and Keefe
Bruyette, PHFG also agreed to reimburse Keefe Bruyette for reasonable
out-of-pocket expenses and disbursements incurred in connection with its
retention and to indemnify Keefe Bruyette against certain liabilities, including
liabilities under the federal securities laws.
EXCHANGE OF FAMILY COMMON STOCK CERTIFICATES
At the Effective Time, each holder of a certificate or certificates
theretofore evidencing issued and outstanding shares of Family Common Stock,
upon surrender of the same to an agent, duly appointed by PHFG ("Exchange
Agent"), shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of full shares of PHFG Common Stock into
which the shares of Family Common Stock theretofore
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<PAGE> 50
represented by the certificate or certificates so surrendered shall have been
converted by virtue of the Merger. As promptly as practicable after the
Effective Time (and in no event later than the fifth business day following the
Effective Time), the Exchange Agent shall mail to each holder of record of an
outstanding certificate which immediately prior to the Effective Time evidenced
shares of Family Common Stock, and which is to be exchanged for PHFG Common
Stock by virtue of the Merger, a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to such
certificate shall pass, only upon delivery of such certificate to the Exchange
Agent) advising such holder of the terms of the exchange effected by the Merger
and of the procedure for surrendering to the Exchange Agent such certificate in
exchange for a certificate or certificates evidencing PHFG Common Stock and cash
in lieu of any fractional share interest. Upon surrender to the Exchange Agent
of one or more certificates evidencing shares of Family Common Stock, together
with a properly completed and executed letter of transmittal, the Exchange Agent
will mail to the holder thereof after the Effective Time a certificate or
certificates representing the number of full shares of PHFG Common Stock into
which the aggregate number of shares of Family Common Stock previously
represented by such certificate or certificates surrendered shall have been
converted pursuant to the Agreement, plus cash in lieu of any fractional share
interest. PHFG shall be entitled, after the Effective Time, to treat
certificates representing shares of Family Common Stock as evidencing ownership
of the number of full shares of PHFG Common Stock into which the shares of
Family Common Stock represented by such certificates shall have been converted
pursuant to the Agreement, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
After the Effective Time, there shall be no further transfer on the
records of Family of certificates representing shares of Family Common Stock. If
any such certificates are presented to Family or the transfer agent for the
Family Common Stock for transfer after the Effective Time, they shall be
cancelled against delivery of certificates for PHFG Common Stock in accordance
with the Agreement.
No dividends which have been declared on the PHFG Common Stock will be
remitted to any person entitled to receive shares of PHFG Common Stock under the
Agreement until such person surrenders the certificate or certificates
representing Family Common Stock, at which time such dividends shall be remitted
to such person, without interest.
ASSUMPTION OF FAMILY STOCK OPTIONS
Directors, officers and employees of Family have been granted options
(the "Family Options") to purchase shares of Family Common Stock, generally
pursuant to Family's 1995 Incentive and Nonqualified Stock Option Plan, 1986
Incentive and Nonqualified Stock Option Plan and 1986 Nonemployees Nonqualified
Stock Option Plan (collectively, the "Family Stock Option Plans"). Under the
Agreement, each Family Option which is outstanding at the Effective Time,
whether or not exercisable, shall cease to represent a right to acquire shares
of Family Common Stock and shall be converted into an option to purchase shares
of PHFG Common Stock, and PHFG shall assume each Family Option, in accordance
with the terms of the applicable Family Stock Option Plan and stock option or
other agreement by which it is evidenced, except that from and after the
Effective Time, (i) PHFG and the Human Resources Committee of its Board of
Directors shall be substituted
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<PAGE> 51
for Family and the committee of Family's Board of Directors (including, if
applicable, the entire Board of Directors of Family) administering such Family
Stock Option Plan, (ii) each Family Option assumed by PHFG may be exercised
solely for shares of PHFG Common Stock, (iii) the number of shares of PHFG
Common Stock subject to such Family Option shall be equal to the number of
shares of Family Common Stock subject to such Family Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, provided that any
fractional shares of PHFG Common Stock resulting from such multiplication shall
be rounded down to the nearest share, and (iv) the per share exercise price
under each such Family Option shall be adjusted by dividing the per share
exercise price under each such Family Option by the Exchange Ratio, provided
that such exercise price shall be rounded up to the nearest cent. The Agreement
also provides that within 30 days after the Effective Time, PHFG shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of PHFG Common
Stock subject to such options and shall use its reasonable efforts to maintain
the current status of the prospectus or prospectuses contained therein for so
long as such options remain outstanding.
As of the date of the Agreement, there were Family Options to purchase
an aggregate of 233,606 shares of Family Common Stock outstanding, including
Family Options held by Messrs. Hindle, Fahey, Trombley, LaFlamme and Fenn to
purchase 20,358 shares, 22,858 shares, 22,608 shares, 3,657 shares and 28,250
shares, respectively, at prices which range from $3.33 per share to $17.50
share. The foregoing Family Options will be converted into options to purchase
shares of PHFG Common Stock in the manner set forth in the Agreement to the
extent that they are not exercised and do not expire in accordance with their
terms prior to the Effective Time.
REPRESENTATIONS AND WARRANTIES
In the Agreement each of PHFG and Family made customary representations
and warranties relating to, among other things, (i) corporate organization and
similar corporate matters; (ii) capital structure; (iii) authorization,
execution, delivery, performance and enforceability of the Agreement; (iv) the
absence of material conflicts or violations with organizational documents,
applicable laws or material contracts or agreements; (v) required regulatory
approvals; (vi) the absence of a Material Adverse Effect, as defined, since
March 31, 1996; (vii) the absence of material litigation; (viii) compliance with
applicable laws; (ix) the accuracy of documents filed with the SEC and banking
authorities; (x) employee benefit plans and related matters; (xi) tax returns
and payment of taxes; (xii) environmental matters; (xiii) brokers' and finders'
fees; and (xiv) the accuracy of information relating to it in this
Prospectus/Joint Proxy Statement.
CONDITIONS TO THE MERGER
The Agreement provides that consummation of the Merger is subject to
the satisfaction of certain conditions, or the waiver of such conditions by the
party or parties entitled to do so, at or before the Effective Time. Each of the
parties' obligations under the Agreement is subject to the following conditions:
(i) all corporate action (including without limitation approval by the requisite
votes of the shareholders of PHFG and Family) necessary to authorize the
execution and delivery of the Agreement and consummation of the transactions
contemplated thereby shall have been duly and validly taken; (ii) the receipt
44
<PAGE> 52
of all necessary regulatory approvals and consents required to consummate the
Merger by any governmental authority, and the expiration of all notice periods
and waiting periods with respect thereto, provided, however, that no required
approval or consent shall be deemed to have been received if it shall include
any condition or requirement that, individually or in the aggregate, would so
materially reduce the economic or business benefits of the transactions
contemplated by the Agreement to PHFG that had such condition or requirement
been known PHFG, in its reasonable judgment, would not have entered into the
Agreement; (iii) none of PHFG or Family or their respective subsidiaries shall
be subject to any statute, rule, regulation, order or decree which prohibits,
restricts or makes illegal the consummation of the Merger; (iv) the Registration
Statement shall have become effective under the Securities Act, and PHFG shall
have received all permits, authorizations or exemptions necessary under all
state securities laws to issue PHFG Common Stock in connection with the Merger,
and neither the Registration Statement nor any such permit, authorization or
exemption shall be subject to a stop order or threatened stop order by any
governmental authority; (v) the shares of PHFG Common Stock to be issued in
connection with the Merger shall have been approved for quotation on NASDAQ; and
(vi) each of PHFG and Family shall have received an opinion of its respective
counsel to the effect that the Merger qualifies as a reorganization within the
meaning of Section 368 of the Code and, in the case of Family, with respect to
certain other related federal income tax considerations.
In addition to the foregoing conditions, the obligations of PHFG and
PHMC under the Agreement are conditioned upon (i) the accuracy in all material
respects as of the date of the Agreement and as of the Effective Time of the
representations and warranties of Family set forth in the Agreement, except as
to any representation or warranty which specifically relates to an earlier date
and except as otherwise contemplated by the Agreement; (ii) the performance in
all material respects of all covenants and obligations required to be complied
with and satisfied by Family; (iii) the receipt of a certificate from specified
officers of Family with respect to compliance with the conditions relating to
(i) and (ii) immediately above as set forth in the Agreement; (iv) the receipt
of an opinion from Family's legal counsel covering specified matters; (v) any
dissenting shares of Family Common Stock under the MBCL shall constitute not
more than 10% of the outstanding shares of Family Common Stock prior to the
Effective Time; (vi) the receipt of "comfort" letters from the independent
public accountants of Family as of specified dates; and (vii) the receipt by
PHFG of such certificates of Family's officers or others and such other
documents to evidence fulfillment of the conditions relating to Family as PHFG
may reasonably request. Any of the foregoing conditions may be waived by PHFG
and PHMC.
In addition to the other conditions set forth above, Family's
obligations under the Agreement are conditioned upon (i) the accuracy in all
material respects as of the date of the Agreement and as of the Effective Time
of the representations and warranties of PHFG set forth in the Agreement, except
as to any representation or warranty which specifically relates to an earlier
date and except as otherwise contemplated by the Agreement; (ii) the performance
in all material respects of all covenants and obligations required to be
complied with and satisfied by PHFG and PHMC; (iii) the receipt of a certificate
from specified officers of PHFG with respect to compliance with the conditions
relating to (i) and (ii) immediately above as set forth in the Agreement; (iv)
the receipt of an opinion from legal counsel to PHFG covering specified matters;
and (v) the receipt by Family of such certificates of PHFG's or PHMC's officers
or others and such other documents to evidence
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<PAGE> 53
fulfillment of the conditions relating to them as Family may reasonably request.
Any of the foregoing conditions may be waived by Family.
REGULATORY APPROVALS
Consummation of the Merger is subject to prior receipt of all required
approvals and consents of the Merger by all applicable federal and state
regulatory authorities. In order to consummate the Merger, PHFG must obtain the
prior consent and approval, as applicable, of the FRB, the OTS, the
Superintendent and the Massachusetts Board, the approval of which may not be
granted until it has received notice from the MHPF that PHFG and the MHPF have
made the arrangements required by Massachusetts law.
The Merger is subject to the prior approval of the FRB under Section 4
of the BHCA, which requires PHFG to provide the FRB written notice of the Merger
at least 60 days before its consummation. In connection with such notice, the
FRB shall consider whether the acquisition of Family by PHFG can reasonably be
expected to produce benefits to the public such as greater convenience,
increased competition or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices.
The Merger is subject to the prior approval of the OTS under Section
10(e) of the HOLA and regulations of the OTS thereunder. The OTS may deny an
application by an acquiror to acquire control of a savings association if (i)
the OTS finds that the financial and managerial resources and future prospects
of the acquiror and the savings association would be detrimental to the savings
association or the insurance risk to the FDIC or (ii) the acquiror fails or
refuses to furnish information requested by the OTS. Pursuant to the applicable
provisions of the HOLA and regulations thereunder, the OTS may not approve an
acquisition of control of a savings association if (i) such transaction would
result in a monopoly or would be in furtherance of any combination or conspiracy
to monopolize or attempt to monopolize the business of banking in any part of
the United States; (ii) the effect of such transaction, in any section of the
country, may be to substantially lessen competition, or tend to create a
monopoly, or in any other manner to restrain trade, in each case unless the OTS
finds that the anticompetitive effects of the proposed transaction are clearly
outweighed in the public interests by the probable effect of the transaction in
meeting the convenience and needs of the community to be served; or (iii) the
acquiror fails to provide adequate assurances to the OTS that the acquiror will
make available to the OTS such information on the operations or activities of
the acquiror and any affiliate thereof as the OTS determines to be appropriate
to determine and enforce compliance with the HOLA. Consideration of the
managerial resources of an acquiror or savings association shall include
consideration of the competence, experience and integrity of the directors,
officers and controlling shareholders of the acquiror and the savings
association.
Consummation of the Merger also requires the approval of the
Superintendent under Part 10 of Title 9-B of the Maine Revised Statutes. The
Superintendent shall not approve an application for such a transaction unless he
determines, after a consideration of all relevant evidence, that it would
contribute to the financial strength and success of the applicant and promote
the convenience and advantage of the public. The factors to be considered by the
Superintendent in this regard are substantially similar to those to be
considered by federal banking agencies, as discussed above.
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The Merger also is subject to approval of the Massachusetts Board under
Sections 2 and 4 of Chapter 167A of the Massachusetts General Laws.
Massachusetts law requires that the Massachusetts Board find that the Merger
would not unreasonably affect competition among banking institutions and that it
would promote public convenience and advantage. In making such a determination,
the Massachusetts Board must consider, among other things, a showing of net new
benefits, including initial capital investments, job creation plans, consumer
and business services, commitments to maintain and open branch offices within
Family Bank's statutorily delineated local community, and such other matters as
the Massachusetts Board may deem necessary or advisable.
In addition, Massachusetts law provides that the Massachusetts Board
cannot approve the Merger until it has received notice from the MHPF that
arrangements satisfactory to the MHPF have been made for the proposed acquiror
to make 0.9 percent of its assets located in Massachusetts available for call by
the MHPF for a period of ten years for purposes of funding various affordable
housing programs. Massachusetts law provides that such funds shall bear interest
at rates approved by the Massachusetts Commissioner of Banks ("Massachusetts
Commissioner"), which shall be based upon the cost (not to include lost
opportunity costs) incurred in making funds available to the MHPF. Pursuant to
this requirement, Family Bank and PHFG, as lender and guarantor, respectively,
will enter into a loan agreement with the MHPF pursuant to which Family Bank
will agree to make funds available for call by MHPF's Board.
Under Massachusetts law, PHFG also would be required to maintain, for a
period of two years following the consummation of the Merger, the asset base of
Family Bank at a level equal to or greater than the total assets of such bank on
the date of consummation, provided, however, that the Massachusetts Commissioner
may waive such asset retention requirement if, in his judgment, economic
conditions warrant such waiver. PHFG currently intends to request confirmation
from the Massachusetts Commissioner that this requirement does not apply to the
assets of Family Bank located in New Hampshire and, thus, the sale of certain of
Family Bank's branch offices in New Hampshire to BNH. See "The Merger -- Branch
Sale."
Applications have been or will be filed with applicable regulatory
authorities for approval of the Merger. Although neither PHFG nor Family is
aware of any basis for disapproving the Merger, there can be no assurance that
all requisite approvals will be obtained, that such approvals will be received
on a timely basis or that such approvals will not impose conditions or
requirements which, individually or in the aggregate, would so materially reduce
the economic or business benefits of the transactions contemplated by the
Agreement to PHFG that had such condition or requirement been known PHFG, in its
reasonable judgment, would not have entered into the Agreement. If any such
condition or requirement is imposed, the Agreement permits the Board of
Directors of PHFG to terminate the Agreement.
BUSINESS PENDING THE MERGER
Pursuant to the Agreement, Family agreed that, except as contemplated
by the Agreement or with the prior written consent of PHFG, during the period
from the date of the Agreement and continuing until the Effective Time it and
Family Bank shall carry on their respective businesses in the ordinary course
consistent with past practice. Pursuant to
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the Agreement, Family also agreed to use all reasonable efforts to (i) preserve
its business organization and that of Family Bank intact, (ii) keep available to
itself and PHFG the present services of the employees of Family and Family Bank
and (iii) preserve for itself and PHFG the goodwill of the customers of Family
and Family Bank and others with whom business relationships exist. In addition,
under the terms of the Agreement, Family agreed not to take certain actions, nor
permit its subsidiaries to take certain actions, without the prior written
consent of PHFG, including, among other things, the following: (i) declare, set
aside, make or pay any dividend or other distribution in respect of Family
Common Stock, except for regular quarterly cash dividends at a rate per share of
Family Common Stock not in excess of $.12 per share, which shall have the same
record and payment dates as the record and payment dates relating to dividends
on the PHFG Common Stock, it being the intention of the parties that the
shareholders of Family receive dividends for any particular quarter on either
the Family Common Stock or the PHFG Common Stock but not both, provided,
however, that if the Effective Time does not occur prior to the record date for
the first regular quarterly dividend in 1997, the regular per share quarterly
dividend on the Family Common Stock for such quarter (and any subsequent
quarterly dividends prior to the Effective Time) may be increased to up to $.14
per share; (ii) issue, grant or authorize any capital stock or rights to acquire
the same, other than in each case pursuant to the Family Stock Option Agreement
or upon the exercise of Family Options; purchase any shares of Family Common
Stock; or effect any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization; (iii) amend its articles of organization
or bylaws; impose, or suffer the imposition of, any lien, charge or encumbrance
on any share of stock held by Family in a subsidiary of Family, or permit any
such lien to exist; or waive or release any material right or cancel or
compromise any material debt or claim; (iv) increase the rate of compensation
of, pay or agree to pay any bonus or severance to, or provide any other new
employee benefit or incentive to, any of its directors, officers or employees,
except (a) as may be required pursuant to binding commitments as of the date of
the Agreement and (b) such as may be granted in the ordinary course of business
consistent with past practice; (v) enter into or modify any employee benefit
plan, or make any contributions to Family's defined benefit pension plan or
401(k) Plan other than in the ordinary course of business consistent with past
practice, or make any contributions to Family's Employee Stock Ownership Plan,
other than necessary to enable such plan to make required payments on existing
indebtedness; (vi) enter into (w) any agreement, arrangement or commitment not
made in the ordinary course of business, (x) any agreement, indenture or other
instrument relating to the borrowing of money by Family or Family Bank or
guarantee by Family or Family Bank of any such obligation, except for deposits
and certain other borrowings in the ordinary course of business consistent with
past practice, (y) any employment, consulting or severance contracts or
agreements, or amend any such existing agreement, or (z) any contract, agreement
or understanding with a labor union; (vii) change its methods of accounting or
tax reporting, except as may be required by changes in generally accepted
accounting principles or applicable law; (viii) make any capital expenditures in
excess of $50,000 individually or $250,000 in the aggregate, other 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
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granting any preferential right to purchase any of its assets or rights or
requiring the consent of any party to the transfer and assignment of any such
assets or rights; (xiii) take any action that would prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368 of the
Code, provided that this covenant shall not limit the ability of Family to
exercise its rights under the PHFG Stock Option Agreement; (xiv) take any action
that would result in any of the representations and warranties of Family
contained in the Agreement not to be true and correct in any material respect at
the Effective Time; or (xv) agree to do any of the foregoing.
Pursuant to the Agreement, PHFG agreed that during the period from the
date of the Agreement to the Effective Time it shall continue to conduct its
business in a manner designed in its reasonable judgment to enhance the
long-term value of the PHFG Common Stock and the business prospects of PHFG. In
addition, under the terms of the Agreement, PHFG agreed not to take the
following actions, nor permit its significant subsidiaries to take the following
actions, without the prior written consent of Family: (i) declare, set aside,
make or pay any dividend or other distribution in respect of PHFG Common Stock,
except for regular quarterly cash dividends in an amount determined by the Board
of Directors of PHFG in the ordinary course of business and consistent with past
practice; (ii) amend its articles of incorporation or bylaws in a manner which
would adversely affect the terms of the PHFG Common Stock or the ability of PHFG
to consummate the transactions contemplated by the Agreement; (iii) make any
acquisition or take any other action that individually or in the aggregate could
materially adversely affect the ability of PHFG to consummate the transactions
contemplated by the Agreement in a reasonably timely manner; (iv) take any
action that would prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code, provided that this
covenant shall not limit the ability of PHFG to exercise its rights under the
Family Stock Option Agreement; (v) take any action that would result in any of
the representations and warranties of PHFG contained in the Agreement not to be
true and correct in any material respect at the Effective Time; or (vi) agree to
do any of the foregoing.
Pursuant to the Agreement, PHFG and Family also agreed to provide the
other party and its representatives with such financial data and other
information with respect to its and its subsidiaries' business and properties as
such party shall from time to time reasonably request. Each party will cause all
non-public financial and business information obtained by it from the other to
be treated confidentially. If the Merger is not consummated, each party will
return to the other all non-public financial statements, documents and other
materials previously furnished by such party.
BRANCH SALE
In the Agreement PHFG and Family agreed to cause BNH and Family Bank,
respectively, to take all necessary and appropriate actions to effect the sale
of the branch office maintained by Family Bank in Seabrook, New Hampshire, and
such other branch offices maintained by Family Bank in New Hampshire as may be
determined by PHFG and Family, to BNH immediately after the Effective Time, or
at such other time thereafter as may be determined by PHFG (the "Branch Sale").
Consummation of the Branch Sale is subject to the approval of the FDIC and the
New Hampshire Bank Commissioner, but is not a precondition to the closing of the
Merger and the closing of the Merger shall not be delayed in order to facilitate
a simultaneous closing of the Merger and the Branch Sale.
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NO SOLICITATION
Pursuant to the Agreement, Family agreed to not, and to cause its
subsidiaries not to, solicit or encourage inquiries or proposals with respect
to, furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition, lease or purchase of all or a
substantial portion of the assets of, or any equity interest in, Family or any
of its subsidiaries, other than as contemplated by the Agreement, provided,
however, that the Board of Directors of Family may furnish such information or
participate in such negotiations or discussions if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the failure to do the same would cause the members of such Board
of Directors to breach their fiduciary duties under applicable law. Family shall
promptly inform PHFG of any such request for information or of any such
negotiations or discussions, as well to instruct its and its subsidiaries'
directors, officers, representatives and agents to refrain from taking any
action prohibited by the above-described restrictions.
EFFECTIVE TIME OF THE MERGER; TERMINATION AND AMENDMENT
The Effective Time of the Merger shall be the date and time of the
filing of articles of merger with the Secretary of State of Maine pursuant to
the MBCA and the Secretary of State of the Commonwealth of Massachusetts
pursuant to the MBCL, unless a different date and time is specified as the
effective time in such articles of merger. The 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, approval of the Agreement by
the requisite votes of the shareholders of PHFG and Family and the satisfaction
or waiver of all other conditions to the Merger set forth in the Agreement.
A closing (the "Closing") shall take place immediately prior to the
Effective Time on the fifth business day, or under certain circumstances on the
first day which is at least two business days, following the satisfaction or
waiver (to the extent permitted) of all the conditions to consummation of the
Merger specified in the Agreement (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing), or
on such other date as the parties may mutually agree upon.
The Agreement may be terminated as follows: (i) at any time on or prior
to the Effective Time by the mutual consent in writing of the parties; (ii) at
any time on or prior to the Effective Time by either party in the event of a
material breach by the other party of any material covenant or agreement or
representation and warranty, in any case which would have a material adverse
effect, as defined, and which has not been cured within the time period
specified in the Agreement; (iii) at any time by any party in writing if any
application for any required federal or state regulatory approval has been
denied or is approved with any condition or requirement which would prevent
satisfaction of this condition to PHFG's obligation to consummate the Merger,
and the time period for appeals and requests for reconsideration has run; (iv)
at any time by any party in writing if the shareholders of PHFG or Family fail
to approve the Agreement at a meeting duly called for the purpose, unless the
failure of such occurrence is due to the failure of the party seeking to
terminate to perform or observe in any material respect its agreements set forth
in the Agreement; (v) by any party in writing in the event that the Merger is
not consummated by May 30, 1997, provided that this right to terminate shall not
be available
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to any party whose failure to perform an obligation under the Agreement resulted
in the failure of the Merger to be consummated by such date; and (vi) by Family
at any time during the five-day period following the Pricing Period (as defined
below) if the average of the daily closing prices of a share of PHFG Common
Stock, as reported on NASDAQ, during the Pricing Period (the "Average Closing
Price") is less than $15.00, subject, however, to the following three sentences.
If Family elects to exercise its termination right pursuant to clause (vi)
above, it shall give written notice to PHFG (which may be withdrawn by it at any
time during the aforementioned five-day period). During the five-day period
commencing with its receipt of such notice, PHFG shall have the option to
increase the consideration to be received by the holders of Family Common Stock
under the Agreement by adjusting the Exchange Ratio to equal a number
(calculated to the nearest one-thousandth) obtained by dividing (x) $18.90 by
(y) the Average Closing Price. If PHFG so elects within such five-day period, it
shall give prompt written notice to Family of such election and the revised
Exchange Ratio, whereupon no termination shall have occurred pursuant to clause
(vi) above and the Agreement shall remain in effect in accordance with its terms
(except as the Exchange Ratio shall have been so modified). Under the Agreement,
the term "Pricing Period" means the period of ten consecutive trading days
following the Determination Date and the term "Determination Date" means the
earlier of (x) the date on which the last regulatory approval required to
consummate the Merger is obtained and (y) December 1, 1996.
Family may elect not to terminate the Agreement even if the Average
Closing Price is below $15.00 per share. In determining whether to elect to
terminate the Agreement in these circumstances, the Family Board will take into
account, consistent with its fiduciary duties, all relevant facts and
circumstances existing at the time, including, without limitation, whether it
believes that PHFG is prepared to increase the Exchange Ratio, the market for
bank and thrift stocks in general, the relative value of the PHFG Common Stock
in the market and the advice of its financial advisors and legal counsel. By
approving the Agreement, the Family shareholders would be permitting the Family
Board to determine, in the exercise of its fiduciary duties, to proceed with the
Merger even if the Average Closing Price of the PHFG Common Stock during the
Pricing Period is less than $15.00 per share.
In the event of termination, the Agreement shall become null and void,
except that certain provisions thereof relating to expenses and confidentiality
shall survive any such termination and any such termination shall not relieve
any breaching party from liability for any willful breach of any covenant,
undertaking, representation or warranty giving rise to such termination.
To the extent permitted under applicable law, the Agreement may be
amended or supplemented at any time by written agreement of the parties whether
before or after the approval of the shareholders of PHFG or Family, provided
that after any such approval the Agreement may not be amended or supplemented in
a manner which modifies either the amount or form of the consideration to be
received by Family's shareholders or otherwise materially adversely affects
Family or PHFG shareholders without further approval by those shareholders who
are so affected.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of Family may be deemed to
have interests in the Merger in addition to their interests as shareholders
generally. The Board of Directors of Family was aware of these factors and
considered them, among other matters, in approving the Agreement and the
transactions contemplated thereby.
Election of Directors. Pursuant to the Agreement, PHFG agreed that it
will take such action as is necessary to appoint or elect, effective as of the
Effective Time, one non-employee director of Family as of the date hereof who is
designated by Family and who both meets the director qualification requirements
set forth in PHFG's Bylaws and is otherwise acceptable to PHFG as a director of
PHFG. Such person shall serve until the first annual meeting of shareholders of
PHFG following the Effective Time and until his successor is elected and
qualified. Subject to compliance with the director qualification requirements
set forth in PHFG's Bylaws, PHFG shall include such person on the list of
nominees for director presented by the Board of Directors of PHFG and for which
said Board shall solicit proxies at the first annual meeting of shareholders of
PHFG following the Effective Time, which person shall be nominated for a
three-year term. The member of the Family Board who will become a director of
PHFG pursuant to the Agreement has not been identified as of the date hereof.
Employment Agreements. Pursuant to the Agreement, PHFG agreed to honor,
or to cause PHMC and/or Family Bank to honor, the obligations of Family and
Family Bank under the Amended and Restated Employment Agreements among Family,
Family Bank and each of Messrs. Hindle, Fahey, Trombley, LaFlamme and Fenn (each
an "Employment Agreement" and together the "Employment Agreements"). The
Employment Agreements are substantially the same and provide for severance pay
benefits if the officer's employment is terminated under certain circumstances
following a "change in control," which would include the Merger. In the event
that an officer's employment is terminated within three years after a change in
control (i) by the employers for any reason other than death, disability or
cause or (ii) by the officer because various adverse actions had been taken with
respect to his employment, the officer generally would be entitled to receive a
lump-sum payment from Family Bank equal to approximately three times his average
annual compensation during the five most recently completed calendar years
preceding the change in control. Assuming the Merger were to be consummated as
of December 31, 1996, the aggregate amount of the lump sum payments due to
Messrs. Hindle, Fahey, Trombley, LaFlamme and Fenn under the Employment
Agreements would be approximately $550,000, $343,000, $348,000, $306,000 and
$278,000, respectively. In the event that any of the above-named officers desire
to become employees of PHFG or its subsidiaries following consummation of the
Merger, he will be required to waive his rights under his respective Employment
Agreement.
Supplemental Executive Retirement Plan. Pursuant to the Agreement, PHFG
agreed to honor, or to cause PHMC and/or Family Bank to honor, the obligations
of Family Bank under the supplemental executive retirement plan between Family
Bank and each of Messrs. Hindle, Fahey, Trombley, LaFlamme and Fenn (each a
"SERP" and together the "SERPs"). The SERPs are substantially the same and
generally provide that if the officer remains in the employ of Family Bank until
he reaches age 65, he will be entitled to receive a 15-year retirement benefit
equal to 65% of the officer's average annual compensation during the five
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years that such compensation was the highest, offset by the full value of all
other retirement benefits funded by Family Bank and 50% of the officer's social
security retirement benefit. This benefit is reduced if the officer has
completed fewer than 25 years of service with Family Bank at the time he reaches
age 65. If the officer's employment is terminated, voluntarily or involuntarily,
for any reason other than for "cause," as defined, the officer is entitled to
receive, at age 65, a 15-year "accrued benefit," determined by multiplying the
benefit he would have received if he had stayed in the employ of Family Bank
until age 65 by a fraction whose numerator is the actual number of months of the
officer's employment with Family Bank and the denominator of which is 300
months.
Each SERP generally provides that neither Family nor Family Bank shall
merge into another corporation unless (i) the officer and the resulting
corporation agree that the officer shall continue in the employ of the resulting
corporation and the resulting corporation agrees to assume and discharge the
obligations of Family Bank under the Agreement or (ii) in the absence of either
of the foregoing, Family Bank pays to the officer, in one lump sum, his "accrued
benefit," calculated as if the officer's employment had terminated as of the
date of the merger. Assuming the Merger was consummated as of December 31, 1996,
the aggregate amount of the accrued benefit payable in a lump sum under the
SERPs to Messrs. Hindle, Fahey, Trombley, LaFlamme and Fenn would be $____,
$_____, $_____, $_____ and $_____, respectively.
Split-Dollar Insurance Agreements. Pursuant to the Agreement, PHFG
agreed to honor, or to cause PHMC and/or Family Bank to honor, the split-dollar
insurance agreements between Family Bank and each of Messrs. Hindle, Fahey,
Trombley and LaFlamme (each a "Split-Dollar Agreement" and together the
"Split-Dollar Agreements"). Under the Split-Dollar Agreements, which are
substantially the same, Family Bank purchased a life insurance policy on the
officer's life which provides the officer with a death benefit equal to three
times his base salary. Family Bank pays all premiums due under the policy so
long as the officer remains an employee of Family Bank. At the officer's death
(or prior termination of the insurance policy) Family Bank will receive an
amount equal to the aggregate amount of its premium payments under the policy
and the officer or the officer's beneficiary will receive the excess. Pursuant
to the Split-Dollar Agreements, each officer's insurance policy has been
assigned to Family Bank as collateral for its premium payments thereunder. The
Split-Dollar Agreements provide that at any time after the date of termination
of the officer's employment with Family Bank the officer shall have the option
of obtaining the release of the collateral assignment of the insurance policy to
Family Bank. To obtain such release, the officer must pay to Family Bank an
amount in cash equal to the aggregate amount of premiums paid under the
insurance policy by Family Bank to date.
Indemnification and Insurance. Pursuant to the Agreement, PHFG agreed,
from and after the Effective Time through the sixth anniversary of the Effective
Time, to indemnify and hold harmless each present and former director, officer
and employee of Family or a Family subsidiary, in each case determined as of the
Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent to which such
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Indemnified Parties were entitled under the Articles of Organization and Bylaws
of Family or in similar organizational documents of a Family subsidiary, in each
case as in effect on the date of the Agreement, provided, however, that all
rights to indemnification in respect of any claim asserted or made within such
period shall continue until the final disposition of such claim. Without
limiting the foregoing obligation, PHFG also agreed that all limitations of
liability existing in favor of the Indemnified Parties in the Articles of
Organization and Bylaws of Family or in similar organizational documents of a
Family subsidiary, in each case as in effect on the date of the Agreement,
arising out of matters existing or occurring at or prior to the Effective Time
shall survive the Merger and shall continue in full force and effect for a
period of six years from the Effective Time, provided, however, that all such
rights in respect of any claim asserted or made within such period shall
continue until the final disposition of such claim.
Pursuant to the Agreement, PHFG also agreed to cause Family to maintain
Family's existing directors' and officers' liability insurance policy (or a
policy providing coverage on substantially the same terms and conditions) for
acts or omissions occurring prior to the Effective Time by persons who are
currently covered by such insurance policy maintained by Family for a period of
three years following the Effective Time.
Other than as set forth above, no director or executive officer of
Family has any direct or indirect material interest in the Merger, except
insofar as ownership of Family Common Stock and options to acquire Family Common
Stock might be deemed such an interest.
CERTAIN EMPLOYEE MATTERS
The Agreement provides that as soon as administratively practicable
after the Effective Time, PHFG shall take all reasonable action so that
employees of Family and its subsidiaries shall be entitled to participate in
PHFG's employee benefit plans of general applicability, and until such time
Family's employee benefit plans shall remain in effect, provided that no
employee of Family or a Family subsidiary who becomes an employee of PHFG and
subject to PHFG's medical insurance plans shall be excluded coverage thereunder
on the basis of a preexisting condition that was not also excluded under
Family's medical insurance plans, except to the extent such preexisting
condition was excluded from coverage under Family's medical insurance plans, in
which case the Agreement does not require coverage for such preexisting
condition. For purposes of determining eligibility to participate in and the
vesting of benefits under PHFG's employee benefit plans, PHFG shall recognize
years of service with Family and a Family subsidiary as such service is
recognized by Family and a Family subsidiary.
All employees of Family or a Family subsidiary as of the Effective Time
shall become employees of PHFG or a PHFG subsidiary as of the Effective Time,
provided that PHFG or a PHFG subsidiary shall have no obligation to continue the
employment of any such person and nothing contained in the Agreement shall give
any employee of Family or a Family subsidiary a right to continuing employment
with PHFG or a PHFG subsidiary after the Effective Time. To the extent that the
employment of any employee of Family or a Family subsidiary (other than any
employee who is party to an employment agreement) is involuntarily terminated
following the Effective Time, such employee will be entitled to receive
severance payments in accordance with, and to the extent provided in, PHFG's
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severance plan regarding the Merger. For purposes of determining benefits under
such severance plan, PHFG shall recognize years of service with Family or a
Family subsidiary prior to the Effective Time.
RESALE OF PHFG COMMON STOCK
The PHFG Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any Family
shareholder who may be deemed to be an affiliate of PHFG for purposes of Rule
144 promulgated under the Securities Act ("Rule 144") or an affiliate of Family
for purposes of Rule 145 promulgated under the Securities Act ("Rule 145") (each
an "Affiliate"). Affiliates will include persons (generally executive officers,
directors and 10% shareholders) who control, are controlled by or are under
common control with (i) PHFG or Family at the time of the Family Special Meeting
or (ii) PHFG at or after the Effective Time.
Rules 144 and 145 will restrict the sale of PHFG Common Stock received
in the Merger by Affiliates and certain of their family members and related
interests. Generally speaking, during the two years following the Effective
Time, those persons who are Affiliates of Family at the time of the Family
Special Meeting, provided they are not Affiliates of PHFG at or following the
Effective Time, may publicly resell any PHFG Common Stock received by them in
the Merger, subject to certain limitations as to, among other things, the amount
of PHFG Common Stock sold by them in any three-month period and as to the manner
of sale. After the two-year period, such Affiliates may resell their shares
without such restrictions so long as there is adequate current public
information with respect to PHFG as required by Rule 144. Persons who are
Affiliates of PHFG after the Effective Time may publicly resell the PHFG Common
Stock received by them in the Merger subject to similar limitations and subject
to certain filing requirements specified in Rule 144.
The ability of Affiliates to resell shares of PHFG Common Stock
received in the Merger under Rule 144 or 145 as summarized herein generally will
be subject to PHFG's having satisfied its Exchange Act reporting requirements
for specified periods prior to the time of sale. Affiliates also would be
permitted to resell PHFG Common Stock received in the Merger pursuant to an
effective registration statement under the Securities Act or another available
exemption from the Securities Act registration requirements. This
Prospectus/Joint Proxy Statement does not cover any resales of PHFG Common Stock
received by persons who may be deemed to be Affiliates of PHFG or Family in the
Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion generally describes the material United States
federal income tax consequences to holders of Family Common Stock as a result of
the Merger. The discussion is intended as a general summary of the material
United Stated federal income tax consequences of the Merger to such holders and
is not intended as a substitute for professional tax advice that takes into
account the particular circumstances relevant to a specific holder. In addition,
holders should note that the following discussion does not address state or
local tax considerations or taxation under the laws of jurisdictions other than
those of the United States.
The summary is based on the Code, administrative pronouncements,
judicial decisions and existing and proposed U.S. Treasury regulations, changes
to any of which subsequent to the
55
<PAGE> 63
date hereof may affect the tax consequences described herein. The summary
discusses only shares that are held as capital assets within the meaning of
Section 1221 of the Code. It does not discuss all of the tax consequences that
may be relevant to a holder of stock or stock options in light of such holder's
particular circumstances, or to holders subject to special rules, such as
certain financial institutions, insurance companies, tax-exempt investors and
dealers in securities; nor does it discuss the tax consequences to a holder
that, for United States federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust. Holders should consult their own professional tax advisors with regard to
the application of the United States federal income tax laws to their particular
situations.
Family has received an opinion from Foley, Hoag & Eliot LLP, special
counsel to Family, as set forth below. The opinion of Foley, Hoag & Eliot LLP is
not binding upon the Internal Revenue Service, and there can be no assurance
that the Internal Revenue Service will not contest the conclusions expressed in
the opinion. The opinion states that Foley, Hoag & Eliot LLP are of opinion, as
of the date hereof and under existing law, for United States federal income tax
purposes, as follows:
1. Except to the extent of cash received in lieu of fractional shares,
as described below, no gain or loss will be recognized by the stockholders of
Family upon the receipt in the Merger of shares of PHFG Common Stock in exchange
for their shares of Family Common Stock.
2. Cash received in lieu of a fractional share interest in PHFG Common
Stock will be treated as if the fractional share interest had been distributed
in exchange for shares of PHFG Common Stock and then the fractional share had
been redeemed by PHFG. The cash will be treated as a distribution in full
payment in exchange for the fractional share interest, provided the redemption
is not essentially equivalent to a dividend, and will accordingly result in the
recognition of gain, if any, measured by the difference between the portion of
the basis of the shares of Family Common Stock allocable to such fractional
share and the cash received in full payment therefor. If such shares of Family
Common Stock are capital assets in the hands of the Family shareholder, then
such gain will be capital gain.
3. The aggregate basis of the PHFG Common Stock received by a Family
shareholder in the Merger will be the same as the aggregate basis of the Family
Common Stock surrendered in exchange therefor.
4. The holding period for each share of PHFG Common Stock received by a
Family shareholder in exchange for Family Common Stock will include the period
for which such shareholder held such Family Common Stock, so long as the
shareholder's Family Common Stock is held as a capital asset at the Effective
Time.
5. A Family shareholder who validly exercises dissenters' rights as to
all such holder's shares of Family Common Stock and who is not deemed to be an
owner of any shares of Family Common Stock held by others will recognize gain or
loss measured by the difference between the basis of such shareholder's
dissenting shares and the cash received in exchange therefor. Such gain or loss
will be capital gain or loss, provided that the holder's dissenting shares are
held as a capital asset at the Effective Time.
56
<PAGE> 64
These opinions are based upon certain customary representations made by
Family, PHFG and certain shareholders of Family and upon certain factual
assumptions. If any of these representations or assumptions is not correct, then
each holder of Family Common Stock may be required to recognize gain or loss
with respect to each share of Family Common Stock surrendered in the Merger,
equal to the difference between (i) such shareholder's basis in the share and
(ii) the fair market value of the PHFG Common Stock received in exchange for the
share plus the cash received in lieu of any fractional share interest. In such
event, the shareholder's aggregate basis in the shares of PHFG Common Stock
received in the exchange would equal the fair market value of such shares, and
the shareholder's holding period for such shares of PHFG Common Stock would not
include the period during which the shareholder had held the Family shares
exchanged therefor. In addition, Family would recognize taxable gain in an
amount equal to the difference between the fair market value of its assets and
its tax basis in such assets.
Each party's obligation to effect the Merger is conditioned on the
delivery of an opinion to Family from Foley, Hoag & Eliot LLP, dated as of the
Effective Time, with respect to the foregoing federal income tax consequences of
the Merger, as well as an opinion of Elias, Matz, Tiernan & Herrick L.L.P.,
special counsel to PHFG, dated as of the Effective Time, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368 of the
Code. Each of such opinions will be based upon certain customary representations
and assumptions set forth therein.
ACCOUNTING TREATMENT OF THE MERGER
It is expected that the Merger will be accounted for as a purchase
under generally accepted accounting principles. Under the purchase method of
accounting, the acquired assets and liabilities as of the effective date of the
acquisition are recorded at their respective fair market values and added to
those of PHFG. Financial statements of PHFG issued after consummation of the
transaction reflect such values. Financial statements of PHFG issued before
consummation of a transaction recorded under the purchase method are not
restated retroactively to reflect the historical financial position or results
of operations of the acquired assets and liabilities. The unaudited pro forma
financial information contained in this Prospectus/Joint Proxy Statement has
been prepared using the purchase method to account for the Merger. See "Selected
Pro Forma Consolidated Financial Data" and "Pro Forma Combined Consolidated
Financial Data."
EXPENSES OF THE MERGER
The Agreement provides that each party thereto shall each bear and pay
all costs and expenses incurred by it in connection with the transactions
contemplated by the Agreement, including fees and expenses of its own financial
consultants, accountants and counsel, except that expenses of printing the
Registration Statement and the registration fee to be paid to the SEC in
connection therewith shall be shared equally between PHFG and Family.
STOCK OPTION AGREEMENTS
As an inducement and a condition to PHFG's entering into the Agreement,
PHFG and Family also entered into the Family Stock Option Agreement, pursuant to
which Family, as issuer, granted PHFG, as grantee, the Family Option, upon the
occurrence of certain
57
<PAGE> 65
events (none of which has occurred as of the date hereof to the best of the
knowledge of PHFG and Family), to purchase up to 832,000 shares of Family Common
Stock, representing 19.9% of the outstanding shares of Family Common Stock, at a
price of $20.50 per share, subject to adjustment in certain circumstances and
termination within certain periods. As an inducement and a condition to Family's
entering into the Agreement, PHFG and Family also entered into the PHFG Stock
Option Agreement, pursuant to which PHFG, as issuer, granted Family, as grantee,
the PHFG Option, upon the occurrence of certain events (none of which has
occurred as of the date hereof to the best of the knowledge of PHFG and Family),
to purchase up to 1,500,000 shares of PHFG Common Stock, representing
approximately 6.0% of the outstanding shares of PHFG Common Stock, at a price of
$19.75 per share, subject to adjustment in certain circumstances and termination
within certain periods. With the exception of the number and percentage of
shares of common stock of the Issuer ("Issuer Common Stock") subject to an
Option ("Option Shares") and the per share price at which an Option may be
exercised, the terms of the Family Stock Option Agreement and the PHFG Stock
Option Agreement are substantially identical.
For purposes of the following summary of the material provisions of the
Stock Option Agreements, the term (i) "Issuer" means Family with respect to the
Family Stock Option Agreement and PHFG with respect to the PHFG Stock Option
Agreement, (ii) "Grantee" means PHFG with respect to the Family Stock Option
Agreement and Family with respect to the PHFG Stock Option Agreement and (iii)
"Option" means the Family Option or the PHFG Option, as applicable.
Provided that the holder of an Option (which is initially the Grantee
thereof) is not in material breach of the Agreement or the applicable Stock
Option Agreement and there is no applicable injunction or order in effect, the
holder of the Option may exercise the Option, in whole or in part, at any time
and from time to time following the occurrence of a Purchase Event (as defined),
provided that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (i) the Effective Time, (ii) termination of the
Agreement in accordance with its terms prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event (as defined), other than a termination of
the Agreement by Grantee as a result of the Issuer having breached a material
covenant or obligation in the Agreement (a "Default Termination"); (iii) 12
months after termination of the Agreement by Grantee pursuant to a Default
Termination and (iv) 12 months after termination of the Agreement (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event. The purchase of any shares of Issuer Common
Stock pursuant to a Stock Option Agreement is subject to compliance with
applicable law, including the receipt of necessary approvals under the BHCA and
the HOLA.
Each Stock Option Agreement defines a "Purchase Event" to mean any of
the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries
58
<PAGE> 66
representing in either case 15% or more of the consolidated assets of
Issuer and its subsidiaries, or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 15% or
more of the voting power of Issuer or any of its subsidiaries (any of
the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined in Section 13(d)(3) of the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock.
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.
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<PAGE> 67
As used in the Stock Option Agreements, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
Each Stock Option Agreement provides that, subject to limitations set
forth therein, the holder of the Option may demand that Issuer promptly prepare,
file and keep current a registration statement under the Securities Act covering
the Option Shares and use its reasonable efforts to cause such registration
statement to become effective and remain current in order to permit the
disposition of the Option Shares by such holder.
Each Stock Option Agreement provides for adjustment in the number of
Option Shares to reflect any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, exchange of shares or similar
transaction. Each Stock Option Agreement also provides that upon the occurrence
of certain events set forth therein the Option must be converted into, or
exchanged for, an option, at the election of the holder of the Option, covering
the stock of another corporation or Issuer (the "Substitute Option"). The number
of shares subject to the Substitute Option and the exercise price per share will
be determined in accordance with a formula set forth in each Stock Option
Agreement.
At the request of a holder of an Option at any time beginning on the
first occurrence of certain events, including, among others, the acquisition by
a third party of beneficial ownership of 50% or more of the outstanding Issuer
Common Stock, and ending 12 months thereafter, Issuer will repurchase from the
holder of the Option (i) the Option and (ii) all shares of Issuer Common Stock
purchased by the holder of the Option pursuant to the applicable Stock Option
Agreement with respect to which such holder then has beneficial ownership. The
manner for determining the repurchase price of the Option and such shares of
Issuer Common Stock is set forth in each Stock Option Agreement.
The Stock Option Agreements are intended to increase the likelihood
that the Merger will be consummated in accordance with the terms of the
Agreement and may have the effect of discouraging competing offers to the
Merger.
Copies of the Family Stock Option Agreement and the PHFG Stock Option
Agreement are included as Annexes II and III to this Prospectus/Joint Proxy
Statement, respectively, and reference is made thereto for the complete terms
thereof.
STOCKHOLDER AGREEMENT
In conjunction with the Agreement, PHFG also entered into a Stockholder
Agreement, dated as of May 30, 1996, with each of the directors of Family and
senior executive officers of Family and Family Bank. Pursuant to the Stockholder
Agreement, a copy of which is included as Annex IV hereto, each of such persons,
solely in his or her capacity as a shareholder of Family, agreed, among other
things, not to sell, pledge, transfer or otherwise dispose of his or her shares
of Family Common Stock (which amount to ____% of the shares of such stock
outstanding as of the Record Date) prior to the meeting of shareholders of
Family at which the Agreement is considered and to vote such shares of Family
Common Stock in favor of the Agreement. See "Certain Beneficial Owners of Family
Common Stock."
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<PAGE> 68
DISSENTERS' RIGHTS
Shareholders of record of Family as of the Record Date have the
statutory right to dissent from the Merger and, if the Merger is consummated, to
receive compensation equal to the fair value of their shares as determined in an
appraisal proceeding brought in accordance with Sections 85 through 98
(inclusive) of Chapter 156B of the MBCL. The text of Sections 85 through 98 is
set forth in full in Annex VII attached hereto, which all Family shareholders
are urged to read in its entirety.
A shareholder electing to exercise his or her statutory appraisal
rights must: (i) deliver to Family before the shareholder vote on the Agreement
a written objection to the Merger stating that he or she intends to demand
payment for his or her shares through the exercise of his or her statutory
appraisal rights; (ii) not vote in favor of approval of the Agreement; and (iii)
in the event that the Merger is approved by Family's shareholders and is
consummated, demand in writing payment for his or her shares from PHMC, as
Family's successor, within 20 days after the date of the notice that the Merger
has become effective is mailed to the shareholder (a "Dissenting Shareholder").
Failure to vote against the Agreement will not constitute a waiver of appraisal
rights. Neither a vote against the proposed Merger nor a proxy directing such
vote will, by itself, satisfy the requirement that a written objection to the
Merger be delivered to Family. Written demands for appraisal must be delivered
to Family before the vote at the Family Special Meeting, at Family Bancorp, 153
Merrimack Street, Haverhill, Massachusetts 01830, Attention: George E. Fahey.
Within ten days after the Effective Time, PHMC, as Family's successor, will give
notice to each shareholder who has complied with conditions (i) and (ii) above
that the Merger was effective as of the Effective Time. Shareholders who fail to
comply with the appraisal procedures set forth in Annex VII will receive shares
of PHFG Common Stock in exchange for each share of Family Common Stock held by
such shareholders in accordance with the terms of the Agreement.
PHMC will be required to make payment of the fair value of the shares
owned by each Dissenting Shareholder within 30 days after the expiration of the
20-day period during which a demand for payment for shares may be made. If PHMC
and any such Dissenting Shareholder fail during the 30-day period to agree as to
the value of such shares of Family Common Stock , PHMC or any Dissenting
Shareholder may, within four months after the expiration of the 30-day period,
file a bill in equity in the Essex County Superior Court of Massachusetts for
determination of the fair value of the shares held by all Dissenting
Shareholders who have not reached agreement with PHMC as to the value of their
shares of Family Common Stock. Dissenting Shareholders seeking to exercise
appraisal rights should not assume that PHMC will file a petition with respect
to the fair appraisal of the value of their shares or that PHMC will initiate
any negotiations with respect to the fair value of such shares. PHMC does not
currently plan to file such a petition. Accordingly, Dissenting Shareholders
should regard it as their obligation to initiate all necessary actions with
respect to the perfection of their appraisal rights within the time periods
prescribed in Sections 85 through 98 of Chapter 156B of the MBCL. If no
Dissenting Shareholder files a bill in equity in the Essex County Superior court
within four months after the expiration of the 30-day period, the rights of all
Dissenting Shareholders to appraisal will cease.
At a trial, the Essex County Superior Court will appraise the shares
and determine their fair value as of the day preceding the date of the meeting
at which the Merger was
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<PAGE> 69
approved, exclusive of any element of value arising from the Merger, which may
be greater or less than the consideration offered to the shareholders of Family
under the Agreement. The court will direct payment by Family of the fair value
of the shares held by the Dissenting Shareholders, together with interest, if
any. The costs of the proceeding would be determined by the court and taxed upon
the parties, including any Dissenting Shareholders, as the court may deem
equitable.
Under Massachusetts statutory law, procedures relating to dissenters'
rights are stated to be the exclusive remedy available to a shareholder
objecting to the Merger, except upon the grounds that the Merger will be or is
illegal or fraudulent as to such shareholder. Under Massachusetts case law,
however, dissenting shareholders may not be limited to the statutory remedy of
judicial appraisal where violations of fiduciary duty are found.
The above summary of Sections 85 through 98 of Chapter 156B of the MBCL
does not purport to be complete and is qualified in its entirety by reference to
such provisions in Annex VII hereto, which should be reviewed carefully by any
holder of Family Common Stock who wishes to exercises statutory appraisal rights
with respect thereto or who wishes to preserve the right to do so. Failure to
comply with the procedures set forth in Sections 85 through 98 of Chapter 156B
of the MBCL may result in the loss of appraisal rights.
Holders of PHFG Common Stock do not have rights under the MBCA or
otherwise to dissent from the Merger and obtain the fair value of their shares
of PHFG Common Stock.
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed consolidated
balance sheet presents the combined balance sheets of PHFG and Family, assuming
the Merger was consummated as of March 31, 1996, and the following unaudited pro
forma combined condensed consolidated statements of operations present the
combined consolidated statements of operations of PHFG and Family assuming the
Merger was consummated as of the beginning of the indicated periods. The Merger
will be accounted for under the purchase method of accounting. For a description
of the purchase method of accounting, see "The Merger - Accounting Treatment of
the Merger." Certain insignificant reclassifications have been reflected in the
pro forma information to conform statement presentations.
The effect of reorganization and restructuring charges in connection
with the Merger have been reflected in the pro forma combined condensed
consolidated balance sheet; however, because the charges are nonrecurring, they
have not been reflected in the pro forma combined condensed consolidated
statements of operations. The pro forma financial data does not give effect to
anticipated cost savings in connection with the Merger.
The following unaudited pro forma combined condensed consolidated
balance sheet of PHFG and Family also presents the effects of PHFG's plan to
repurchase approximately 2.6 million shares of PHFG Common Stock in connection
with the acquisition of Family (the "Repurchase Program"), assuming the
Repurchase Program was consummated as of March 31, 1996, and the following
unaudited pro forma combined consolidated statements
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<PAGE> 70
of operations of PHFG and Family present the combined consolidated statements of
operations of PHFG and Family assuming the Repurchase Program was consummated as
of the beginning of the indicated periods. In each case it is assumed that
shares of PHFG Common Stock, which may be purchased pursuant to an issuer tender
offer, in the open market and/or in privately-negotiated transactions with
existing shareholders, are purchased at a weighted average effective cost of $21
per share. Although PHFG intends to repurchase all or substantially all of the
desired number of shares of PHFG Common Stock by the date of consummation of the
Merger, repurchases will be subject to market and economic conditions and, as a
result, there can be no assurance that PHFG will repurchase such shares or that
such shares will be repurchased at the assumed weighted average effective cost
set forth above. Consummation of the Repurchase Program is not a condition to
the obligations of the parties to the Agreement to consummate the Merger.
The pro forma information presented is not necessarily indicative of
the combined financial position that would have resulted had the Merger and the
Repurchase Program been consummated at March 31, 1996 or the combined results of
operations that would have resulted had the Merger and the Repurchase Program
been consummated at the beginning of the indicated periods, nor is the pro forma
information necessarily indicative of the future financial position or results
of operations of the combined entities.
The pro forma information should be read in conjunction with the
historical consolidated financial statements of PHFG and Family, including the
related notes, incorporated by reference herein, the supplemental consolidated
financial statements of PHFG, including the related notes, incorporated by
reference herein and the selected consolidated and other pro forma financial
information, including the notes thereto, appearing elsewhere in this
Prospectus/Joint Proxy Statement. See "Incorporation of Certain Documents by
Reference."
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<PAGE> 71
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
PHFG AND FAMILY
MARCH 31, 1996
(Unaudited)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
PHFG
and
Pro Forma Family
PHFG Family Adjustments Combined
-------- ---------- ------------ ----------
ASSETS
<S> <C> <C> <C> <C>
Cash and due from banks $164,587 $ 31,032 $ -- $195,619
Federal funds sold 49,000 5,135 -- 54,135
Securities available for sale
at market value 767,539 364,721 -- 1,132,260
Loans held for sale 88,185 8,009 96,194
Loans and leases (net of deferred fees) 3,022,443 450,297 2,780(1) 3,475,520
Less: Allowance for loan and lease losses 65,533 6,506 -- 72,039
-------- ------- ------ --------
Net loans and leases 2,956,910 443,791 2,780 3,403,461
--------- ------- ------ ---------
Premises and equipment 56,809 12,641 99(2) 69,549
Goodwill and other intangibles 40,100 5,865 35,921(3) 81,886
Mortgage servicing rights 23,187 83 4,217(4) 27,487
Other real estate and repossessed assets owned 12,954 4,057 -- 17,011
Deferred income taxes 33,045 2,676 1,844(5) 37,565
Interest and dividends receivable 31,019 5,596 -- 36,615
Other assets 34,577 3,781 -- 38,358
------ ----- ------ ------
Total assets $4,257,912 $887,387 $44,862 $5,190,161
========= ======= ====== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Regular savings $599,424 $175,689 $ -- $775,113
Money market access accounts 510,216 60,912 -- 571,128
Certificates of deposit 1,463,867 340,876 (1,913)(6) 1,802,830
NOW accounts 357,891 82,437 -- 440,328
Demand deposits 416,029 76,732 -- 492,761
------- ------ ------- -------
3,347,427 736,646 (1,913) 4,082,160
--------- ------- ------- ---------
Federal funds purchased 20,337 -- -- 20,337
Securities sold under repurchase agreements 164,674 2,615 -- 167,289
Borrowings from the Federal Home
Loan Bank of Boston 291,444 65,311 2,079(7) 358,834
Other borrowings 21,265 -- -- 21,265
Deferred income taxes 10,566 261 2,908(8) 13,807
Other liabilities 40,044 13,711 4,960(9) 58,715
------- ------ ------- ---------
Total liabilities 3,895,757 818,544 8,106 4,722,407
--------- ------- ------- ---------
Shareholders' equity:
Preferred Stock -- -- -- --
Common Stock:
PHFG 256 (54)(10) 310
Family 562 (562)(10) --
Paid in capital 224,268 30,040 75,505(10) 329,813
Retained earnings 143,379 48,857 (48,857)(10) 143,379
Net unrealized gain (loss) on
securities available for sale 807 (679) 679(10) 807
Treasury stock at cost (6,555) (9,883) 9,883(10) (6,555)
Unearned compensation - ESOP -- (54) 54(10) --
------- -------- -------- --------
Total shareholders' equity 362,155 68,843 36,756 467,754
------- ------- ------ -------
Total liabilities and shareholders'
equity $4,257,912 $887,387 $44,862 $5,190,161
========= ======= ====== =========
</TABLE>
<TABLE>
<CAPTION>
PHFG
and
Repurchase Family
Program Combined
----------- ----------
ASSETS
<S> <C> <C>
Cash and due from banks $ -- $195,619
Federal funds sold -- 54,135
Securities available for sale
at market value (54,600) 1,077,660
Loans held for sale -- 96,194
Loans and leases (net of deferred fees) -- 3,475,520
Less: Allowance for loan and lease losses -- 72,039
------- --------
Net loans and leases -- 3,403,481
------- ---------
Premises and equipment -- 69,549
Goodwill and other intangibles -- 81,886
Mortgage servicing rights -- 27,487
Other real estate and repossessed assets owned -- 17,011
Deferred income taxes -- 37,565
Interest and dividends receivable -- 36,615
Other assets -- 38,358
------- ------
Total assets $(54,600) $5,135,561
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Regular savings $ -- $775,113
Money market access accounts -- 571,128
Certificates of deposit -- 1,802,830
NOW accounts -- 440,328
Demand deposits -- 492,761
------- -------
-- 4,082,160
------- ---------
Federal funds purchased -- 20,337
Securities sold under repurchase agreements -- 167,289
Borrowings from the Federal Home
Loan Bank of Boston -- 358,834
Other borrowings -- 21,265
Deferred income taxes -- 13,807
Other liabilities -- 58,715
------- ------
Total liabilities -- 4,722,407
------- ---------
Shareholders' equity:
Preferred Stock -- --
Common Stock:
PHFG -- 310
Family -- --
Paid in capital -- 329,813
Retained earnings -- 143,379
Net unrealized gain (loss) on
securities available for sale -- 807
Treasury stock at cost (54,600) (61,155)
Unearned compensation - ESOP -- --
------- -------
Total shareholders' equity (54,600) 413,154
------- -------
Total liabilities and shareholders'
equity $(54,600) $5,135,561
======= =========
</TABLE>
64
<PAGE> 72
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND FAMILY
THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
PHFG
Pro Forma and Family
PHFG Family Adjustments Combined
------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases $67,930 $ 9,987 $ (139)(11) $ 77,778
Interest on mortgage-backed investments 3,496 4,131 -- 7,627
Interest on other investments 8,904 1,406 -- 10,310
Dividends on equity securities 424 129 -- 553
------- ------- ------- -------
Total interest and dividend income 80,754 15,653 (139) 96,268
------ ------ ------- ------
Interest expense:
Interest on deposits 29,568 6,565 239(12) 36,372
Interest on borrowed funds 6,047 1,008 (260)(13) 6,795
----- ------ ------- -----
Total interest expense 35,615 7,573 (21) 43,167
------ ------ ------- ------
Net interest income 45,139 8,080 (118) 53,101
Provision for loan losses 450 250 -- 700
------- ------- ------- ------
Net interest income after
provision for loan losses 44,689 7,830 (118) 52,401
------ ------ ------ ------
Noninterest income:
Mortgage banking services 3,364 224 (151)(14) 3,437
Customer services 3,269 938 -- 4,207
Trust and investment advisory services 1,644 46 -- 1,690
Loan related services 442 25 -- 467
Net securities gains 504 202 -- 706
Other noninterest income 246 62 -- 308
------ ------ ------- -------
9,469 1,497 (151) 10,815
----- ------ ------- ------
Noninterest expenses:
Salaries and employee benefits 18,238 2,823 -- 21,061
Occupancy 3,297 466 1(15) 3,764
Data processing 2,798 250 -- 3,048
Equipment 2,008 487 -- 2,495
Advertising and marketing 993 300 -- 1,293
Deposit and other assessments 345 106 -- 451
Collection and carrying costs of
nonperforming assets 504 53 -- 557
Other noninterest expenses 6,399 1,395 598(16) 8,392
----- ------ ------ -------
34,582 5,880 599 41,061
------ ------ ------ -------
Income before income tax 19,576 3,447 (868) 22,155
Applicable income tax 6,970 1,335 (113)(17) 8,192
----- ------ ---- ------
Net income $12,606 $ 2,112 $(755) $ 13,963
====== ====== ==== ======
Net income per share $ 0.50 $ 0.50 $ -- $ 0.45
Average shares outstanding 25,128,427 4,261,651 1,305,132 30,695,210
</TABLE>
<TABLE>
<CAPTION>
PHFG
Repurchase and Family
Program Combined
----------- -----------
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases $ -- $ 77,778
Interest on mortgage-backed investments -- 7,627
Interest on other investments (853) 9,457
Dividends on equity securities -- 553
----------- -----------
Total interest and dividend income (853) 95,416
----------- -----------
Interest expense:
Interest on deposits -- 36,372
Interest on borrowed funds -- 6,795
----------- -----------
Total interest expense -- 43,167
----------- -----------
Net interest income (853) 52,248
Provision for loan losses -- 700
----------- -----------
Net interest income after
provision for loan losses (853) 51,548
----------- -----------
Noninterest income:
Mortgage banking services -- 3,437
Customer services -- 4,207
Trust and investment advisory services -- 1,690
Loan related services -- 467
Net securities gains -- 706
Other noninterest income -- 308
----------- -----------
-- 10,815
----------- -----------
Noninterest expenses:
Salaries and employee benefits -- 21,061
Occupancy -- 3,764
Data processing -- 3,048
Equipment -- 2,495
Advertising and marketing -- 1,293
Deposit and other assessments -- 451
Collection and carrying costs of
nonperforming assets -- 557
Other noninterest expenses -- 8,392
----------- -----------
-- 41,061
----------- -----------
Income before income tax (853) 21,302
Applicable income tax (290) 7,902
----------- -----------
Net income $ (563) $ 13,400
=========== ===========
Net income per share $ -- $ 0.48
Average shares outstanding (2,600,000) 28,095,210
</TABLE>
65
<PAGE> 73
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND FAMILY
YEAR ENDED DECEMBER 31, 1995
(Unaudited)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
PHFG
Pro Forma and Family
PHFG Family Adjustments Combined
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases $ 253,787 $ 40,207 $ (556)(11) $ 293,438
Interest on mortgage-backed investments 12,627 12,285 -- 24,912
Interest on other investments 37,521 6,667 -- 44,188
Dividends on equity securities 1,914 825 -- 2,739
-------- -------- ------- -----
Total interest and dividend income 305,849 59,984 (556) 365,277
------- ------- ---- -------
Interest expense:
Interest on deposits 108,209 24,860 957(12) 134,026
Interest on borrowed funds 26,686 2,872 (1,040)(13) 28,519
------- -------- ------ ------
Total interest expense 134,895 27,732 (83) 162,544
------- ------- --- -------
Net interest income 170,954 32,252 (473) 202,733
Provision for loan losses 4,230 1,150 -- 5,380
-------- -------- ----- -----
Net interest income after
provision for loan losses 166,724 31,102 (473) 197,353
------- ------- ---- -------
Noninterest income:
Mortgage banking services 10,849 1,025 (602)(14) 11,272
Customer services 11,908 3,465 -- 15,373
Trust and investment advisory services 5,850 200 -- 6,050
Loan related services 1,907 199 -- 2,106
Net securities gains 116 979 -- 1,095
Other noninterest income 787 313 -- 1,100
-------- -------- ------ -----
31,417 6,181 (602) 36,996
------- ------- ------ ------
Noninterest expenses:
Salaries and employee benefits 67,472 10,775 -- 78,247
Occupancy 10,574 1,951 3(15) 12,528
Data processing 8,924 1,052 -- 9,976
Equipment 6,844 1,909 -- 8,753
Advertising and marketing 4,642 749 -- 5,391
Deposit and other assessments 4,497 845 -- 5,342
Collection and carrying costs of
nonperforming assets 2,595 397 -- 2,992
Merger expenses 4,958 -- -- 4,958
Other noninterest expenses 19,774 6,024 2,395(16) 28,193
------- -------- ----- ------
130,280 23,702 2,398 156,380
------- ------- ----- -------
Income before income tax 67,861 13,581 (3,473) 77,969
Applicable income tax 23,375 5,582 (453)(17) 28,504
------- -------- ------ ------
Net income $ 44,486 $ 7,999 $ (3,020) $ 49,465
======= ======= ====== ======
Net income per share $ 1.80 $ 1.90 $ -- $ 1.64
Average shares outstanding 24,696,393 4,203,000 1,289,883 30,189,276
</TABLE>
<TABLE>
<CAPTION>
PHFG
Repurchase and Family
Program Combined
----------- -----------
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases $ -- $ 293,438
Interest on mortgage-backed investments -- 24,912
Interest on other investments (3,413) 40,776
Dividends on equity securities -- 2,739
------ -----
Total interest and dividend income (3,413) 361,865
------ -------
Interest expense:
Interest on deposits -- 134,026
Interest on borrowed funds -- 28,519
------- ------
Total interest expense -- 162,544
------- -------
Net interest income (3,413) 199,321
Provision for loan losses -- 5,380
------ -----
Net interest income after
provision for loan losses (3,413) 193,941
------ -------
Noninterest income:
Mortgage banking services -- 11,272
Customer services -- 15,373
Trust and investment advisory services -- 6,050
Loan related services -- 2,106
Net securities gains -- 1,095
Other noninterest income -- 1,100
------- -----
-- 36,996
------- ------
Noninterest expenses:
Salaries and employee benefits -- 78,247
Occupancy -- 12,528
Data processing -- 9,976
Equipment -- 8,753
Advertising and marketing -- 5,391
Deposit and other assessments -- 5,342
Collection and carrying costs of
nonperforming assets -- 2,992
Merger expenses -- 4,958
Other noninterest expenses -- 28,193
------- ------
-- 156,380
------- -------
Income before income tax (3,413) 74,556
Applicable income tax (1,160) 27,344
------- ------
Net income $ (2,253) $47,212
====== ======
Net income per share $ -- $ 1.71
Average shares outstanding (2,600,000) 27,589,276
</TABLE>
66
<PAGE> 74
Notes to Pro Forma Combined Condensed Consolidated Financial Statements
(1) Reflects adjustment of Family's loan portfolio to estimated fair value.
(2) Reflects adjustment of Family's premises and equipment to estimated fair
value.
(3) Reflects the excess of the purchase price of Family over the fair value of
the net assets acquired (goodwill) after reflecting the adjustments described in
Notes 1-2 and 4-9.
(4) Reflects the estimated fair value of Family's mortgage servicing portfolio.
(5) Reflects adjustment related to the exercise of the Family Options referred
to in Note 10 and the tax effect of certain related purchase accounting
adjustments.
(6) Reflects adjustment of Family's certificates of deposit to fair value.
(7) Reflects adjustment of Family's FHLB advances to fair value.
(8) Reflects tax effect of certain purchase accounting adjustments.
(9) Reflects $4.96 million of estimated one-time reorganization
and restructuring costs related to the Merger. Such costs include estimated
investment banking and other professional fees, severance costs associated with
expected consolidations following the Merger, stock issuance costs and
miscellaneous other costs. The effect of the one-time charges has been reflected
in the pro forma consolidated balance sheet data but not in the pro forma
operations data because it is nonrecurring.
(10) Reflects elimination of certain Family shareholder equity accounts and
adjustment of paid-in capital and common stock to reflect market value of the
PHFG Common Stock to be issued in the Merger. The purchase price is based on
exchanging 1.26 shares of PHFG Common Stock for (i) each outstanding share of
Family Common Stock and (ii) each share of Family Common Stock (x) issued upon
exercise of outstanding Family Options between March 31, 1996 and May 31, 1996
and (y) issuable upon exercise of outstanding Family Options which are
scheduled to expire in accordance with their terms on or prior to December 31,
1996, in each case at the per share closing price of the PHFG Common Stock
($19.75) on May 30, 1996, the last business day preceding public announcement
of the Agreement. Shares issuable upon the exercise of Family Options which are
not scheduled to expire in accordance with their terms on or prior to December
31, 1996 are not included in the number of outstanding shares of Family Common
Stock on the assumption that all such options will become equivalent options
to purchase PHFG Common Stock.
67
<PAGE> 75
The estimated total market value of the PHFG Common Stock to be issued
in connection with the Merger is calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
Number of shares of Family Common Stock outstanding on
March 31, 1996 4,087,048
Incremental shares of Family Common Stock issued upon exercise
of Family Options between March 31, 1996 and May 31, 1996
and upon exercise of Family Options which expire on or before
December 31, 1996 156,431
---------
Total assumed number of outstanding shares of Family Common
Stock 4,243,479
Exchange Ratio 1.26
Total number of shares of PHFG Common Stock to be issued in
the Merger 5,346,784
Market price per share of PHFG Common Stock on May 30,
1996 $19.75
-----
Total market value of PHFG Common Stock to be issued in the
Merger (in thousands) $105,599
=======
</TABLE>
(11) Reflects accretion of the premium on loans and leases over a five-year
period.
(12) Reflects amortization of the premium on deposits over a two-year period.
(13) Reflects accretion of the discount on borrowings over a two-year period.
(14) Reflects amortization of mortgage servicing rights resulting from the
acquisition of Family over a seven-year period.
(15) Reflects amortization of adjustment to fair value of premises and
equipment over a 31.5 year period.
(16) Reflects amortization of goodwill (amortized over a 15-year period).
(17) Reflects the tax effect of the adjustments described in Notes 11-15.
68
<PAGE> 76
CERTAIN REGULATORY CONSIDERATIONS
Financial institutions and their holding companies are extensively
regulated under federal and state laws. As a result, the business, financial
condition and prospects of PHFG and Family and their respective banking
subsidiaries can be materially affected not only by management decisions and
general economic conditions, but also by applicable statutes and regulations and
other regulatory pronouncements and policies promulgated by regulatory agencies
with jurisdiction over them. The effect of such statutes, regulations and other
pronouncements and policies can be significant, cannot be predicted with a high
degree of certainty and can change over time. Moreover, such statutes,
regulations and other pronouncements and policies are intended to protect
depositors and the BIF and the Savings Association Insurance Fund ("SAIF")
administered by the FDIC, and not stockholders or holders of indebtedness which
is not insured by the FDIC.
PHFG is a registered bank holding company under the BHCA subject to
regulation and supervision by the FRB. As state-chartered banking institutions,
PHB and BNH are subject to regulation and supervision by the Bureau of Banking
of the State of Maine and the New Hampshire Bank Commissioner, respectively, as
well as by the FDIC. The BIF, and to a lesser extent the SAIF as a result of
acquisitions of savings institutions or branches thereof, insure the deposits of
PHFG's banking subsidiaries up to the maximum extent permitted by federal law.
Family is a registered savings and loan holding company under the HOLA
subject to regulation and supervision by the OTS. Family Bank is subject to
regulation and supervision by the OTS, as its chartering authority, and by the
FDIC. The BIF, and to a lesser extent the SAIF as a result of Family's
acquisition of a savings institution branch, insure Family Bank's deposits up to
the maximum extent permitted by federal law.
Subject to application to and approval of the OTS (see "The Merger -
Regulatory Approvals"), as a result of the Merger PHFG will become a savings and
loan holding company under the HOLA subject to certain regulation and
supervision by the OTS (which will continue to be the primary federal banking
regulator of Family Bank). Such regulation and supervision of PHFG will be in
addition to that of the FRB as a result of PHFG's status as a bank holding
company under the BHCA. Set forth below is a brief description of the regulation
of savings and loan holding companies which also are bank holding companies and
which will be applicable to PHFG upon consummation of the Merger.
Registration and Reporting Requirements. Savings and loan holding
companies are required to register as such with the OTS within 90 days after
becoming a savings and loan holding company. Each savings and loan holding
company, including subsidiary savings and loan holding companies, is required to
file an annual report with the OTS and quarterly current reports detailing
changes from the annual filing. Currently, no fees are required in connection
with the filing of these reports.
Activities Limitations. In general, a savings and loan holding company
which holds only one savings institution subsidiary which meets a so-called
"qualified thrift lender test" set forth in the HOLA and regulations of the OTS
thereunder is not subject to activities limitations, whereas a savings and loan
holding company which holds more than one savings institution subsidiaries, or
only one savings institution subsidiary which does not meet the
69
<PAGE> 77
"qualified thrift lender" test, is subject to activities limitations which are
comparable to, but not identical with, the activities limitations which are
applicable to all bank holding companies under the BHCA. Pursuant to OTS
regulations, the activities limitations which are applicable to a savings and
loan holding company are not applicable to a company which is treated as a bank
holding company under the BHCA or any of its subsidiaries.
Restrictions on Acquisitions. Except under limited circumstances,
savings and loan holding companies are prohibited from acquiring, without prior
approval of the Director of the OTS, (i) control of any other savings
institution or savings and loan holding company or substantially all the assets
thereof or (ii) more than 5% of the voting shares of a savings institution or
holding company thereof which is not a subsidiary. Except with the prior
approval of the Director of the OTS, no director or officer of a savings and
loan holding company or person owning or controlling by proxy or otherwise more
than 25% of such company's stock, may acquire control of any savings
institution, other than a subsidiary savings institution, or of any other
savings and loan holding company.
The Director of the OTS may approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
institutions in more than one state only if (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home or
branch office located in the state of the institution to be acquired as of March
5, 1987, (ii) the acquiror is authorized to acquire control of the savings
institution pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by state-chartered savings institutions located in the state where the
acquiring entity is located (or by a holding company that controls such
state-chartered savings institutions).
Transactions with Affiliates. Transactions between a savings
institution and its affiliates (including its parent holding company) are
subject to substantially the same restrictions as are applicable to transactions
between a bank and its affiliates. In this regard, a savings institution
subsidiary is subject to the restrictions set forth in Sections 23A and 23B of
the Federal Reserve Act and the additional restrictions set forth in Section
11(a) of the HOLA, as implemented in regulations of the OTS thereunder.
Examinations. Each savings and loan holding company and each subsidiary
thereof is subject to such examinations as the OTS may prescribe. The cost of
each examination (other than examinations of savings institutions) shall be
assessed against and paid by such holding company. The OTS shall, to the extent
feasible, use for these purposes reports filed with or examinations made by
other federal agencies or the appropriate state supervisory authority.
The above discussion of the regulation of financial institutions and
their holding companies is not intended to be a complete description of the
regulation and supervision of PHFG and Family and their respective banking
subsidiaries and is qualified in its entirety by reference to applicable
statutes, regulations and other regulatory pronouncements. Additional
information relating to the regulation of PHFG and Family is included in the
documents incorporated by reference herein. See "Incorporation of Certain
Documents by Reference" and "Available Information."
70
<PAGE> 78
DESCRIPTION OF PHFG CAPITAL STOCK
PHFG is authorized to issue up to 100,000,000 shares of PHFG Common
Stock and up to 5,000,000 shares of preferred stock, par value $.01 per share
("PHFG Preferred Stock"). The capital stock of PHFG does not represent or
constitute a deposit account and is not insured by the FDIC.
The following description of the PHFG capital stock does not purport to
be complete and is qualified in all respects by reference to the Articles of
Incorporation ("Articles") and Bylaws of PHFG, the PHFG Rights Agreement (as
defined below) and the MBCA.
PHFG COMMON STOCK
General. Each share of PHFG Common Stock has the same relative rights
and is identical in all respects with each other share of PHFG Common Stock. The
PHFG Common Stock is not subject to call for redemption and, upon receipt by
PHFG of the shares of Family Common Stock surrendered in exchange for PHFG
Common Stock, each share of PHFG Common Stock offered hereby will be fully paid
and non-assessable.
Voting Rights. Except as provided in any resolution or resolutions
adopted by the Board of Directors establishing any series of PHFG Preferred
Stock, the holders of PHFG Common Stock possess exclusive voting rights in PHFG.
Each holder of PHFG Common Stock is entitled to one vote for each share held on
all matters voted upon by shareholders, and shareholders are not permitted to
cumulate votes in elections of directors.
Dividends. Subject to the rights of the holders of any series of PHFG
Preferred Stock, the holders of the PHFG Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors of PHFG
out of funds legally available therefor.
Preemptive Rights. Holders of PHFG Common Stock do not have any
preemptive rights with respect to any shares which may be issued by PHFG in the
future; thus, PHFG may sell shares of PHFG Common Stock without first offering
them to the then holders of the PHFG Common Stock.
Liquidation. In the event of any liquidation, dissolution or winding up
of PHFG, the holders of the PHFG Common Stock would be entitled to receive,
after payment of all debts and liabilities of PHFG, all assets of PHFG available
for distribution, subject to the rights of the holders of any PHFG Preferred
Stock which may be issued with a priority in liquidation or dissolution over the
holders of the PHFG Common Stock.
PHFG PREFERRED STOCK
The Board of Directors of PHFG is authorized to issue PHFG Preferred
Stock and to fix and state voting powers, designations, preferences or other
special rights of such shares and the qualifications, limitations and
restrictions thereof. The PHFG Preferred Stock may be issued in distinctly
designated series, may be convertible into PHFG Common Stock and may rank prior
to the PHFG Common Stock as to dividend rights, liquidation preferences, or
both.
71
<PAGE> 79
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 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
72
<PAGE> 80
of its transferees, will thereafter have the right to receive, upon exercise and
payment of the Purchase Price, PHFG Common Stock (or, in certain circumstances,
cash, property or other securities of PHFG) having a value equal to two times
the exercise price of the PHFG Right. In addition, unless the PHFG Rights are
earlier redeemed, in the event that at any time following the Stock Acquisition
Date, (i) PHFG is involved in a merger or other business combination in which
PHFG is not the surviving corporation or in which the PHFG Common Stock is
changed into or exchanged for other securities of any other person or cash or
any other property, or (ii) 50% or more of PHFG's assets or earning power of
PHFG and its subsidiaries taken as a whole is sold or transferred, the PHFG
Rights Agreement provides that proper provision shall be made so that each
holder of record of a PHFG Right (other than PHFG Rights which previously have
been voided as set forth above) will from and after such date have the right to
receive, upon exercise and payment of the Purchase Price, common stock of the
acquiring company having a value equal to two times the exercise price of the
PHFG Right. The events set forth in this paragraph are referred to in the PHFG
Rights Agreement as the "Triggering Events."
At any time after a person becomes an Acquiring Person, PHFG may
exchange all or part of the PHFG Rights (other than PHFG Rights which previously
have been voided as set forth above) for shares of PHFG Common Stock at an
exchange ratio of one share per PHFG Right, as such may be appropriately
adjusted to reflect any stock split or similar transaction.
At any time until 10 days following the Stock Acquisition Date, PHFG
may redeem the PHFG Rights in whole, but not in part, at a price of $.01 per
PHFG Right (the "Redemption Price"). Immediately upon the action of the PHFG
Board ordering redemption of the PHFG Rights, the PHFG Rights will terminate and
the only right of the holders of PHFG Rights will be to receive the Redemption
Price.
The PHFG Rights may have certain anti-takeover effects. The PHFG Rights
would cause substantial dilution to a person or group that acquires 20% or more
of the outstanding shares of PHFG Common Stock if a Triggering Event thereafter
occurs without the PHFG Rights having been redeemed. However, the PHFG Rights
should not interfere with any merger or other business combination approved by
the PHFG Board because the PHFG Rights are redeemable under certain
circumstances.
The complete terms of the PHFG Rights are set forth in the PHFG Rights
Agreement, which is incorporated by reference as an exhibit to the Registration
Statement.
See "Available Information."
OTHER PROVISIONS
The Articles and Bylaws of PHFG contain a number of provisions which
may be deemed to have the effect of discouraging or delaying attempts to gain
control of PHFG, including provisions in the Articles: (i) classifying the PHFG
Board into three classes to serve for three years with one class being elected
annually; (ii) authorizing the PHFG Board to fix the size of the PHFG Board
between three and 15 directors; (iii) authorizing directors to fill vacancies in
the PHFG Board; (iv) increasing the vote for removal of directors by
shareholders; (v) increasing the amount of stock required to be held by
shareholders seeking to call a special meeting of shareholders; and (vi)
requiring an increased vote of
73
<PAGE> 81
shareholders to approve certain business combinations unless certain price and
procedural requirements are met or the PHFG Board approves the business
combination in the manner provided therein. The provisions in the Bylaws of PHFG
include specific conditions under which (i) persons may be nominated for
election as directors of PHFG at an annual meeting of shareholders; and (ii)
business may be transacted at an annual meeting of shareholders.
In addition to the foregoing, in certain instances the issuance of
authorized but unissued shares of PHFG Common Stock or PHFG Preferred Stock may
have an anti-takeover effect by making it more difficult and/or expensive to
acquire PHFG. Sections 611-A and 910 of the MBCA also may have the same
anti-takeover effects. See "Comparison of the Rights of Shareholders - State
Anti-takeover Statutes."
TRANSFER AGENT
The transfer agent and registrar for the PHFG Common Stock is
ChaseMellon Shareholder Services, New York, New York.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
PHFG is a Maine corporation subject to the provisions of the MBCA and
Family is a Massachusetts corporation subject to the provisions of the MBCL.
Upon consummation of the Merger, shareholders of Family will become shareholders
of PHFG and their rights as shareholders of PHFG will be governed by the
Articles and Bylaws of PHFG and the MBCA.
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE
DIFFERENCES AFFECTING THE RIGHTS OF FAMILY'S SHAREHOLDERS, BUT RATHER SUMMARIZES
THE MORE SIGNIFICANT DIFFERENCES AFFECTING THE RIGHTS OF SUCH SHAREHOLDERS AND
CERTAIN IMPORTANT SIMILARITIES; THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE ARTICLES OF ORGANIZATION AND BYLAWS OF FAMILY, THE ARTICLES AND
BYLAWS OF PHFG AND APPLICABLE LAWS AND REGULATIONS.
AUTHORIZED CAPITAL STOCK
Family. Family's Articles of Organization authorize the issuance of up
to 20,000,000 shares of Family Common Stock, of which ______ shares were
outstanding as of the Record Date, and up to 10,000,000 shares of preferred
stock, $0.10 par value per share ("Family Preferred Stock"), of which no shares
are issued and outstanding. The Family Preferred Stock is issuable in series,
each series having such rights and preferences as the Family Board may fix and
determine by resolution.
PHFG. PHFG's Articles authorize the issuance of up to 100,000,000
shares of PHFG Common Stock, of which ________ 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 the PHFG Board may fix
and determine by resolution.
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<PAGE> 82
ISSUANCE OF CAPITAL STOCK
Family. Pursuant to authority contained in the MBCL, Family's Bylaws
provide that the Family Board shall have the authority to issue or reserve for
issue from time to time the capital stock of Family which may be authorized from
time to time to such persons or organizations, for such consideration and on
such terms as the Family Board may determine, including without limitation the
granting of options, warrants of conversion or other rights to subscribe to such
capital stock. Neither the MBCL nor Family's Articles of Organization and Bylaws
require shareholder approval of any such actions. However, the Bylaws of the
NASD generally require corporations, such as Family, with securities which are
quoted on the Nasdaq Stock Market's National Market to obtain shareholder
approval of certain issuances of common stock and most stock compensation plans
for directors, officers and key employees of the corporation. Shareholder
approval of stock-related compensation plans also may be sought in certain
instances in order to qualify such plans for favorable federal income tax
treatment under current laws and regulations.
Holders of the capital stock of Family are not entitled to pre-emptive
rights with respect to any shares of the capital stock of Family which may be
issued.
PHFG. Under the MBCA, PHFG may issue shares of PHFG capital stock and
rights or options for the purchase of shares of capital stock of PHFG on such
terms and for such consideration as may be determined by the Board of Directors
of PHFG. Neither the MBCA nor PHFG's Articles and Bylaws require shareholder
approval of any such actions, except that pursuant to the MBCA such rights or
options to purchase PHFG Common Stock may be issued to directors, officers or
employees of PHFG or its subsidiaries only if the issuance or plan pursuant to
which they are issued is approved by the holders of a majority of the
outstanding PHFG Common Stock. Moreover, PHFG also is subject to the same
requirements of the Bylaws of the NASD as Family, and also may elect to seek
shareholder approval of stock-related compensation plans in certain instances in
order to qualify such plans for favorable federal income tax treatment under
current laws and regulations.
Holders of capital stock of PHFG are not entitled to pre-emptive rights
with respect to any shares of the capital stock of PHFG which may be issued.
VOTING RIGHTS
Family. Each share of Family Common Stock is entitled to one vote per
share on all matters properly presented at meetings of shareholders of Family.
Holders of Family Common Stock are not permitted to cumulate votes in elections
of directors.
PHFG. Each share of PHFG Common Stock is entitled to one vote per share
on all matters properly presented at meetings of shareholders of PHFG. Holders
of PHFG Common Stock are not permitted to cumulate votes in elections of
directors.
For information about the effects of the Merger on the voting rights of
shareholders of Family and PHFG in connection with business combinations and
certain other circumstances, see "Mergers, Consolidations and Sales of Assets,"
"Business Combinations with Certain Persons" and "State Anti-takeover Statutes"
below.
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CLASSIFICATION AND SIZE OF BOARD OF DIRECTORS
Family. The Articles of Organization and Bylaws of Family provide that
the number of directors of Family shall not be less than three nor more than 25.
The Bylaws of Family provide that the Board of Directors of Family may be
increased by up to two additional directors in any fiscal year by the
shareholders at any meeting or by vote of a majority of the directors then in
office. Currently the number of directors of Family is five.
Pursuant to Family's Articles of Organization and Bylaws, the Family
Board is divided into three classes as nearly equal in number as possible and
approximately one-third of the directors are elected annually to serve
three-year terms.
PHFG. The Articles of PHFG provide that the PHFG Board may increase or
decrease the number of directors of PHFG by resolution, and that the
shareholders of PHFG may increase or decrease the number of directors by the
affirmative vote of the holders of at least 67% of the shares entitled to vote
generally in an election of directors, provided in each case that the minimum
number of directors shall be three and the maximum number of directors shall be
15 and further provided that no decrease in the number of directors shall have
the effect of shortening the term of any incumbent director. Currently the
number of directors of PHFG is 12, which will be increased to 13 upon
consummation of the Merger. See "The Merger - Interests of Certain Persons in
the Merger."
Pursuant to PHFG's Articles and Bylaws, the PHFG Board is divided into
three classes as nearly equal in number as possible and approximately one-third
of the directors are elected annually to serve three-year terms.
DIRECTOR VACANCIES AND REMOVAL OF DIRECTORS
Family. Any vacancy occurring in the Family Board as a result of
resignation, removal or death may be filled by vote of a majority of the
remaining directors, unless there is an "interested stockholder," in which case
such vacancy may only be filled by vote of a majority of the "continuing
directors" then in office. (The terms "interested stockholder" and "continuing
directors" have the meanings set forth in Family's Articles of Organization. See
"Business Combinations with Certain Persons" below.) A director elected to fill
such a vacancy shall be elected to serve for a term of office continuing until
the next election of directors by the shareholders. Any directorship to be
filled by reason of an increase in the authorized number of directors may be
filled by the Family Board for a term of office continuing until the next
election of directors by the shareholders.
Under Family's Bylaws, any director may be removed, either with or
without cause, by an affirmative vote of not less than (i) 80% of the total
votes eligible to be cast by shareholders at a duly constituted meeting of
shareholders called expressly for such purpose or (ii) 80% of the members of the
Family Board then in office, unless at the time of such removal there shall be
an "interested stockholder," in which case the affirmative vote of not less than
a majority of the "continuing directors" then in office shall instead be
required for removal by vote of the Family Board.
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PHFG. Vacancies occurring in the PHFG Board by reason of an increase in
the number of directors may be filled by the PHFG Board, and any directors so
chosen shall hold office until the next election of directors by the
shareholders of PHFG. Any other vacancy in the PHFG Board, whether by reason of
death, resignation, removal or otherwise, may be filled by the remaining
directors of PHFG, or by a sole remaining director, and any directors so chosen
shall hold office until the next election of the class for which such directors
shall have been chosen and until their successors are elected and qualified.
Pursuant to the Articles of PHFG, directors of PHFG may be removed,
with or without cause, by the holders of two thirds of the votes entitled to
vote for directors at a meeting of shareholders called expressly for such
purpose. Directors of PHFG also can be removed by PHFG for cause in the manner
specified in the MBCA.
DIRECTOR DUTIES
Family. Under the MBCL, in determining what they reasonably believe to
be in the best interests of the corporation, directors may consider the interest
of the corporation's employees, suppliers, creditors and customers, the economy
of the state, region and nation, community and societal considerations and the
long-term and short-term interests of the corporation and its shareholders. The
Articles of Organization of Family contain a provision which provides for
similar authority.
PHFG. Under the MBCA, directors and officers may, in considering the
best interests of the corporation and of its shareholders, consider the effects
of any action upon employees, suppliers and customers of the corporation,
communities in which offices or other establishments of the corporation are
located and all other pertinent factors.
DIRECTOR CONFLICT OF INTEREST TRANSACTIONS
Family. The Articles of Organization of Family provide that Family may
enter into contracts and otherwise transact business as vendor, purchaser or
otherwise with its directors, officers and shareholders and with corporations,
joint stock companies, trusts, firms and associations in which they are or may
be or become interested as directors, officers, shareholders, members, trustees,
beneficiaries or otherwise as freely as though such adverse interest did not
exist even though the vote, action or presence of such director, officer or
shareholder may be necessary to obligate Family upon such contract or
transaction. The Articles of Organization of Family further provide that no such
contract or transaction shall be avoided and no such director, officer or
shareholder shall be held liable to account to Family or to any creditor or
shareholder of Family for any profit or benefit realized by him through any such
contract or transaction by reason of such adverse interest or by reason of any
fiduciary relationship of such director, officer or shareholder to Family
arising out of such office or stock ownership, provided (in the case of
directors and officers but not in the case of any shareholder who is not a
director or officer of Family) that such contract or transaction was entered
into in good faith, and the nature of the interest of such director or officer,
though not necessarily the details or extent thereof, is known by or disclosed
to the directors.
PHFG. The MBCA generally provides that transactions involving a Maine
corporation and an interested director (or officer) of that corporation are not
void or
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voidable solely because of such director's (or officer's) interest if: (i) the
material facts are disclosed and noted in the minutes and a majority of
disinterested directors on the board of directors or a committee thereof
authorize, approve or ratify the transaction, (ii) the material facts are
disclosed and a majority of shares entitled to vote thereon authorize, approve
or ratify the transaction, inclusive of any shares owned by or voted under the
control of the benefited director, or (iii) the transaction was fair and
equitable to the corporation at the time it is authorized or approved and the
party asserting the fairness of the transaction establishes fairness.
EXCULPATION OF DIRECTORS
Family. Family's Articles of Organization provide that a director of
Family shall not be personally liable to Family or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to Family or its shareholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 61 or Section 62 of Chapter
156B of the MBCL (dealing with illegal distributions and certain loans,
respectively) or (iv) for any transaction from which the director derived an
improper personal benefit.
PHFG. The MBCA contains a provision which provides that a director of a
Maine corporation shall not be held personally liable for monetary damages for
failure to discharge any duty as a director unless the director is found not to
have acted honestly or in the reasonable belief that the action was in or not
opposed to the best interests of the corporation or its shareholders.
SPECIAL MEETINGS OF SHAREHOLDERS
Family. Special meetings of shareholders of Family may be called by the
President or by the affirmative vote of a majority of the Family Board,
provided, however, that if there is an "interested stockholder," any such call
also shall require the affirmative vote of a majority of the "continuing
directors" then in office. In addition, a special meeting of shareholders of
Family shall be called by the clerk of Family upon written application of one or
more shareholders who hold at least 10% of the capital stock entitled to vote
thereat.
PHFG. Special meetings of shareholders of PHFG may be called by the
Chairman, the President or a majority of the PHFG Board and shall be called by
the Chairman, the President or the Clerk upon the written request of the holders
of not less than 50% of the issued and outstanding capital stock of PHFG
entitled to vote on the matter for which the meeting is called, voting together
as a single class, provided, however, that special meetings of shareholders of
PHFG also may be called by the Superior Court of the State of Maine upon the
petition of the holders of not less than 10% of the shares entitled to vote at
the meeting.
SHAREHOLDER NOMINATIONS
Family. Family's Bylaws provide that nominations by shareholders for
election as a director must be made in writing and delivered or mailed to the
President of Family (i) not less than 60 days nor more than 90 days prior to the
date of the scheduled annual meeting,
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regardless of postponements, deferrals or adjournments of the meeting to a later
date, provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the scheduled annual meeting is given or made, notice
by the shareholder to be timely must be so delivered or received not later than
the close of business on the 10th day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or the day on
which such public disclosure was made. A shareholder's notice shall set forth
the information specified in Family's Bylaws.
PHFG. PHFG's Bylaws provide that nominations by shareholders for
election as a director must be made in writing and delivered or mailed to the
Clerk of PHFG not later than (i) 90 days prior to the anniversary date of the
immediately preceding annual meeting, and (ii) with respect to an election to be
held at a special meeting of shareholders for the election of directors, the
close of business on the tenth day following the date on which notice of such
meeting is first given to shareholders. A shareholder's notice shall set forth
the information specified in PHFG's Bylaws.
SHAREHOLDER PROPOSALS
Family. Family's Bylaws provide that a proposal by shareholders for
submission to a vote of shareholders at an annual meeting must be delivered to,
or mailed and received at, the principal executive offices of Family not less
than 60 days nor more than 90 days prior to the scheduled annual meeting,
regardless of any postponements, deferrals or adjournments of that meeting to a
later date, provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the scheduled annual meeting is given or made, notice
by the shareholder to be timely must be so delivered or received not later than
the close of business on the tenth day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or the day on
which public disclosure was made. A shareholder's notice shall set forth as to
each matter the shareholder proposes to bring before the annual meeting the
information specified in Family's Bylaws.
PHFG. PHFG's Bylaws provide that a proposal by shareholders for
submission to a vote of shareholders at an annual meeting must be made in
writing and delivered or mailed to the Clerk of PHFG not less than 90 days prior
to the anniversary date of the immediately preceding annual meeting. A
shareholder's notice shall set forth as to each matter the shareholder proposes
to bring before the annual meeting the information specified in PHFG's Bylaws.
SHAREHOLDER ACTION WITHOUT A MEETING
Family. The Bylaws of Family provide that action by shareholders may be
taken only at a duly constituted meeting of shareholders. As a result,
shareholders of Family may not act without a meeting by written consent of some
or all of the shareholders.
PHFG. The Bylaws of PHFG provide that any action to be taken or which
may be taken at any annual or special meeting of shareholders may be taken if a
consent in writing, setting forth the actions so taken, is given by the holders
of all outstanding shares entitled to vote. Unanimous written consent is
obtainable, as a practical matter, only on matters on which there are only a
relatively few shareholders entitled to vote.
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SHAREHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS
Family. Pursuant to the MBCL, Family's Articles of Organization,
Bylaws, records of all meetings of incorporators and shareholders and the stock
and transfer records shall be kept in Massachusetts for inspection by
shareholders at Family's principal office and/or at an office of its transfer
agent, its clerk or its resident agent. Under the statute, Family may refuse to
make such books and records available for inspection if the purpose is other
than in the interest of the shareholder relative to the affairs of Family, and
under Family's Bylaws Family may similarly refuse to permit such inspection,
except to the extent otherwise required by law, if there is reasonable ground
for belief by the Family Board that such inspection will for any reason be
adverse to the interests of Family.
PHFG. The Bylaws of PHFG provide that a list of shareholders shall be
available for inspection by any shareholder entitled to vote for a period of not
less than 10 days before and during each meeting of shareholders. The MBCA
provides that a shareholder of a Maine corporation such as PHFG who has been
such for at least six months or owns 10% or more of the corporation's
outstanding shares may, for any proper purpose, and subject to the provision, if
requested, of specified affidavits, inspect the corporation's books and records
of account, minutes of meetings and list or record of shareholders. The MBCA
authorizes a shareholder of a Maine corporation which refuses to permit an
authorized inspection to bring a legal action for an order directing the
corporation to permit such inspection and, if successful, to be awarded costs
and in certain circumstances specified punitive damages.
AMENDMENT OF GOVERNING INSTRUMENTS
Family. No amendment to Family's Articles of Organization may be made
unless it is approved by the shareholders of Family by not less than two thirds
of the total votes eligible to be cast or, in the case of the provisions dealing
with name, purpose and authorized capitalization of Family, a majority of the
total votes eligible to be cast, at a duly constituted meeting, provided that if
at any time within the 60-day period immediately preceding the meeting at which
the shareholder vote is taken there is an "interested stockholder," such
amendment also shall require the affirmative vote of a majority of the
"continuing directors" prior to approval by shareholders.
The Bylaws of Family generally may be amended by the shareholders or
the Family Board. Such action by the Family Board shall require the affirmative
vote of at least 80% of the directors then in office at a duly constituted
meeting of the Family Board, unless at the time of such action there shall be an
"interested stockholder," in which case such action also shall require the
affirmative vote of at least a majority of the "continuing directors" then in
office, at such meeting. Such action by the shareholders generally shall require
(i) the submission by the shareholders of written proposals for amending the
Bylaws at least 60 days prior to the meeting at which they are to be considered
and (ii) the affirmative vote of at least 80% of the total votes eligible to be
cast by shareholders at a duly constituted meeting of shareholders called
expressly for such purpose.
PHFG. No amendment to PHFG's Articles generally may be made unless it
is first proposed by the Board of Directors of PHFG and thereafter approved by
the holders of at least a majority of all outstanding shares entitled to vote
thereon, with the exception of
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certain sections thereof which can only be amended by the holders of at least
75% of the shares of PHFG entitled to vote generally in an election of
directors, as specified therein. The sections in PHFG's Articles requiring such
a higher vote of shareholders for amendment include those relating to the Board
of Directors, special meetings of shareholders, informal action by shareholders
and amendment of the Articles and Bylaws. In addition, the "fair price"
provision included in the Articles of PHFG may not be amended except in the
manner set forth therein. See "Business Combinations with Certain Persons"
below.
The Board of Directors of PHFG has the exclusive power to adopt, amend
or repeal the Bylaws of PHFG.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
Family. The MBCL generally provides that an agreement of merger or
consolidation or a sale, lease or exchange of all or substantially all of the
property and assets of a corporation such as Family must be approved by the
holders of two thirds of the shares of each class of stock outstanding and
entitled to vote thereon, unless a corporation's articles of organization
designate a lower percentage (but not less than a majority). The Articles of
Organization and Bylaws of Family do not contain provisions which require a
specific lower or, except as described under "Business Combinations with Certain
Persons" below, higher shareholder vote for such transactions.
PHFG. The MBCA generally requires the approval of the Board of
Directors of PHFG and the holders of at least a majority of the outstanding PHFG
Common Stock for mergers and consolidations in which PHFG is a participating
corporation and for sales of all or substantially all of PHFG's property and
assets.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Family. The Articles of Organization of Family contain a provision
which requires that mergers and certain other business combinations with an
"interested stockholder," as defined, be approved by the holders of at least 80%
of the capital stock of Family entitled to vote thereon at an annual meeting or
special meeting of the shareholders called for that purpose, unless certain
price and procedural requirements are met or the merger or other business
combination is approved or ratified by a majority of Family's "continuing
directors," as defined, in which case only such affirmative vote as is required
by law or otherwise shall be applicable. An "interested stockholder" for this
purpose generally includes any person, firm or entity which is the beneficial
owner of more than 10% of the voting stock of Family, and a "continuing
director" for this purpose generally is any director who was a director prior to
the time the "interested stockholder" became such and who is not an affiliate or
associate of an "interested stockholder."
PHFG. The Articles of PHFG contain a provision which requires that
mergers and certain other business combinations with a "related person," as
defined, be approved by the holders of not less than 80% of the outstanding
voting stock of PHFG and an "independent majority of stockholders," as defined,
unless certain price and procedural requirements are met or the Board of
Directors, including a majority of "continuing directors," as defined, approves
the merger or other business combination, in which case only such affirmative
vote
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as is required by law or otherwise shall be applicable. A "related person" for
this purpose generally includes any person, firm or entity which is the
beneficial owner of 10% or more of the voting shares of PHFG, and a "continuing
director" for this purpose generally is any director who was a director prior to
the time the "related person" became such and who is not an affiliate or
associate of a "related person."
STATE ANTI-TAKEOVER STATUTES
Family. Under Chapter 110F of the Massachusetts General Laws, a
Massachusetts corporation such as Family is prohibited from engaging in certain
business combinations (defined by the statute to include certain mergers and
consolidations, dispositions of assets and issuances of securities, as well as
certain other transactions) with an interested shareholder (defined by the
statute to include holders of 5% or more of the outstanding stock of the
corporation) for a period of three years following the date that such
shareholder became an interested shareholder, except under certain
circumstances, which include prior approval by the board of directors of the
business combination or the transaction which resulted in the shareholder
becoming an interested shareholder, or subsequent approval of the business
combination by the board of directors and by a vote of at least two thirds of
the outstanding voting stock which is not owned by the interested shareholder.
The statute includes an exception to the prohibitions of the statute if, upon
consummation of the transaction which resulted in the shareholder becoming an
interested shareholder, the shareholder owned at least 90% of the voting stock
of the corporation.
Under Chapter 110D of the Massachusetts General Laws, any person
(hereinafter, the "acquiror") who makes a bona fide offer to acquire, or
acquires, shares of stock of a Massachusetts corporation that, when combined
with shares already owned, would increase the acquiror's ownership to at least
20%, 33.33% or a majority of the voting stock of such corporation, must obtain
the approval of a majority of shares held by all shareholders except the
acquiror and the officers and inside directors of the corporation in order to
vote the shares acquired. The statute permits a Massachusetts corporation to
elect not to be governed by its provisions by including in its articles of
organization or bylaws a provision pursuant to which the corporation "opts out"
of the statute. Family has not included such a provision in either its Articles
of Organization or Bylaws.
PHFG. Section 910 of the MBCA generally provides shareholders of a
Maine corporation which has a class of voting shares registered or traded on a
national securities exchange or registered under the Exchange Act, such as PHFG,
with the right to demand payment of an amount equal to the fair value of each
voting share in the corporation held by the shareholder from a person or group
of persons which become a "controlling person," which generally is defined to
mean an individual, firm or entity (or group thereof) which has voting power
over at least 25% of the outstanding voting shares of the corporation. Such a
demand must be submitted to the controlling person within 30 days after the
controlling person provides required notice to the shareholders of the
acquisition or transactions which resulted in such person or group becoming a
controlling person. Section 910 could be interpreted to provide that a person or
group of persons could become a controlling person for purposes of such section
by soliciting and acquiring revocable proxies to vote at least 25% of the voting
shares of a corporation.
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Section 611-A of the MBCA generally provides that a Maine corporation
which has a class of voting stock registered or traded on a national securities
exchange or under the Exchange Act may not engage in any business combination
for five years following an "interested stockholder's" "stock acquisition date"
unless the business combination is (i) approved by the corporation's board of
directors prior to that interested stockholder's stock acquisition date or (ii)
approved, subsequent to that interested stockholder's stock acquisition date, by
the board of directors of the Maine corporation and authorized by the holders of
a majority of the outstanding voting stock of the corporation not beneficially
owned by that interested stockholder or any affiliate or associate thereof or by
persons who are either directors or officers and also employees of the
corporation. An "interested stockholder" is defined to include any person, firm
or entity that is directly or indirectly the beneficial owner of 25% or more of
the outstanding voting stock of the corporation, other than by reason of a
revocable proxy given in response to a proxy solicitation conducted in
accordance with the Exchange Act which is not then reportable on a Schedule 13D
under the Exchange Act, and "stock acquisition date" is defined to mean the date
that any person, firm or entity first becomes an interested stockholder of that
corporation.
DISSENTERS' RIGHTS OF APPRAISAL
Family. Under the MBCL, a shareholder of a Massachusetts corporation
such as Family generally has the right to dissent from, and obtain payment of
the fair value of his shares in the event of, a statutory merger or
consolidation, an amendment to the articles of organization which adversely
affects the rights of shareholders or a sale, lease or exchange of all or
substantially all of a corporation's property and assets, subject in each case
to specified procedural requirements. Such appraisal rights are not available
when the corporation is to be the surviving corporation and no vote of its
shareholders is required for the merger. For a detailed description of the
dissenters' rights of shareholders of Family in connection with the Merger, see
"The Merger - Dissenters' Rights."
PHFG. Under the MBCA, a shareholder of a Maine corporation such as PHFG
generally has the right to dissent from a merger or consolidation in which the
corporation is participating or a sale of all or substantially all of the assets
of the corporation, subject in each case to specified procedural requirements.
Such appraisal rights are not available when the corporation is to be the
surviving corporation and no vote of its shareholders is required for the
merger. The MBCA also generally does not confer appraisal rights if the
corporation's stock is either (i) registered or traded on a national securities
exchange or (ii) registered with the SEC pursuant to Section 12(g) of the
Exchange Act, as is the PHFG Common Stock. See "Available Information."
Notwithstanding the foregoing, however, the MBCA provides that appraisal rights
generally will be permitted if shareholders of the corporation are required to
accept for their stock in any merger, consolidation or similar transaction
anything other than (i) shares of the surviving or new corporation resulting
from the transaction, or such shares plus cash in lieu of fractional shares, or
(ii) shares, or shares plus cash in lieu of fractional shares, of any other
corporation unless such shares are registered or traded on a national securities
exchange or held of record by not less than 2,000 shareholders, or any
combination of the foregoing.
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SHAREHOLDER RIGHTS PLANS
Family. Family has not adopted a shareholder rights plan.
PHFG. PHFG has adopted a shareholder rights plan, as described under
"Description of PHFG Capital Stock - PHFG Rights."
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 May 31, 1996 by (i) each director and executive officer
of PHFG and (ii) all directors and executive officers of PHFG as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
as of May 31, 1996(1)
-----------------------------
Name of Beneficial Owner Amount Percent
------------------------------ --------- -------
<S> <C> <C>
Directors:
Robert P. Bahre ..................... 38,660(2) --%
Everett W. Gray ..................... 5,583(2) --
Andrew W. Greene .................... 3,179(2) --
Katherine M. Greenleaf .............. 7,123(2) --
Dana S. Levenson .................... 5,262(2) --
Robert A. Marden .................... 8,864(2)(3) --
Malcolm W. Philbrook, Jr ............ 47,282(2)(4) --
Pamela P. Plumb ..................... 9,281(2) --
William J. Ryan ..................... 146,841(5) --
Curtis M. Scribner .................. 8,303(2) --
Paul R. Shea ........................ 8,260 --
Davis P. Thurber .................... 334,902(6)
Executive Officers who are not Directors:
Henry G. Beyer ...................... 29,543(5) --
John W. Fridlington ................. 43,711(5) --
Carol L. Mitchell ................... 16,439 --
Peter J. Verrill .................... 64,881(5)(7) --
All directors and executive officers of
PHFG as a group (16 persons) ........... 778,114 %(8)
</TABLE>
- ---------------
(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
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investment power with respect to the indicated shares and all
individual holdings amount to less than 1% of the outstanding PHFG
Common Stock.
(2) In the case of all indicated directors other than Mr. Marden, includes
options to purchase 1,000 shares granted under PHFG's 1995 Stock Option
Plan for Non-Employee Directors, and in the case of Mr. Marden
includes outstanding options to purchase 523 shares of PHFG Common
Stock granted pursuant to such plan (net of exercises).
(3) Includes 1,564 shares held by Mr. Marden's spouse, with whom beneficial
ownership of such shares is shared.
(4) Includes 1,670 shares held by one entity for which Mr. Philbrook serves
as director; beneficial ownership of such shares is shared with the
other members of the investment committee. Also includes 14,416 shares
held in various trusts for which Mr. Philbrook serves as sole trustee
or in one case as co-trustee; beneficial ownership of 2,505 of such
shares is shared with a co-trustee.
(5) Includes shares over which an officer has voting power pursuant to
PHFG's Thrift Incentive Plan and Profit Sharing Employee Stock
Ownership Plan (in each case as of December 31, 1995), and options to
purchase shares of PHFG Common Stock pursuant to PHFG's 1987 Stock
Option and Stock Appreciation Rights Plan, as amended, which are
exercisable within 60 days of May 31, 1996, as follows:
<TABLE>
<CAPTION>
Profit Sharing Currently
Employee Stock Exercisable
Thrift Incentive Plan Ownership Plan Options
---------------------- ------------------ ------------------
<S> <C> <C> <C>
William J. Ryan..................... 21,826 2,062 110,727
Henry G. Beyer...................... 10,698 1,482 17,323
John W. Fridlington................. 2,944 1,176 34,823
Carol L. Mitchell................... 1,412 654 11,334
Peter J. Verrill.................... 17,451 2,062 40,569
</TABLE>
(6) Includes 242,676 shares held by Mr. Thurber as trustee of the Davis P.
Thurber 1996 Revocable Trust, 10,000 shares held by Mr. Thurber's
spouse and an interest in 82,226 shares held by BNH as trustee under
testamentary trusts created under the wills of George F. Thurber and
Muriel D. Thurber.
(7) Includes 3,824 shares held jointly with Mr. Verrill's wife, as well as
250 shares and 25 shares held by Mr. Verrill's wife and son,
respectively, in each case with whom beneficial ownership of such
shares is shared.
(8) Includes an aggregate of 69,498 shares of PHFG Common Stock which are
held by the trusts established pursuant to the Thrift Incentive Plan
(59,779 shares) and the Profit Sharing Employee Stock Ownership Plan
(9,719 shares) on behalf of executive officers of PHFG as a group. Also
includes 258,103 shares which may be acquired by directors and
executive officers as a group upon the exercise of outstanding stock
options which are exercisable within 60 days of May 31, 1996. Shares
subject to such
85
<PAGE> 93
stock options are deemed to be outstanding for the purpose of computing
the percentage of PHFG Common Stock beneficially owned by directors and
executive officers of PHFG as a group.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of May 31, 1996, there was no person or entity, including any
"group" as that term is used in Section 13(d)(3) of the Exchange Act, who or
which was known by PHFG to be the beneficial owner of 5% or more of the
outstanding PHFG Common Stock.
CERTAIN BENEFICIAL OWNERS OF FAMILY COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the Family Common
Stock beneficially owned as of May 31, 1996 by (i) each director and executive
officer of Family and (ii) all directors and executive officers of Family as a
group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
as of May 31, 1996(1)
-------------------------------
Name of Beneficial Owner Amount Percent
--------------------------- ------------ -------
<S> <C> <C>
Directors:
Charles George, Jr ................... 8,250(2) --%
David D. Hindle ...................... 50,230(2)(3)(4) 1.2
Elkin B. McCallum .................... 57,150(5) 1.4
Kenneth L. Paul ...................... 12,300(2)(6) --
John E. Veasey ....................... 125,462(2)(7) 3.0
Executive Officers who are not Directors:
George E. Fahey ...................... 47,142(2)(3)(8) 1.1
Bruce Fenn, III ...................... 39,381(2)(3) --
David J. LaFlamme .................... 36,839(2)(3) --
Ronald G. Trombley ................... 44,990(2)(3)(9) 1.1
All directors and executive officers of
Family as a group (nine persons) ....... 421,744(2)(3) 9.8%
</TABLE>
- ---------------
(1) The number of shares beneficially owned by the persons set forth above
is determined under rules under Section 13 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, an individual is considered to
beneficially own any shares of Family Common Stock if he or she
directly or indirectly has or shares: (i) voting power, which includes
the power to vote or to direct the voting of the shares, or (ii)
investment power, which includes the power to dispose or direct the
disposition of the shares. Unless otherwise indicated, an individual
has sole voting power and sole
86
<PAGE> 94
investment power with respect to the indicated shares and all
individual holdings amount to less than 1% of the outstanding Family
Common Stock.
(2) Includes shares which directors and executive officers have the right
to acquire upon exercise of options which are exercisable within 60
days of May 31, 1996, as follows:
<TABLE>
<CAPTION>
Currently Exercisable
Options
---------------------
<S> <C>
Charles George, Jr. 4,500
David D. Hindle 20,358
Kenneth L. Paul 4,500
John E. Veasey 4,500
George E. Fahey 22,858
Bruce Fenn, III 28,250
David J. LaFlamme 3,657
Ronald G. Trombley 22,608
All directors and executive officers as a group 111,231
</TABLE>
(3) Includes shares allocated to the accounts of executive officers of
Family under Family's Employee Stock Ownership Plan and Trust ("ESOP"),
as well as nonallocated shares under the ESOP which may be deemed to be
beneficially owned by the executive officers as a result of such
person's ability to direct the voting of those shares through the vote
of shares allocated to their accounts under the ESOP, as follows:
<TABLE>
<CAPTION>
ESOP
---------------------------
Allocated Unallocated
--------- -----------
<S> <C> <C>
David D. Hindle 3,187 352
George E. Fahey 2,825 312
Bruce Fenn, III 1,131 304
David J. LaFlamme 1,589 125
Ronald G. Trombley 2,755 176
All executive officers as a group 11,487 1,269
</TABLE>
(4) Includes 5,638 shares as to which voting and investment power is shared
with Mr. Hindle's wife, as well as 1,750 shares owned by Mr. Hindle's
wife individually.
(5) Beneficial ownership of the indicated shares is shared with Mr.
McCallum's wife.
(6) Does not include 4,500 shares held by Mr. Paul as custodian for his
sons. Mr. Paul disclaims beneficial ownership of such shares.
(7) Does not include 4,927 shares owned by Mr. Veasey's wife individually.
Mr. Veasey disclaims beneficial ownership of such shares.
87
<PAGE> 95
(8) Includes 1,653 shares as to which voting and investment power is shared
with Mr. Fahey's wife, as well as 424 shares owned by Mr. Fahey's wife
individually.
(9) Includes 889 shares and 255 shares as to which voting and investment
power is shared with Mr. Trombley's wife and mother, respectively, as
well as 399 shares owned by Mr. Trombley's wife individually.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to Family Common Stock
beneficially owned by each person or entity, including any "group" as that term
is used in Section 13(d)(3) of the Exchange Act, who or which was known by
Family to be the beneficial owner of 5% or more of the outstanding Family Common
Stock as of May 31, 1996.
<TABLE>
<CAPTION>
Shares Beneficially Owned
as of May 31, 1996 (1)
----------------------------------------
Name and Address of
Beneficial Owner Amount Percent
- ------------------------------------ ----------- -------------
<S> <C> <C>
First Manhattan Co.
437 Madison Avenue
New York, New York 10022 285,750(1) %
</TABLE>
- ---------------
(1) Based on a Schedule 13G filed under the Exchange Act on February 9,
1996.
LEGAL OPINION
The validity of the PHFG Common Stock offered hereby will be passed
upon for PHFG by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C.
EXPERTS
The historical consolidated financial statements of PHFG as of December
31, 1995 and 1994, and for each of the years in the three-year period ended
December 31, 1995 incorporated by reference herein and elsewhere in the
Registration Statement, have been incorporated by reference herein and elsewhere
in the Registration Statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP refers to a change in method of accounting for
mortgage servicing rights effective January 1, 1995.
The supplemental consolidated financial statements of PHFG as of
December 31, 1995 and 1994, and for each of the years in the three-year period
ended December 31, 1995
88
<PAGE> 96
incorporated by reference herein and elsewhere in the Registration Statement,
have been incorporated by reference herein and elsewhere in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP refers to a change in method of accounting for mortgage
servicing rights effective January 1, 1995.
The consolidated financial statements of Family included in Family's
Annual Report on Form 10-K for the year ended December 31, 1995 have been
audited by Wolf & Company, P.C., independent auditors, as set forth in their
report thereon incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
PROPOSALS FOR THE 1997
ANNUAL MEETINGS
Any proposal which a shareholder of PHFG wishes to have included in the
proxy materials of PHFG relating to the next annual meeting of shareholders,
which is scheduled to be held in April 1997, must be received at the principal
executive offices of Peoples Heritage Financial Group, Inc., One Portland
Square, P.O. Box 9540, Portland, Maine 04112-9540, Attention: Carol L. Mitchell,
Esq., Senior Vice President, General Counsel, Secretary and Clerk, no later than
November 22, 1996. If such proposal is in compliance with all of the
requirements of Rule 14a-8 under the Exchange Act, it will be included in the
proxy statement and set forth on the form of proxy issued for the next annual
meeting of shareholders. It is urged that any shareholder proposals be sent
certified mail, return- receipt requested.
Any proposal which a shareholder of Family wishes to present at
Family's 1997 annual meeting of shareholders, which absent prior consummation of
the Merger is scheduled to be held in April 1997, must be received at the
principal executive offices of Family Bancorp, P.O. Box 431, 153 Merrimack
Street, Haverhill, Massachusetts 01831, Attention: Clerk, no later than November
20, 1996 to be eligible for inclusion in Family's proxy statement and on the
form of proxy relating to such meeting. If such proposal is in compliance with
all of the requirements of Rule 14a-8 under the Exchange Act, it will be
included in the proxy statement and set forth on the form of proxy issued for
the next annual meeting of shareholders. It is urged that any shareholder
proposals be sent certified mail, return-receipt requested.
89
<PAGE> 97
ANNEX I
AGREEMENT AND PLAN OF MERGER
AMONG
PEOPLES HERITAGE FINANCIAL GROUP, INC.,
PEOPLES HERITAGE MERGER CORP.
AND
FAMILY BANCORP
DATED AS OF MAY 30, 1996
<PAGE> 98
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS...................................................2
ARTICLE II THE MERGER....................................................7
2.1 The Merger....................................................7
2.2 Effective Time; Closing.......................................8
2.3 Treatment of Capital Stock....................................8
2.4 Shareholder Rights; Stock Transfers...........................9
2.5 Dissenting Shares.............................................9
2.6 Fractional Shares.............................................9
2.7 Exchange Procedures..........................................10
2.8 Anti-Dilution Provisions.....................................11
2.9 Options......................................................11
2.10 Additional Actions...........................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY...............................................13
3.1 Capital Structure............................................13
3.2 Organization, Standing and Authority of the Company..........13
3.3 Ownership of the Company Subsidiaries........................14
3.4 Organization, Standing and Authority of
the Company Subsidiaries...................................14
3.5 Authorized and Effective Agreement...........................14
3.6 Securities Documents and Regulatory Reports..................16
3.7 Financial Statements.........................................16
3.8 Material Adverse Change......................................17
3.9 Environmental Matters........................................17
3.10 Tax Matters..................................................18
3.11 Legal Proceedings............................................19
3.12 Compliance with Laws.........................................19
3.13 Certain Information..........................................20
3.14 Employee Benefit Plans.......................................20
3.15 Certain Contracts............................................21
3.16 Brokers and Finders..........................................22
3.17 Insurance....................................................22
3.18 Properties...................................................23
i
<PAGE> 99
3.19 Labor........................................................23
3.20 Required Vote; Inapplicability of Antitakover Statutes.......23
3.21 Ownership of Acquiror Common Stock...........................24
3.22 Disclosures..................................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR..............................................25
4.1 Capital Structure............................................25
4.2 Organization, Standing and Authority of the Acquiror.........25
4.3 Ownership of the Acquiror Subsidiaries.......................25
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries......................................26
4.5 Authorized and Effective Agreement...........................26
4.6 Securities Documents and Regulatory Reports..................28
4.7 Financial Statements.........................................28
4.8 Material Adverse Change......................................29
4.9 Environmental Matters........................................29
4.10 Tax Matters..................................................29
4.11 Legal Proceedings............................................30
4.12 Compliance with Laws.........................................30
4.13 Certain Information..........................................31
4.14 Employee Benefit Plans.......................................31
4.15 Certain Contracts............................................33
4.16 Brokers and Finders..........................................33
4.17 Insurance....................................................33
4.18 Properties...................................................33
4.19 Labor........................................................34
4.20 Required Vote; Acquiror Rights Agreement.....................34
4.21 Ownership of Company Common Stock............................34
4.22 Disclosures..................................................34
ARTICLE V COVENANTS....................................................35
5.1 Reasonable Best Efforts......................................35
5.2 Shareholder Meetings.........................................35
5.3 Regulatory Matters...........................................35
5.4 Investigation and Confidentiality............................36
5.5 Press Releases...............................................37
5.6 Business of the Parties......................................37
5.7 Certain Actions..............................................41
5.8 Current Information..........................................42
5.9 Indemnification; Insurance...................................42
5.10 Directors....................................................43
ii
<PAGE> 100
5.11 Benefit Plans and Arrangements...............................44
5.12 Branch Sale..................................................45
5.13 Certain Policies; Integration................................45
5.14 Disclosure Supplements.......................................46
5.15 Failure to Fulfill Conditions................................46
ARTICLE VI CONDITIONS PRECEDENT.........................................46
6.1 Conditions Precedent - The Acquiror, the Acquiror Sub
and the Company.............................................46
6.2 Conditions Precedent - The Company...........................47
6.3 Conditions Precedent - The Acquiror and the Acquiror Sub.....48
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT............................49
7.1 Termination..................................................49
7.2 Effect of Termination........................................50
7.3 Survival of Representations, Warranties
and Covenants..............................................51
7.4 Waiver.......................................................51
7.5 Amendment or Supplement......................................51
ARTICLE VIII MISCELLANEOUS.................................................52
8.1 Expenses.....................................................52
8.2 Entire Agreement.............................................52
8.3 No Assignment................................................52
8.4 Notices......................................................52
8.5 Alternative Structure........................................53
8.6 Interpretation...............................................54
8.7 Counterparts.................................................54
8.8 Governing Law................................................54
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Company Stockholder Agreement
Exhibit C Form of Acquiror Stock Option Agreement
Exhibit D Matters to be covered by Opinion of Counsel to the Acquiror
Exhibit E Matters to be covered by Opinion of Counsel to the Company
iii
<PAGE> 101
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of May 30,
1996, by and among Peoples Heritage Financial Group, Inc. (the "Acquiror"), a
Maine corporation, Peoples Heritage Merger Corp. (the "Acquiror Sub"), a Maine
corporation and a wholly-owned subsidiary of the Acquiror, and Family Bancorp
(the "Company"), a Massachusetts corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquiror and the Company have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions provided
for herein, including the merger of the Company with and into the Acquiror Sub,
subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into this Agreement, (i) the Company is concurrently entering into a Stock
Option Agreement with the Acquiror (the "Company Stock Option Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant to which the
Company is granting to the Acquiror the option to purchase shares of Company
Common Stock (as defined herein) under certain circumstances and (ii) certain
stockholders of the Company are concurrently entering into a Stockholder
Agreement with the Acquiror (the "Company Stockholder Agreement"), in
substantially the form attached hereto as Exhibit B, pursuant to which, among
other things, such stockholders agree to vote their shares of Company Common
Stock in favor of this Agreement and the transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Company's willingness to
enter into this Agreement, the Acquiror is concurrently entering into a Stock
Option Agreement with the Company (the "Acquiror Stock Option Agreement"), in
substantially the form attached hereto as Exhibit C, pursuant to which the
Acquiror is granting to the Company the option to purchase shares of Acquiror
Common Stock (as defined herein) under certain circumstances;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
<PAGE> 102
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Common Stock" shall mean the common stock, par value $.01 per
share, of the Acquiror and, unless the context otherwise requires, related
Acquiror Rights.
"Acquiror Employee Plans" shall have the meaning set forth in Section
4.14(a) hereof.
"Acquiror Employee Stock Benefit Plans" shall mean the following
employee benefit plans of the Acquiror: 1986 Stock Option and Stock Appreciation
Rights Plan, 1986 Employee Stock Purchase Plan, Thrift Incentive Plan, Profit
Sharing Employee Stock Ownership Plan, Restricted Stock Plan for Non-Employee
Directors, 1995 Stock Option Plan for Non-Employee Directors, 1996 Equity
Incentive Plan and Dividend Reinvestment Plan.
"Acquiror Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of the Acquiror as of December 31, 1995, 1994 and 1993 and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of the Acquiror for each of the three years ended
December 31, 1995, 1994 and 1993 as filed by the Acquiror in its Securities
Documents, and (ii) the consolidated statements of financial condition of the
Acquiror (including related notes and schedules, if any) and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of the Acquiror included in the Securities
Documents filed by the Acquiror with respect to the quarterly and annual periods
ended subsequent to December 31, 1995.
"Acquiror Maine Bank" shall mean Peoples Heritage Savings Bank, a
Maine-chartered savings bank and a wholly-owned subsidiary of the Acquiror.
"Acquiror National Bank" shall mean The First National Bank of
Portsmouth, a national bank and a wholly-owned subsidiary of the Acquiror, which
is to be merged with and into the Acquiror New Hampshire Bank on or about July
1, 1996.
"Acquiror New Hampshire Bank" shall mean Bank of New Hampshire, a New
Hampshire-chartered commercial bank and a wholly-owned subsidiary of the
Acquiror.
"Acquiror Preferred Stock" shall mean the shares of preferred stock,
par value $.01 per share, of the Acquiror.
"Acquiror Rights" shall mean the rights attached to shares of Common
Stock pursuant to the Acquiror Rights Agreement.
2
<PAGE> 103
"Acquiror Rights Agreement" shall mean the Stockholder Rights
Agreement, dated as of September 12, 1989, between Acquiror and Mellon
Securities Trust Company, in its capacity as Rights Agent.
"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Bank" shall mean Family Bank, FSB, a federally-chartered savings bank
and a wholly-owned subsidiary of the Company.
"Bank Commissioner" shall mean the Bank Commissioner of the State of
New Hampshire.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Branch Sale" shall mean the sale of the branch office maintained by
the Bank in Seabrook, New Hampshire, and such other branch offices maintained by
the Bank in New Hampshire as may be determined by the Company and the Acquiror,
to the Acquiror New Hampshire Bank.
"Branch Sale Agreement" shall mean the Branch Sale Agreement between
the Bank and the Acquiror New Hampshire Bank to be executed as soon as
practicable after the parties' execution of this Agreement and which provides
for the Branch Sale.
"Central Fund" shall mean the Mutual Savings Central Fund, Inc.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $0.10 per
share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of the Company as of December 31, 1995, 1994 and 1993 and the consolidated
statements of operations, shareholders' equity and cash flows (including related
notes and schedules, if any) of the Company for each of the three years ended
December 31, 1995, 1994 and 1993 as filed by the Company in its Securities
Documents, and (ii) the consolidated statements of financial
3
<PAGE> 104
condition of the Company (including related notes and schedules, if any) and the
consolidated statements of operations, shareholders' equity and cash flows
(including related notes and schedules, if any) of the Company included in the
Securities Documents filed by the Company with respect to the quarterly and
annual periods ended subsequent to December 31, 1995.
"Company Options" shall mean options to purchase shares of Company
Common Stock granted pursuant to the Company Stock Option Plans or as otherwise
Previously Disclosed.
"Company Option Plans" shall mean the following stock option plans of
the Company, as amended and as in effect as of the date hereof: 1995 Incentive
and Nonqualified Stock Option Plan, 1986 Incentive and Nonqualified Stock Option
Plan and 1986 Nonemployees Nonqualified Stock Option Plan.
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $0.10 per share, of the Company.
"Dissenting Shares" shall have the meaning set forth in Section 2.5
hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
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
4
<PAGE> 105
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 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.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Massachusetts Board" shall mean the Massachusetts Board of Bank
Incorporation.
"Material Adverse Effect" shall mean, with respect to the Acquiror or
the Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and its
Subsidiaries taken as whole or the Company and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of either the
Company, on the one hand, or the Acquiror or the Acquiror Sub, on the other
hand, to consummate the transactions contemplated by this Agreement, provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in laws and regulations or interpretations thereof that are
generally applicable to the banking or savings industries (including without
limitation prospective changes which result in
5
<PAGE> 106
assessments which are intended to recapitalize the SAIF), (b) changes in
generally accepted accounting principles that are generally applicable to the
banking or savings industries, (c) expenses incurred in connection with the
transactions contemplated hereby or (d) actions or omissions of a party (or any
of its Subsidiaries) taken with the prior informed written consent of the other
party or parties in contemplation of the transactions contemplated hereby,
including without limitation any actions taken by the Company pursuant to
Section 5.13 hereof.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the
Acquiror Sub pursuant to the terms hereof.
"MBCA" shall mean the Maine Business Corporation Act, as amended.
"MBCL" shall mean the Massachusetts Business Corporation Law, as
amended.
"MHPF" shall mean the Massachusetts Housing Partnership Fund.
"MRSA" shall mean the Maine Revised Statutes Annotated, as amended.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OCC" shall mean the Office of the Comptroller of the Currency of the
U.S. Department of the Treasury or any successor thereto.
"OTS" shall mean the Office of Thrift Supervision of the U.S.
Department of the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the
date hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.14 hereof.
"Proxy Statement" shall mean the prospectus/joint proxy statement
contained in the Form S-4, as amended or supplemented, and to be delivered to
shareholders of the Acquiror
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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.
ARTICLE II
THE MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Acquiror Sub (the "Merger") in accordance with the provisions
of Section 906 of the MBCA and Section 79 of the MBCL. The Acquiror Sub shall be
the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") of the Merger, and shall continue its corporate existence under
the laws of the State of Maine. The name of the Surviving Corporation shall
continue to be "Peoples Heritage Merger Corp." Upon consummation of the Merger,
the separate corporate existence of the Company shall terminate.
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(b) From and after the Effective Time, the Merger shall have the
effects set forth in Section 905 of the MBCA and Section 80 of the MBCL.
(c) The Articles of Incorporation and Bylaws of the Acquiror Sub, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation, respectively, until
altered, amended or repealed in accordance with their terms and applicable law.
(d) The authorized capital stock of the Surviving Corporation shall be
as stated in the Articles of Incorporation of the Acquiror Sub immediately prior
to the Effective Time.
(e) The directors and officers of the Acquiror Sub immediately prior to
the Effective Time shall be the directors and officers of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation.
2.2 Effective Time; Closing
The Merger shall become effective upon the occurrence of the filing of
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Maine pursuant to Section 906(7) of the MBCA and the Secretary of State
of the Commonwealth of Massachusetts pursuant to Section 79(c) of the MBCL,
unless a later date and time is specified as the effective time in such Articles
of Merger (the "Effective Time"). A closing (the "Closing") shall take place
immediately prior to the Effective Time at 10:00 a.m., Eastern Time, on the
fifth business day following the satisfaction or waiver, to the extent permitted
hereunder, of the conditions to the consummation of the Merger specified in
Article VI of this Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the Closing), at the
principal executive offices of the Acquiror in Portland, Maine, or at such other
place, at such other time, or on such other date as the parties may mutually
agree upon, provided that, notwithstanding the foregoing, the parties hereby
agree to hold the Closing on the first day which is at least two business days
following the satisfaction or waiver, to the extent permitted hereunder, of the
conditions to consummation of the Merger specified in Article VI of this
Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing) if necessary for the
Effective Time to occur on or before December 31, 1996. At the Closing, there
shall be delivered to the Acquiror and the Company the opinions, certificates
and other documents required to be delivered under Article VI hereof.
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:
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(a) each share of Acquiror Common Stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding;
(b) each share of Acquiror Sub common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding; and
(c) subject to Sections 2.5 and 2.6 hereof, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held by the Acquiror or any of its Subsidiaries other than in
a fiduciary capacity that are beneficially owned by third parties or as a result
of debts previously contracted, which shall be cancelled and retired) shall
become and be converted into the right to receive 1.26 shares of Acquiror Common
Stock (subject to possible adjustment as set forth in Sections 2.8 and 7.1(f)
hereof, the "Exchange Ratio").
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 MBCL and has not effectively withdrawn
or lost such right as of the Effective Time (the "Dissenting Shares") shall not
be converted into or represent a right to receive shares of Acquiror Common
Stock hereunder, and the holder thereof shall be entitled only to such rights as
are granted by the MBCL. The Company shall give the Acquiror prompt notice upon
receipt by the Company of any such written demands for payment of the fair value
of such shares of Company Common Stock and of withdrawals of such demands and
any other instruments provided pursuant to the MBCL (any shareholder duly making
such demand being hereinafter called a "Dissenting Shareholder"). If any
Dissenting Shareholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to such payment at any time, such holder's
shares of Company Common Stock shall be converted into the right to receive
Acquiror Common Stock in accordance with the applicable provisions of this
Agreement. Any payments made in respect of Dissenting Shares shall be made by
the Surviving Corporation.
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
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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.
(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
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Agreement, notwithstanding the failure on the part of the holder thereof to
surrender such certificates.
(c) The Acquiror shall not be obligated to deliver a certificate or
certificates representing shares of Acquiror Common Stock to which a holder of
Company Common Stock would otherwise be entitled as a result of the Merger until
such holder surrenders the certificate or certificates representing the shares
of Company Common Stock for exchange as provided in this Section 2.7, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond in an amount as may be reasonably required in each case by the Acquiror.
If any certificate evidencing shares of Acquiror Common Stock is to be issued in
a name other than that in which the certificate evidencing Company Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the certificate surrendered or
otherwise establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
2.8 Anti-Dilution Provisions
If, between the date hereof and the Effective Time, the shares of
Acquiror Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
shall be adjusted accordingly.
2.9 Options
(a) At the Effective Time, each Company Option which is then
outstanding, whether or not exercisable, shall cease to represent a right to
acquire shares of Company Common Stock and shall be converted automatically into
an option to purchase shares of Acquiror Common Stock, and the Acquiror shall
assume each Company Option, in accordance with the terms of the applicable
Company Stock Option Plan and stock option or other agreement by which it is
evidenced, except that from and after the Effective Time, (i) the Acquiror and
the Human Resources Committee of its Board of Directors shall be substituted for
the Company and the committee of the Company's Board of Directors (including, if
applicable, the entire Board of Directors of the Company) administering such
Company Stock Option Plan, (ii) each Company Option assumed by the Acquiror may
be exercised solely for shares of Acquiror Common Stock, (iii) the number of
shares of Acquiror Common Stock subject to such Company Option shall be equal to
the number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
provided that any fractional shares of Acquiror Common Stock resulting from such
multiplication shall be rounded down to the
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nearest share, and (iv) the per share exercise price under each such Company
Option shall be adjusted by dividing the per share exercise price under each
such Company Option by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent. Notwithstanding clauses (iii) and (iv)
of the preceding sentence, each Company Option which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option within the meaning of Section 424(h) of the
Code. The Acquiror and the Company agree to take all necessary steps to effect
the foregoing provisions of this Section 2.9(a).
(b) As soon as practicable after the Effective Time, the Acquiror shall
deliver to each participant in each Company Stock Option Plan an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
subject to such Company Stock Option Plan shall continue in effect on the same
terms and conditions, including without limitation the duration thereof, subject
to the adjustments required by Section 2.9(a) hereof after giving effect to the
Merger. Within 30 days after the Effective Time, the Acquiror shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Acquiror
Common Stock subject to such options and shall use its reasonable efforts to
maintain the current status of the prospectus or prospectuses contained therein
for so long as such options remain outstanding.
2.10 Additional Actions
If, at any time after the Effective Time, the Surviving Corporation
shall consider that any further assignments or assurances in law or any other
acts are necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger, or (ii) otherwise carry out the purposes of this Agreement, the Company
and its proper officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
rights, properties or assets in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 Capital Structure
The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock and 10,000,000 shares of Company Preferred Stock.
As of the date hereof, 4,188,617 shares of Company Common Stock are issued and
outstanding, 1,427,188 shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock and no shares of Company Preferred Stock
are issued and outstanding. All outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Company Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. Except for the
Company Stock Option Agreement and for Company Options to acquire not more than
233,606 shares of Company Common Stock as of the date hereof, a schedule of
which has been Previously Disclosed, there are no Rights authorized, issued or
outstanding with respect to the capital stock of the Company.
3.2 Organization, Standing and Authority of the Company
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts with full
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted and is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification, except where the failure to be so licensed,
qualified or in good standing would not have a Material Adverse Effect on the
Company. The Company is duly registered as a unitary savings and loan holding
company under the HOLA and the regulations of the OTS thereunder. The Company
has heretofore delivered to the Acquiror true and complete copies of the
Articles of Organization and Bylaws of the Company as in effect as of the date
hereof.
3.3 Ownership of the Company Subsidiaries
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary and identified the Bank as its only Significant Subsidiary. Except
for (w) capital stock of the Company Subsidiaries, (x) securities and other
interests held in a fiduciary capacity and beneficially owned by third parties
or taken in consideration of debts previously contracted, (y) the Acquiror Stock
Option Agreement and (z) securities and other interests which are Previously
Disclosed, the Company does not own or have the right to acquire, directly or
indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, bank,
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savings association, partnership, joint venture or other organization, other
than investment securities representing not more than 1% of any entity. The
outstanding shares of capital stock or other ownership interests of each Company
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are directly owned by the Company free and clear of all
liens, claims, encumbrances, charges, pledges, restrictions or rights of third
parties of any kind whatsoever. No Rights are authorized, issued or outstanding
with respect to the capital stock or other ownership interests of the Company
Subsidiaries and there are no agreements, understandings or commitments relating
to the right of the Company to vote or to dispose of such capital stock or other
ownership interests.
3.4 Organization, Standing and Authority of the Company Subsidiaries
Each of the Company Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized. Each of the Company Subsidiaries (i) has
full power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, and (ii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The deposit
accounts of the Bank are insured by the BIF or, in the case of certain deposits,
the SAIF to the maximum extent permitted by the FDIA, and the
Massachusetts-based deposits of the Bank are insured by the Depositors Insurance
Fund for amounts in excess of FDIC limits pursuant to an agreement which
terminates on July 31, 1996. The Bank has paid all deposit insurance premiums
and assessments required by the FDIA and Massachusetts law and the regulations
thereunder. The Company has heretofore delivered or made available to the
Acquiror true and complete copies of the Charter and Bylaws of the Bank as in
effect as of the date hereof.
3.5 Authorized and Effective Agreement
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly 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.
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(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger and
the Branch Sale), nor compliance by the Company with any of the provisions
hereof (i) does or will conflict with or result in a breach of any provisions of
the Articles of Organization or Bylaws of the Company or the equivalent
documents of any Company Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of the Company or a Company Subsidiary pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or a Company
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or a Company
Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the OTS, the FDIC, the
Massachusetts Board, the MHPF, the Central Fund, the Bank Commissioner and the
Superintendent, (ii) the filing and effectiveness of the Form S-4 with the
Commission, (iii) compliance with applicable state securities or "blue sky" laws
and the NASD Bylaws in connection with the issuance of Acquiror Common Stock
pursuant to this Agreement, (iv) the approval of this Agreement by the requisite
vote of the shareholders of the Company and the Acquiror, (v) the filing of
Articles of Merger with the Secretary of State of the State of Maine and the
Secretary of State of the Commonwealth of Massachusetts pursuant to the MBCA and
the MBCL, respectively, in connection with the Merger, and (vi) review of the
Merger by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals which are Previously Disclosed, no consents
or approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of the Company or the Bank in
connection with (i) the execution and delivery by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby and
(ii) the execution and delivery by the Bank of the Branch Sale Agreement and the
consummation by the Bank of the transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor the Bank is aware of
any reasons relating to the Company or the Bank (including without limitation
Community Reinvestment Act compliance) why all consents and approvals shall not
be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Branch
Sale Agreement and (ii) the continuation by the Acquiror after the Effective
Time of the business of each of the Acquiror and the Company as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which, in the reasonable opinion of the Company, could have a
Material
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Adverse Effect on the Acquiror or the Company or materially impair the value of
the Company and the Bank to the Acquiror.
3.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1993, the Company has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, each of the Company and the Bank has duly
filed with the OTS, the FDIC and any other applicable federal or state banking
authority, as the case may be, in correct form the reports required to be filed
under applicable laws and regulations and such reports were in all material
respects complete and accurate and in compliance with the requirements of
applicable laws and regulations. In connection with the most recent examinations
of the Company and the Bank by the OTS and the FDIC, neither the Company nor the
Bank was required to correct or change any action, procedure or proceeding which
the Company or the Bank believes has not been corrected or changed as required
as of the date hereof and which could have a Material Adverse Effect on the
Company.
3.7 Financial Statements
(a) The Company has previously delivered or made available to the
Acquiror accurate and complete copies of the Company Financial Statements which,
in the case of the consolidated statements of financial condition of the Company
as of December 31, 1995, 1994 and 1993 and the consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
ended December 31, 1995, 1994 and 1993, are accompanied by the audit reports of
Wolf & Company, P.C., independent public accountants with respect to the
Company. The Company Financial Statements referred to herein, as well as the
Company Financial Statements to be delivered pursuant to Section 5.8 hereof,
fairly present or will fairly present, as the case may be, the consolidated
financial condition of the Company as of the respective dates set forth therein,
and the consolidated results of operations, shareholders' equity and cash flows
of the Company for the respective periods or as of the respective dates set
forth therein.
(b) Each of the Company Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Company and the Company
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Company and
the Company Subsidiaries are being maintained in material
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compliance with applicable legal and accounting requirements, and such books and
records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of the
Company and its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of the Company as of March
31, 1996 (including related notes) and (ii) of liabilities incurred since March
31, 1996 in the ordinary course of business, neither the Company nor any Company
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.8 Material Adverse Change
Since March 31, 1996 (i) the Company and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement, and
excluding the transactions contemplated hereby) and (ii) no event has occurred
or circumstance arisen that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on the Company.
3.9 Environmental Matters
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a Material Adverse Effect on the Company. Neither the Company nor a Company
Subsidiary has received any communication alleging that the Company or a Company
Subsidiary is not in such compliance and, to the best knowledge of the Company,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties
owned, leased or operated by the Company or a Company Subsidiary has been or is
in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
Material Adverse Effect on the Company.
(c) To the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Company or a Company
Subsidiary or against any person or entity whose liability for any Environmental
Claim the Company or a Company Subsidiary has or may have retained or assumed
either contractually or by operation of law, except such which would not have a
Material Adverse Effect on the Company.
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(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or a Company Subsidiary as of the date hereof.
3.10 Tax Matters
(a) The Company and its Subsidiaries have timely filed all federal,
state and local (and, if applicable, foreign) income, franchise, bank, excise,
real property, personal property and other tax returns required by applicable
law to be filed by them (including, without limitation, estimated tax returns,
income tax returns, information returns and withholding and employment tax
returns) and have paid, or where payment is not required to have been made, have
set up an adequate reserve or accrual for the payment of, all material taxes
required to be paid in respect of the periods covered by such returns and, as of
the Effective Time, will have paid, or where payment is not required to have
been made, will have set up an adequate reserve or accrual for the payment of,
all material taxes for any subsequent periods ending on or prior to the
Effective Time. Neither the Company nor a Company Subsidiary will have any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and its Subsidiaries are complete and accurate in all
material respects. Neither the Company nor a Company Subsidiary is delinquent in
the payment of any tax, assessment or governmental charge or, except as
Previously Disclosed, has requested any extension of time within which to file
any tax returns in respect of any fiscal year or portion thereof which have not
since been filed. Except as Previously Disclosed, the federal, state and local
income tax returns of the Company and its Subsidiaries have been examined by the
applicable tax authorities (or are closed to examination due to the expiration
of the applicable statute of limitations) and no deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against the Company or a Company Subsidiary as a
result of such examinations or otherwise which have not been settled and paid.
There are currently no agreements in effect with respect to the Company or a
Company Subsidiary to extend the period of limitations for the assessment or
collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or a Company Subsidiary (nor does the Company
have any knowledge that the Internal Revenue Service has proposed any such
adjustment or change of accounting method) or (iii) has filed
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a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
3.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the Company or a Company Subsidiary or against any asset,
interest or right of the Company or a Company Subsidiary, or against any
officer, director or employee of any of them that in any such case, if decided
adversely, would have a Material Adverse Effect on the Company. Neither the
Company nor a Company Subsidiary is a party to any order, judgment or decree
which has or could reasonably be expected to have a Material Adverse Effect on
the Company.
3.12 Compliance with Laws
(a) Each of the Company and the Company Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor a Company Subsidiary is in violation of its
respective Articles of Organization, Charter or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (including, without
limitation, all banking (including without limitation all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect on the
Company; and neither the Company nor a Company Subsidiary has received any
notice or communication from any federal, state or local governmental authority
asserting that the Company or a Company Subsidiary is in violation of any of the
foregoing which could reasonably be expected to have a Material Adverse Effect
on the Company. Neither the Company nor a Company Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all savings associations or savings and loan holding companies
issued by governmental authorities), and neither of them has received any
written communication requesting that it enter into any of the foregoing.
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3.13 Certain Information
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 and any amendment thereto becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) the Proxy Statement, as of the date(s) such Proxy Statement is mailed to
shareholders of the Company and the Acquiror and up to and including the date(s)
of the meetings of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a later
date shall be deemed to modify information as of an earlier date. The Proxy
Statement mailed by the Company to its shareholders in connection with the
meeting of shareholders at which this Agreement will be considered by such
shareholders will comply as to form in all material respects with the Exchange
Act and the rules and regulations promulgated thereunder.
3.14 Employee Benefit Plans
(a) The Company has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Company or
any Company Subsidiary (the "Company Employee Plans"), whether written or oral,
and the Company has previously furnished or made available to the Acquiror
accurate and complete copies of the same together with (i) the most recent
actuarial and financial reports prepared with respect to any qualified plans,
(ii) the most recent annual reports filed with any governmental agency, and
(iii) all rulings and determination letters and any open requests for rulings or
letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any pension plan
maintained by either of them and qualified under Section 401 of the Code or, to
the best of the Company's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
any employees of the Company or a Company Subsidiary. To the best of the
Company's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary participates in or has incurred any liability under Section 4201 of
ERISA for a complete or partial withdrawal from a multi-employer plan (as such
term is defined in ERISA).
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(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "Company Pension
Plan") which is intended to qualify under Section 401 of the Code to the effect
that such plan is qualified under Section 401 of the Code and the trust
associated with such employee pension plan is tax exempt under Section 501 of
the Code. No such letter has been revoked or, to the best of the Company's
knowledge, is threatened to be revoked and the Company does not know of any
ground on which such revocation may be based. Neither the Company nor any
Company Subsidiary has any liability under any such plan that is not reflected
on the consolidated statement of financial condition of the Company at March 31,
1996 included in the Company Financial Statements, other than liabilities
incurred in the ordinary course of business in connection therewith subsequent
to the date thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Company Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on the Company.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Company Employee
Plan or ERISA; no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any Company Pension Plan, and there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof.
3.15 Certain Contracts
(a) Except as Previously Disclosed, neither the Company nor a Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the
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Company or a Company Subsidiary (other than in the case of the Bank deposits,
FHLB advances, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business) or the guarantee by the Company
or a Company Subsidiary of any obligation, other than by the Bank in the
ordinary course of its banking business, (ii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election or retention in office of any present or former director, officer or
employee of the Company or a Company Subsidiary, (iii) any agreement,
arrangement or understanding pursuant to which any payment (whether of severance
pay or otherwise) became or may become due to any director, officer or employee
of the Company or a Company Subsidiary upon execution of this Agreement or upon
or following consummation of the transactions contemplated by this Agreement
(either alone or in connection with the occurrence of any additional acts or
events); (iv) any agreement, arrangement or understanding pursuant to which the
Company or a Company Subsidiary is obligated to indemnify any director, officer,
employee or agent of the Company or a Company Subsidiary; (v) any agreement,
arrangement or understanding to which the Company or a Company Subsidiary is a
party or by which any of the same is bound which limits the freedom of the
Company or a Company Subsidiary to compete in any line of business or with any
person, (vi) any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by the OTS, the FDIC or any other regulatory
agency, or (vii) any other agreement, arrangement or understanding which would
be required to be filed as an exhibit to the Company's Annual Report on Form
10-K under the Exchange Act and which has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Company, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
3.16 Brokers and Finders
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
3.17 Insurance
Each of the Company and its Subsidiaries is insured for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies
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engaged in a similar business would, in accordance with good business practice,
customarily be insured and has maintained all insurance required by applicable
laws and regulations. The Company has Previously Disclosed all policies of
insurance maintained by it or a Company Subsidiary as of the date hereof and any
claims thereunder in excess of $50,000 since January 1, 1994.
3.18 Properties
All real and personal property owned by the Company or its Subsidiaries
or presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on the
business of the Company and its Subsidiaries in the ordinary course of business
consistent with their past practices. The Company has good and marketable title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of the
material properties and assets, real and personal, reflected on the consolidated
statement of financial condition of the Company as of March 31, 1996 included in
the Company Financial Statements or acquired after such date, except (i) liens
for current taxes not yet due or payable (ii) pledges to secure deposits and
other liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent and (iv) as reflected on the consolidated
statement of financial condition of the Company as of March 31, 1996 included in
the Company Financial Statements. All real and personal property which is
material to the Company's business on a consolidated basis and leased or
licensed by the Company or a Company Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms and such leases will not terminate or lapse prior to the Effective Time.
3.19 Labor
No work stoppage involving the Company or a Company Subsidiary is
pending or, to the best knowledge of the Company, threatened. Neither the
Company nor a Company Subsidiary is involved in, or threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding
involving the employees of the Company or a Company Subsidiary which could have
a Material Adverse Effect on the Company. Employees of the Company and the
Company Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of the Company's knowledge, there have been no
efforts to unionize or organize any employees of the Company or any of the
Company Subsidiaries during the past five years.
3.20 Required Vote; Inapplicability of Antitakover Statutes
(a) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.21 hereof, the affirmative vote of the holders
of two thirds of the
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issued and outstanding shares of Company Common Stock is necessary to approve
this Agreement and the transactions contemplated hereby on behalf of the
Company.
(b) A majority of the Continuing Directors (as defined in Section 3G of
the Articles of Organization of the Company) has approved the Merger and this
Agreement such that the provisions of Section 3 of the Articles of Organization
of the Company is inapplicable to this Agreement and the transactions
contemplated hereby.
(c) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.21 hereof, no "fair price," "moratorium,"
control share acquisition" or other form of antitakeover statute or regulation,
including without limitation Chapters 110D and 110F of the MBCL, is applicable
to this Agreement and the transactions contemplated hereby.
3.21 Ownership of Acquiror Common Stock
As of the date hereof, neither the Company nor, to its best knowledge,
any of its affiliates or associates (as such terms are defined under the
Exchange Act), (i) beneficially own, directly or indirectly, or (ii) are parties
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of Acquiror Common Stock
which in the aggregate represent 5% or more of the outstanding shares of
Acquiror Common Stock (other than shares held in a fiduciary capacity and
beneficially owned by third parties, shares taken in consideration of debts
previously contracted or in the case of the Company shares which may be acquired
pursuant to the Acquiror Stock Option Agreement).
3.22 Disclosures
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company to
the Acquiror in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as follows:
4.1 Capital Structure
The authorized capital stock of the Acquiror consists of 100,000,000
shares of Acquiror Common Stock and 5,000,000 shares of Acquiror Preferred
Stock. As of April 30, 1996, there were 25,173,106 shares of Acquiror Common
Stock issued and outstanding, 423,444 shares of Acquiror Common Stock were held
as treasury stock and not outstanding and there were no shares of Acquiror
Preferred Stock issued and outstanding. All outstanding shares of Acquiror
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Acquiror Common Stock has
been issued in violation of the preemptive rights of any person, firm or entity.
As of the date hereof, there are no Rights authorized, issued or outstanding
with respect to the capital stock of the Acquiror, except for (i) shares of
Acquiror Common Stock issuable pursuant to the Acquiror Employee Stock Benefit
Plans, (ii) shares of Acquiror Common Stock issuable pursuant to the Acquiror
Rights Agreement and (iii) by virtue of this Agreement and the Acquiror Stock
Option Agreement.
4.2 Organization, Standing and Authority of the Acquiror
The Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maine with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Acquiror. The Acquiror
is duly registered as a bank holding company under the BHCA and the regulations
of the FRB thereunder. The Acquiror has heretofore delivered to the Company true
and complete copies of the Articles of Incorporation and Bylaws of the Acquiror
as in effect as of the date hereof.
4.3 Ownership of the Acquiror Subsidiaries
The Acquiror has Previously Disclosed each direct or indirect Acquiror
Subsidiary and identified Acquiror Maine Bank, Acquiror National Bank and
Acquiror New Hampshire Bank as its only Significant Subsidiaries as of the date
hereof. The outstanding shares of capital stock of each of the Acquiror
Subsidiaries which is a Significant Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable (except as otherwise provided
with respect to the capital stock of the Acquiror Maine Bank and the Acquiror
National Bank by the MRSA and the National Bank Act, respectively) and are
directly or indirectly owned by the Acquiror free and clear of all liens,
claims, encumbrances, charges,
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pledges, restrictions or rights of third parties of any kind whatsoever. No
Rights are authorized, issued or outstanding with respect to the capital stock
or other ownership interests of any Acquiror Subsidiary which is a Significant
Subsidiary and there are no agreements, understandings or commitments relating
to the right of the Acquiror to vote or to dispose of said shares or other
ownership interests.
4.4 Organization, Standing and Authority of the Acquiror Subsidiaries
Each Acquiror Subsidiary which is a Significant Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the United States or the laws of the jurisdiction in which it is organized,
as applicable. Each of the Acquiror Subsidiaries which is a Significant
Subsidiary (i) has full power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted, and (ii) is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such qualification and where the failure to be so licensed,
qualified or in good standing would have a Material Adverse Effect on the
Acquiror. The deposit accounts of each Acquiror Subsidiary which is an insured
depository institution under the FDIA are insured by either the BIF or, in the
case of certain deposits, the SAIF to the maximum extent permitted by the FDIA,
and each such entity has paid all premiums and assessments required by the FDIA
and the regulations thereunder.
4.5 Authorized and Effective Agreement
(a) Each of the Acquiror and the Acquiror Sub has all requisite
corporate power and authority to enter into this Agreement and (subject to
receipt of all necessary governmental approvals and the approval of the
Acquiror's shareholders of this Agreement) to perform all of its obligations
under this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
the Acquiror and the Acquiror Sub, except for the approval of this Agreement by
the Acquiror's shareholders. This Agreement has been duly and validly executed
and delivered by the Acquiror and the Acquiror Sub and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of the Acquiror and the Acquiror Sub which is enforceable
against the Acquiror and the Acquiror Sub in accordance with its terms, subject,
as to enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger and
the Branch Sale) nor compliance by the Acquiror and the Acquiror Sub with any of
the provisions hereof (i) does or will conflict with or result in a breach of
any provisions of the Articles of Incorporation or Bylaws of the Acquiror,
Acquiror Sub or any Acquiror Subsidiary which is a Significant Subsidiary, (ii)
violate, conflict with or result in a breach of any term, condition or provision
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of, or constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of the
Acquiror, Acquiror Sub or any Acquiror Subsidiary which is a Significant
Subsidiary pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which the
Acquiror, Acquiror Sub or any Acquiror Subsidiary which is a Significant
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Acquiror, Acquiror Sub or
any Acquiror Subsidiary which is a Significant Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents and approvals of, as applicable, the FRB, the OTS, the FDIC, the
Massachusetts Board, the MHPF, the Central Fund, the Bank Commissioner and the
Superintendent, (ii) the filing and effectiveness of the Form S-4 with the
Commission, (iii) compliance with applicable state securities or "blue sky" laws
and the NASD Bylaws in connection with the issuance of Acquiror Common Stock
pursuant to this Agreement, (iv) the approval of this Agreement by the requisite
vote of the shareholders of the Company and the Acquiror, (v) the filing of
Articles of Merger with the Secretary of State of the State of Maine and the
Secretary of State of the Commonwealth of Massachusetts pursuant to the MBCA and
the MBCL, respectively, in connection with the Merger and (vi) review of the
Merger by the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals as are Previously Disclosed, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary on the part of the Acquiror, the Acquiror Sub or
Acquiror New Hampshire Bank in connection with (i) the execution and delivery by
the Acquiror and the Acquiror Sub of this Agreement and the consummation by the
Acquiror of the transactions contemplated hereby and (ii) the execution and
delivery by the Acquiror New Hampshire Bank of the Branch Sale Agreement and the
consummation by the Acquiror New Hampshire Bank of the transactions contemplated
thereby.
(d) As of the date hereof, the Acquiror is not aware of any reasons
relating to the Acquiror or any of its Subsidiaries (including without
limitation Community Reinvestment Act compliance) why all consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Branch
Sale Agreement and (ii) the continuation by the Acquiror after the Effective
Time of the business of each of the Acquiror and the Company as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which, in the reasonable opinion of the Acquiror, could have a
Material Adverse Effect on the Acquiror or the Company or materially impair the
value of the Company and the Bank to the Acquiror.
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4.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1993, the Acquiror has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, the Acquiror, the Acquiror Sub and each
Acquiror Subsidiary which is an insured depository institution under the FDIA
has duly filed with the FRB, the OCC, the FDIC, the Bank Commissioner and the
Superintendent, as the case may be, in correct form the reports required to be
filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the requirements
of applicable laws and regulations. In connection with the most recent
examinations of the Acquiror or an Acquiror Subsidiary by the FRB, the OCC, the
FDIC, the Bank Commissioner or the Superintendent, neither the Acquiror nor any
Acquiror Subsidiary was required to correct or change any action, procedure or
proceeding which the Acquiror or the Acquiror Subsidiary believes has not been
corrected or changed as required as of the date hereof and which could have a
Material Adverse Effect on the Acquiror.
4.7 Financial Statements
(a) The Acquiror has previously delivered or made available to the
Company accurate and complete copies of the Acquiror Financial Statements which,
in the case of the consolidated statements of financial condition of the
Acquiror as of December 31, 1995, 1994 and 1993 and the consolidated statements
of operations, shareholders' equity and cash flows for each of the three years
ended December 31, 1995, 1994 and 1993, are accompanied by the audit reports of
KPMG Peat Marwick LLP, independent public accountants with respect to the
Acquiror. The Acquiror Financial Statements referred to herein, as well as the
Acquiror Financial Statements to be delivered pursuant to Section 5.8 hereof,
fairly present or will fairly present, as the case may be, the consolidated
financial condition of the Acquiror as of the respective dates set forth
therein, and the consolidated results of operations, shareholders' equity and
cash flows of the Acquiror for the respective periods or as of the respective
dates set forth therein.
(b) Each of the Acquiror Financial Statements referred to in Section
4.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Acquiror and the Acquiror
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Acquiror and
the Acquiror Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and all such books and
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records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of the
Acquiror and the Acquiror Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for
in the consolidated statement of financial condition of the Acquiror as of March
31, 1996 (including related notes) and (ii) of liabilities incurred since March
31, 1996 in the ordinary course of business, neither the Acquiror nor any
Acquiror Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise, material to the financial condition, results of operations or
business of the Acquiror on a consolidated basis.
4.8 Material Adverse Change
Since March 31, 1996, no event has occurred or circumstance arisen
that, individually or in the aggregate, has had or is reasonably likely to have
a Material Adverse Effect on the Acquiror.
4.9 Environmental Matters
(a) To the best of the Acquiror's knowledge, the Acquiror and the
Acquiror Subsidiaries are in compliance with all Environmental Laws, except for
any violations of any Environmental Law which would not, singly or in the
aggregate, have a Material Adverse Effect on the Acquiror. Neither the Acquiror
nor any Acquiror Subsidiary has received any communication alleging that the
Acquiror or any Acquiror Subsidiary is not in such compliance and, to the best
knowledge of the Acquiror, there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
(b) To the best of the Acquiror's knowledge, none of the properties
owned, leased or operated by the Acquiror or the Acquiror Subsidiaries has been
or is in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
Material Adverse Effect on the Acquiror.
(c) To the best of the Acquiror's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Acquiror or any
Acquiror Subsidiary or against any person or entity whose liability for any
Environmental Claim the Acquiror or any Acquiror Subsidiary has or may have
retained or assumed either contractually or by operation of law, except such
which would not have a Material Adverse Effect on the Acquiror.
4.10 Tax Matters
The Acquiror and the Acquiror Subsidiaries, and each of their
predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank,
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excise, real property, personal property and other tax returns required by
applicable law to be filed by them (including, without limitation, estimated tax
returns, income tax returns, information returns and withholding and employment
tax returns) and have paid, or where payment is not required to have been made,
have set up an adequate reserve or accrual for the payment of, all material
taxes required to be paid in respect of the periods covered by such returns and,
as of the Effective Time, will have paid, or where payment is not required to
have been made, will have set up an adequate reserve or accrual for the payment
of, all material taxes for any subsequent periods ending on or prior to the
Effective Time. Neither the Acquiror nor any of the Acquiror Subsidiaries will
have any material liability for any such taxes in excess of the amounts so paid
or reserves or accruals so established. Except as Previously Disclosed, as of
the date hereof, no audit, examination or deficiency or refund litigation with
respect to any federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Acquiror and the Acquiror Subsidiaries is pending or, to the best
of the Acquiror's knowledge, threatened.
4.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Acquiror
threatened against the Acquiror or any Acquiror Subsidiary or against any asset,
interest or right of the Acquiror or any Acquiror Subsidiary, or against any
officer, director or employee of any of them that in any such case, if decided
adversely, would have a Material Adverse Effect on the Acquiror. Neither the
Acquiror nor any of the Acquiror Subsidiaries is a party to any order, judgment
or decree which has or could reasonably be expected to have a Material Adverse
Effect on the Acquiror.
4.12 Compliance with Laws
(a) Each of the Acquiror and each of the Acquiror Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a Material Adverse Effect on the
Acquiror; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Acquiror, no suspension or cancellation of any of the same is threatened.
(b) Neither the Acquiror nor any of the Acquiror Subsidiaries is in
violation of its respective Articles of Incorporation, Charter or other
chartering instrument or Bylaws, or of any applicable federal, state or local
law 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,
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antitrust, and wage and hour laws, ordinances, orders, rules and regulations),
or in default with respect to any order, writ, injunction or decree of any
court, or in default under any order, license, regulation or demand of any
governmental agency, any of which violations or defaults could reasonably be
expected to have a Material Adverse Effect on the Acquiror; and neither the
Acquiror nor any Acquiror Subsidiary has received any notice or communication
from any federal, state or local governmental authority asserting that the
Acquiror or any Acquiror Subsidiary is in violation of any of the foregoing
which could reasonably be expected to have a Material Adverse Effect on the
Acquiror. Neither the Acquiror nor any Acquiror Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all banks, savings associations or holding companies thereof,
as applicable, issued by governmental authorities), and none of them has
received any written communication requesting that it enter into any of the
foregoing.
4.13 Certain Information
None of the information relating to the Acquiror and the Acquiror
Subsidiaries to be included or incorporated by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the Proxy
Statement, as of the date(s) such Proxy Statement is mailed to shareholders of
the Acquiror and the Company and up to and including the date(s) of the meetings
of shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by the Acquiror to shareholders of the Company and the Acquiror in connection
with the meetings of shareholders at which this Agreement will be considered by
such shareholders will comply as to form in all material respects with the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder.
4.14 Employee Benefit Plans
(a) The Acquiror has Previously Disclosed all stock option, employee
stock purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Acquiror or
any Acquiror Subsidiary (the "Acquiror Employee Plans"), whether written or
oral.
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(b) None of the Acquiror, any Acquiror Subsidiary, any pension plan
maintained by any of them and qualified under Section 401 of the Code or, to the
best of the Acquiror's knowledge, any fiduciary of such plan has incurred any
material liability to the PBGC or the Internal Revenue Service with respect to
any employees of the Acquiror or any Acquiror Subsidiary. To the best of the
Acquiror's knowledge, no reportable event under Section 4043(b) of ERISA has
occurred with respect to any such pension plan.
(c) Neither the Acquiror nor any Acquiror Subsidiary participates in or
has incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Acquiror Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (an
"Acquiror Pension Plan") which is intended to qualify under Section 401 of the
Code to the effect that such plan is qualified under Section 401 of the Code and
the trust associated with such employee pension plan is tax exempt under Section
501 of the Code. No such letter has been revoked or, to the best of the
Acquiror's knowledge, is threatened to be revoked and the Acquiror does not know
of any ground on which such revocation may be based. Neither the Acquiror nor
any Acquiror Subsidiary has any liability under any such plan that is not
reflected on the consolidated statement of financial condition of the Acquiror
at March 31, 1996 included in the Acquiror Financial Statements, other than
liabilities incurred in the ordinary course of business in connection therewith
subsequent to the date thereof.
(e) To the best of the Acquiror's knowledge, no prohibited transaction
(which shall mean any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Acquiror Employee Plan which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or otherwise have a Material Adverse Effect on the Acquiror.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Acquiror
Employee Plan or ERISA; no accumulated funding deficiency (as defined in Section
302 of ERISA or Section 412 of the Code), whether or not waived, exists with
respect to any Acquiror Pension Plan, and there is no "unfunded current
liability" (as defined in Section 412 of the Code) with respect to any Acquiror
Pension Plan.
(g) To the best of the Acquiror's knowledge, the Acquiror Employee
Plans have been operated in compliance in all material respects with the
applicable provisions of ERISA, the Code, all regulations, rulings and
announcements promulgated or issued thereunder and all other applicable
governmental laws and regulations.
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(h) There are no pending or, to the best knowledge of the Acquiror,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Acquiror Employee Plans or any trust related thereto or any
fiduciary thereof.
4.15 Certain Contracts
Neither the Acquiror nor any Acquiror Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Acquiror, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
4.16 Brokers and Finders
Except as Previously Disclosed, neither the Acquiror nor any Acquiror
Subsidiary, nor any of their respective directors, officers or employees, has
employed any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated hereby.
4.17 Insurance
The Acquiror and each Acquiror Subsidiary is insured for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured and has maintained all insurance
required by applicable laws and regulations.
4.18 Properties
All real and personal property owned by the Acquiror or each Acquiror
Subsidiary which is a Significant Subsidiary or presently used by any of them in
its respective business is in an adequate condition (ordinary wear and tear
excepted) and is sufficient to carry on its business in the ordinary course of
business consistent with their past practices. The Acquiror has good and
marketable title free and clear of all liens, encumbrances, charges, defaults or
equities (other than equities of redemption under applicable foreclosure laws)
to all of the material properties and assets, real and personal, reflected on
the consolidated statement of financial condition of the Acquiror as of March
31, 1996 included in the Acquiror Financial Statements or acquired after such
date, except (i) liens for current taxes not yet due or payable (ii) pledges to
secure deposits and other liens incurred in the ordinary course of its banking
business, (iii) such imperfections of title, easements and encumbrances, if any,
as are not material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of the Acquiror as of March
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31, 1996 included in the Acquiror Financial Statements. All real and personal
property which is material to the Acquiror's business on a consolidated basis
and leased or licensed by the Acquiror or an Acquiror Subsidiary is held
pursuant to leases or licenses which are valid and enforceable in accordance
with their respective terms and such leases will not terminate or lapse prior to
the Effective Time.
4.19 Labor
No work stoppage involving the Acquiror or an Acquiror Subsidiary which
is a Significant Subsidiary is pending or, to the best knowledge of the
Acquiror, threatened. Neither the Acquiror nor any Acquiror Subsidiary is
involved in, or threatened with or affected by, any labor dispute, arbitration,
lawsuit or administrative proceeding involving its employees which could have a
Material Adverse Effect on the Acquiror. Employees of the Acquiror and any
Acquiror Subsidiary are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees, and to the best of the Acquiror's knowledge, there have been no
efforts to unionize or organize any employees of the Acquiror or any Acquiror
Subsidiary during the past five years.
4.20 Required Vote; Acquiror Rights Agreement
(a) A majority of the total votes cast on the proposal by the holders
of the issued and outstanding shares of Acquiror Common Stock is necessary to
approve this Agreement and the transactions contemplated hereby on behalf of the
Acquiror.
(b) There is no Acquiring Person, and none of a Stock Acquisition Date,
a Distribution Date or a Triggering Event has occurred, in each case as such
terms are defined in the Acquiror Rights Agreement.
4.21 Ownership of Company Common Stock.
As of the date hereof, neither the Acquiror nor, to its best knowledge,
any of its affiliates or associates (as such terms are defined under the
Exchange Act), (i) beneficially own, directly or indirectly, or (ii) are parties
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of Company Common Stock
which in the aggregate represent 5% or more of the outstanding shares of Company
Common Stock (other than shares held in a fiduciary capacity and beneficially
owned by third parties, shares taken in consideration of debts previously
contracted or in the case of the Acquiror shares which may be acquired pursuant
to the Company Stock Option Agreement).
4.22 Disclosures
None of the representations and warranties of the Acquiror or any of
the written information or documents furnished or to be furnished by the
Acquiror to the Company in
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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 (including, without limitation,
satisfaction of the conditions to consummation of the Merger specified in
Article VI of this Agreement) and the Branch Sale on or before December 31, 1996
or, in the event that requisite regulatory and other approvals have not yet been
obtained, as promptly as practicable thereafter, and to otherwise enable
consummation of the transactions contemplated hereby, and shall cooperate fully
with the other party or parties hereto to that end.
5.2 Shareholder Meetings
Each of the Acquiror and the Company shall take all action necessary to
properly call and convene a meeting of its shareholders as soon as practicable
after the date hereof to consider and vote upon this Agreement and the
transactions contemplated hereby. The Board of Directors of the Acquiror and the
Board of Directors of the Company will recommend that the shareholders of the
Acquiror and the Company, respectively, approve this Agreement and the
transactions contemplated hereby, provided that the Board of Directors of the
Acquiror and the Board of Directors of the Company may fail to make such
recommendation, or withdraw, modify or change any such recommendation, if such
Board of Directors, after having consulted with and considered the advice of
outside counsel, has determined that the making of such recommendation, or the
failure to withdraw, modify or change such recommendation, would constitute a
breach of the fiduciary duties of such directors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the Acquiror and the Company shall use its reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing, and the Acquiror and the Company each shall thereafter
promptly mail the Proxy Statement to its respective
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shareholders. The Acquiror also shall use its reasonable best efforts to obtain
all necessary state securities law or "blue sky" permits and approvals required
to carry out the issuance of Acquiror Common Stock pursuant to the Merger and
all other transactions contemplated by this Agreement, and the Company shall
furnish all information concerning the Company and the holders of the Company
Common Stock as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the Branch Sale). The
Acquiror and the Company shall have the right to review in advance, and to the
extent practicable each will consult with the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) The Acquiror and the Company shall, upon request, furnish each
other with all information concerning themselves, their respective Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the Form S-4 or
any other statement, filing, notice or application made by or on behalf of the
Acquiror, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger, the Branch Sale and the other
transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 Investigation and Confidentiality
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other party all books, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities of
it and its Subsidiaries, including, but not limited to,
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all books of account (including the general ledger), tax records, minute books
of meetings of boards of directors (and any committees thereof) and
shareholders, organizational documents, bylaws, material contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the other party may have a reasonable interest,
provided that such access shall be reasonably related to the transactions
contemplated hereby and, in the reasonable opinion of the respective parties
providing such access, not unduly interfere with normal operations. Each party
and its Subsidiaries shall make their respective directors, officers, employees
and agents and authorized representatives (including counsel and independent
public accountants) available to confer with the other party and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and shall not unduly interfere with normal
operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to the
party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for five years from the date the proposed transactions are abandoned but shall
not apply to (i) any information which (x) the party receiving the information
can establish by convincing evidence was already in its possession prior to the
disclosure thereof by the party furnishing the information; (y) was then
generally known to the public; or (z) became known to the public through no
fault of the party receiving the information; or (ii) disclosures pursuant to a
legal requirement or in accordance with an order of a court of competent
jurisdiction, provided that the party which is the subject of any such legal
requirement or order shall use its best efforts to give the other party at least
ten business days prior notice thereof.
5.5 Press Releases
The Acquiror and the Company shall agree with each other as to the form
and substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
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
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the prior written consent of the Acquiror, the Company and its Subsidiaries
shall carry on their respective businesses in the ordinary course consistent
with past practice. During such period, the Company also will use all reasonable
efforts to (x) preserve its business organization and that of the Bank intact,
(y) keep available to itself and the Acquiror the present services of the
employees of the Company and the Bank and (z) preserve for itself and the
Acquiror the goodwill of the customers of the Company and the Bank and others
with whom business relationships exist. Without limiting the generality of the
foregoing, except with the prior written consent of the Acquiror or as expressly
contemplated hereby, between the date hereof and the Effective Time, the Company
shall not, and shall cause each Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Common Stock, except for regular
quarterly cash dividends at a rate per share of Company Common Stock
not in excess of $.12 per share, which shall have the same record and
payment dates as the record and payment dates relating to dividends on
the Acquiror Common Stock (as Previously Disclosed by the Acquiror), it
being the intention of the parties that the shareholders of the Company
receive dividends for any particular calendar quarter on either the
Company Common Stock or the Acquiror Common Stock acquired in exchange
therefor pursuant to the terms of this Agreement but not both,
provided, however, that if the Effective Time does not occur prior to
the record date for the first regular quarterly dividend in 1997, the
regular per share quarterly dividend on the Company Common Stock for
such quarter (and any subsequent quarterly dividends prior to the
Effective Time) may be increased to up to $.14 per share, and further
provided that nothing contained herein shall be deemed to affect the
ability of a Company Subsidiary to pay dividends on its capital stock
to the Company;
(ii) issue any shares of its capital stock, other than in the
case of the Company pursuant to the Company Stock Option Agreement and
upon exercise of the Company Options referred to in Section 3.1 hereof,
or issue, grant, modify or authorize any Rights, other than the Company
Stock Option Agreement; purchase any shares of Company Common Stock; or
effect any recapitalization, reclassification, stock dividend, stock
split or like change in capitalization;
(iii) amend its Articles of Organization, Charter, Bylaws or
similar organizational documents; impose, or suffer the imposition, on
any share of stock or other ownership interest held by the Company in a
Company Subsidiary of any lien, charge or encumbrance or permit any
such lien, charge or encumbrance to exist; or waive or release any
material right or cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any bonus or
severance to, or provide any other
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new employee benefit or incentive to, any of its directors, officers or
employees, except (i) as may be required pursuant to binding
commitments existing on the date hereof and (ii) such as may be granted
in the ordinary course of business consistent with past practice,
including without limitation pursuant to the Company's Performance
Compensation Program, as Previously Disclosed by the Company pursuant
to Section 3.14(a) hereof;
(v) except as Previously Disclosed, enter into or, except as
may be required by law, modify any pension, retirement, stock option,
stock purchase, stock appreciation right, savings, profit sharing,
deferred compensation, supplemental retirement, consulting, bonus,
group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors, officers or employees; make any
contributions to the Company's defined benefit Pension Plan or 401(k)
Plan not in the ordinary course of business consistent with past
practice; or make any contributions to the Company's Employee Stock
Ownership Plan, other than necessary to enable such plan to make
required payments on its indebtedness as of the date hereof;
(vi) enter into (w) any agreement, arrangement or commitment
not made in the ordinary course of business, (x) any agreement,
indenture or other instrument relating to the borrowing of money by the
Company or a Company Subsidiary or guarantee by the Company or any
Company Subsidiary of any such obligation, except in the case of the
Bank for deposits, FHLB advances, federal funds purchased and
securities sold under agreements to repurchase in the ordinary course
of business consistent with past practice, (y) any agreement,
arrangement or commitment relating to the employment of an employee, or
amend any such existing agreement, arrangement or commitment, provided
that the Company and the Bank may employ an employee in the ordinary
course of business if the employment of such employee is terminable by
the Company or the Bank at will without liability, other than as
required by law; or (z) any contract, agreement or understanding with a
labor union;
(vii) change its method of accounting in effect for the year
ended December 31, 1995, except as required by changes in laws or
regulations or generally accepted accounting principles, or change any
of its methods of reporting income and deductions for federal income
tax purposes from those employed in the preparation of its federal
income tax return for the fiscal year ended October 31, 1995, except as
required by changes in laws or regulations;
(viii) make any capital expenditures in excess of $50,000
individually or $250,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
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(ix) file any applications or make any contract with respect
to branching or site location or relocation;
(x) acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) any business or entity;
(xi) enter into any futures contract, option contract,
interest rate caps, interest rate floors, interest rate exchange
agreement or other agreement for purposes of hedging the exposure of
its interest-earning assets and interest-bearing liabilities to changes
in market rates of interest (other than forward commitments to sell
loans in the ordinary course of business);
(xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the transfer
and assignment of any such assets or rights;
(xiii) take any action that would prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368
of the Code, provided, however, that nothing contained herein shall
limit the ability of the Company to exercise its rights under the
Acquiror Stock Option Agreement;
(xiv) take any action that would result in any of the
representations and warranties of the Company contained in this
Agreement not to be true and correct in any material respect at the
Effective Time; or
(xv) agree to do any of the foregoing.
In addition to the foregoing, the Company agrees to terminate the
existing contract with Wausau providing for a check item processing system using
imaging technology in accordance with its terms and shall not, and shall cause
each Company Subsidiary not to, take any action to acquire or otherwise install
or implement any new check item processing system without the prior written
consent of the Acquiror.
(b) During the period from the date of this Agreement and continuing
until the Effective Time, the Acquiror shall continue to conduct its business
and the business of the Acquiror Subsidiaries which are Significant Subsidiaries
in a manner designed in its reasonable judgment to enhance the long-term value
of the Acquiror Common Stock and the business prospects of the Acquiror. Without
limiting the generality of the foregoing, except with the prior written consent
of the Company or as expressly contemplated hereby, between the date hereof and
the Effective Time, the Acquiror shall not, and shall cause each Acquiror
Subsidiary which is a Significant Subsidiary not to:
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(i) amend its Articles of Incorporation or Bylaws in a manner
which would adversely affect in any manner the terms of the Acquiror
Common Stock or the ability of the Acquiror to consummate the
transactions contemplated hereby;
(ii) make any acquisition or take any other action that
individually or in the aggregate could materially adversely affect the
ability of the Acquiror to consummate the transactions contemplated
hereby in a reasonably timely manner;
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends in an amount determined by the Board of
Directors in the ordinary course of business and consistent with past
practice, provided, however, that nothing contained herein shall be
deemed to affect the ability of (x) an Acquiror Subsidiary to pay
dividends on its capital stock to the Acquiror or (y) the Acquiror to
repurchase shares of Acquiror Common Stock (whether pursuant to an open
market purchase program, privately- negotiated transactions and/or a
self-tender offer) to fund some or all of the shares of Acquiror Common
Stock to be issued pursuant to this Agreement;
(iv) take any action that would prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368
of the Code; provided, however, that nothing contained herein shall
limit the ability of the Acquiror to exercise its rights under the
Company Stock Option Agreement;
(v) take any action that would result in any of the
representations and warranties of the Acquiror contained in this
Agreement not to be true and correct in any material respect at the
Effective Time; or
(vi) agree to do any of the foregoing.
5.7 Certain Actions
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, lease or purchase of all or a substantial portion
of the assets of, or any equity interest in, the Company or a Company Subsidiary
(other than with the Acquiror or an affiliate thereof), provided, however, that
the Board of Directors of the Company may furnish such information or
participate in such negotiations or discussions if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the failure to do the same would cause the members of such Board
of Directors to breach their fiduciary duties under applicable law. The Company
will promptly inform the Acquiror orally and in writing of any such request for
information or of any such negotiations or
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discussions, as well as instruct its and its Subsidiaries' directors, officers,
representatives and agents to refrain from taking any action prohibited by this
Section 5.7.
5.8 Current Information
During the period from the date of this Agreement to the Effective
Time, each party shall, upon the request of the other party, cause one or more
of its designated representatives to confer on a monthly or more frequent basis
with representatives of the other party regarding its financial condition,
operations and business and matters relating to the completion of the
transactions contemplated hereby. As soon as reasonably available, but in no
event more than 45 days after the end of each calendar quarter ending after the
date of this Agreement (other than the last quarter of each fiscal year ending
December 31), the Company and the Acquiror will deliver to the other party its
quarterly report on Form 10-Q under the Exchange Act, and, as soon as reasonably
available, but in no event more than 90 days after the end of each fiscal year,
the Company and the Acquiror will deliver to the other party its Annual Report
on Form 10-K. Within 25 days after the end of each month, the Company and the
Acquiror will deliver to the other party a consolidated balance sheet and a
consolidated statement of operations, without related notes, for such month
prepared in accordance with generally accepted accounting principles.
5.9 Indemnification; Insurance
(a) From and after the Effective Time through the sixth anniversary of
the Effective Time, the Acquiror (the "Indemnifying Party") shall indemnify and
hold harmless each present and former director, officer and employee of the
Company or a Company Subsidiary, in each case determined as of the Effective
Time (the "Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent to which such Indemnified
Parties were entitled under the Articles of Organization and Bylaws of the
Company or in similar organizational documents of a Company Subsidiary, in each
case as in effect on the date hereof, provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim. Without limiting the
foregoing obligation, the Acquiror also agrees that all limitations of liability
existing in favor of the Indemnified Parties in the Articles of Organization and
Bylaws of the Company or in similar organizational documents of a Company
Subsidiary, in each case as in effect on the date hereof, arising out of matters
existing or occurring at or prior to the Effective Time shall survive the Merger
and shall continue in full force and effect for a period of six years from the
Effective Time, provided, however, that all such rights in respect of any claim
asserted or made within such period shall continue until the final disposition
of such claim.
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(b) Any Indemnified Party wishing to claim indemnification under
Section 5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest), (ii) the Indemnified Parties will cooperate in the
defense of any such matter, (iii) the Indemnifying Party shall not be liable for
any settlement effected without its prior written consent and (iv) the
Indemnifying Party shall have no obligation hereunder in the event a federal
banking agency or a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of an Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) The Acquiror shall cause the Surviving Corporation to maintain the
Company's existing directors' and officers' liability insurance policy as of the
date hereof (or a policy providing coverage on substantially the same terms and
conditions) for acts or omissions occurring prior to the Effective Time by
persons who are currently covered by such insurance policy maintained by the
Company for a period of three years following the Effective Time.
(d) In the event that the Acquiror or any of its respective successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 Directors
(a) The Acquiror agrees to take all action necessary to appoint or
elect, effective as of the Effective Time, one non-employee director of the
Company as of the date hereof who is designated by the Company and who both
meets the director qualification
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requirements set forth in the Acquiror's Bylaws and is otherwise acceptable to
the Acquiror as a director of the Acquiror. Such person shall serve until the
first annual meeting of shareholders of the Acquiror following the Effective
Time and until his successor is elected and qualified. Subject to compliance
with the director qualification requirements set forth in the Acquiror's Bylaws,
the Acquiror shall include such person on the list of nominees for director
presented by the Board of Directors of the Acquiror and for which said Board
shall solicit proxies at the first annual meeting of shareholders of the
Acquiror following the Effective Time, which person shall be nominated for a
three-year term.
(b) Following consummation of the Merger, the Board of Directors of the
Bank shall be comprised of the directors of the Bank immediately prior to the
Effective Time and such additional director or directors as may be designated by
the Acquiror. Directors of the Bank shall serve in their capacities as such in
accordance with the Charter and Bylaws of the Bank, as the same may be amended
from time to time.
5.11 Benefit Plans and Arrangements
(a) As soon as administratively practicable after the Effective Time,
the Acquiror shall take all reasonable action so that employees of the Company
and its Subsidiaries shall be entitled to participate in the Acquiror Employee
Plans of general applicability, and until such time the Company Employee Plans
shall remain in effect, provided that no employee of the Company or a Company
Subsidiary who becomes an employee of the Acquiror and subject to the Acquiror's
medical insurance plans shall be excluded from coverage thereunder on the basis
of a preexisting condition that was not also excluded under the Company's
medical insurance plans, except to the extent such preexisting condition was
excluded from coverage under the Company's medical insurance plans, in which
case this Section 5.11(a) shall not require coverage for such preexisting
condition. For purposes of determining eligibility to participate in and the
vesting of benefits under the Acquiror Employee Plans, the Acquiror shall
recognize years of service with the Company and a Company Subsidiary prior to
the Effective Time.
(b) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of the Acquiror or an Acquiror Subsidiary
as of the Effective Time, provided that the Acquiror or an Acquiror Subsidiary
shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of the Company or
any Company Subsidiary a right to continuing employment with the Acquiror or an
Acquiror Subsidiary after the Effective Time. To the extent that the employment
of any employee of the Company or any Company Subsidiary (other than any
employee who is party to an employment agreement) is involuntarily terminated
following the Effective Time, such employee will be entitled to receive
severance payments in accordance with, and to the extent provided in, the
Acquiror's severance plan regarding the Merger, a copy of which the Company
acknowledges has been provided to it by the Acquiror. For purposes of
determining benefits under such severance plan, the
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Acquiror shall recognize years of service with the Company and a Company
Subsidiary prior to the Effective Time.
(c) Following the Merger, the Acquiror shall, or shall cause the
Surviving Corporation and/or the Bank to, honor in accordance with their terms
the employment agreements, split-dollar insurance agreements, deferred fee and
compensation agreements and Supplemental Executive Retirement Plan which have
been Previously Disclosed by the Company to the Acquiror.
5.12 Branch Sale
The Acquiror and the Company shall take, and shall respectively cause
the Acquiror New Hampshire Bank and the Bank to take, all necessary and
appropriate actions, including causing the execution of the Branch Sale
Agreement, to effect the Branch Sale immediately after the Effective Time, or at
such other time thereafter as may be determined by the Acquiror in its sole
discretion, in accordance with the requirements of all applicable laws and
regulations and the terms of the Branch Sale Agreement. Notwithstanding the
foregoing, the closing of the Branch Sale shall not be a precondition to the
closing of the Merger, and the closing of the Merger shall not be delayed in
order to facilitate a simultaneous closing of the Merger and the Branch Sale.
5.13 Certain Policies; Integration
(a) If requested by the Acquiror, on the business day immediately prior
to the Effective Time, the Company shall, consistent with generally accepted
accounting principles, establish or adjust accruals and reserves as may be
necessary to conform the Company's accounting and credit loss reserve practices
and methods to those of the Acquiror (as such practices and methods are to be
applied to the Company or its Subsidiaries from and after the Effective Time)
and reflect the Acquiror's plans with respect to the conduct of the Company's
business following the Merger and to provide for the costs and expenses relating
to the consummation by the Company of the transactions contemplated by this
Agreement; provided, however, that the Company shall not be required to take
such action (i) if such action is prohibited by applicable law or (ii) unless
the Acquiror informs the Company that it has no reason to believe that all
conditions to the Acquiror's obligations to consummate the transactions
contemplated by this Agreement set forth in Article VI hereof will not be
satisfied or waived. The establishment or adjustment of such accruals and
reserves shall not constitute a breach of any representation or warranty of the
Company contained in this Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its directors, officers and employees
to, cooperate with and assist the Company in the formulation of a plan of
integration for the Acquiror and the Company and their respective banking
subsidiaries.
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5.14 Disclosure Supplements
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and delivered to
the other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in materials Previously Disclosed to
the other party or which is necessary to correct any information in such
materials which has been rendered materially inaccurate thereby; no such
supplement or amendment to such materials shall be deemed to have modified the
representations, warranties and covenants of the parties for the purpose of
determining whether the conditions set forth in Article VI hereof have been
satisfied.
5.15 Failure to Fulfill Conditions
In the event that either of the parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party or parties. Each party will
promptly inform the other party or parties of any facts applicable to it that
would be likely to prevent or materially delay approval of the Merger or the
Branch Sale by any Governmental Entity or third party or which would otherwise
prevent or materially delay completion of the Merger or the Branch Sale.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - The Acquiror, the Acquiror Sub and the Company
The respective obligations of the Acquiror, the Acquiror Sub and the
Company to effect the Merger shall be subject to satisfaction of the following
conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the Merger shall have been duly
and validly taken by the Acquiror and the Company, including approval by the
requisite vote of the respective shareholders of the Acquiror and the Company of
this Agreement.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the consummation of the Merger
shall have been received and all statutory waiting periods in respect thereof
shall have expired; and the Acquiror and the Company shall have procured all
other approvals, consents and waivers of each person (other than the
Governmental Entities referred to above) whose approval, consent or waiver is
necessary to the consummation of the Merger and the failure of which to obtain
would have the effects set forth in the following proviso clause; provided,
however, that no approval or consent referred to in this Section 6.1(b) shall be
deemed to have been received
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if it shall include any condition or requirement that, individually or in the
aggregate, would so materially reduce the economic or business benefits of the
transactions contemplated by this Agreement to the Acquiror that had such
condition or requirement been known the Acquiror, in its reasonable judgment,
would not have entered into this Agreement.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger.
(d) The Form S-4 shall have become effective under the Securities Act,
and the Acquiror shall have received all state securities laws or "blue sky"
permits and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Acquiror Common Stock in connection with the
Merger, and neither the Form S-4 nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the Commission or
any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection with
the Merger shall have been approved for listing on the Nasdaq Stock Market's
National Market.
(f) The Acquiror shall have received the written opinion of Elias,
Matz, Tiernan & Herrick L.L.P. to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code, and the Company
shall have received the written opinion of Foley, Hoag & Eliot LLP to such
effect and to the effect that (i) except for cash received in lieu of fractional
share interests, holders of Company Common Stock who receive Acquiror Common
Stock in the Merger will not recognize income, gain or loss for federal income
tax purposes, (ii) the basis of such Acquiror Common Stock will equal the basis
of the Company Common Stock for which it is exchanged, and (iii) the holding
period of such Acquiror Common Stock will include the holding period of the
Company Common Stock for which it is exchanged, assuming that such stock is a
capital asset in the hands of the holder thereof at the Effective Time. Each
such opinion shall be based on such written representations from the Acquiror,
the Company and others as such counsel shall reasonably request as to factual
matters.
6.2 Conditions Precedent - The Company
The obligations of the Company to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Acquiror as set forth in
Article IV hereof shall be true and correct as of the date of this Agreement and
as of the Effective Time as though made on and as of the Effective Time (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date),
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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 opinion of Elias, Matz,
Tiernan & Herrick L.L.P., dated the date of the Closing, that addresses the
matters set forth in Exhibit D hereto.
(e) The Acquiror and the Acquiror Sub shall have furnished the Company
with such certificates of its respective officers or others and such other
documents to evidence fulfillment of the conditions set forth in Sections 6.1
and 6.2 as such conditions relate to the Acquiror and the Acquiror Sub as the
Company may reasonably request.
6.3 Conditions Precedent - The Acquiror and the Acquiror Sub
The obligations of the Acquiror and the Acquiror Sub to effect the
Merger shall be subject to satisfaction of the following conditions at or prior
to the Effective Time unless waived by the Acquiror or the Acquiror Sub pursuant
to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in
Article III hereof shall be true and correct as of the date of this Agreement
and as of the Effective Time as though made on and as of the Effective Time (or
on the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.3(a) shall be
deemed to have been satisfied even if such representations or warranties are not
true and correct unless the failure of any of the representations or warranties
to be so true and correct would have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
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(c) The Company shall have delivered to the Acquiror a certificate,
dated the date of the Closing and signed by its President and by its Chief
Financial Officer, to the effect that the conditions set forth in Sections
6.3(a) and 6.3(b) have been satisfied.
(d) The Acquiror shall have received the written opinion of Foley, Hoag
& Eliot LLP, dated the date of the Closing, that addresses the matters set forth
in Exhibit E hereto.
(e) Dissenting Shares shall constitute not more than 10.0% of the
outstanding shares of Company Common Stock immediately prior to the Effective
Time.
(f) The Acquiror shall have received a letter to it from the
independent certified public accountants for the Company, dated (i) the date on
which the Form S-4 shall become effective and (ii) the date of the Closing, in
form and substance customary for "comfort" letters delivered by independent
accountants in accordance with Statement of Financial Accounting Standards No.
72 or any successor thereto.
(g) The Company shall have furnished the Acquiror with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.3 as such
conditions relate to the Company as the Acquiror may reasonably request.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by the Acquiror or
the Acquiror Sub in writing if the Company has, or by the Company in writing if
the Acquiror or the Acquiror Sub has, in any material respect, breached (i) any
material covenant or undertaking contained herein or (ii) any representation or
warranty contained herein, in any case if such breach would have a Material
Adverse Effect on the party and has not been cured by the earlier of 30 days
after the date on which written notice of such breach is given to the party
committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the
applications for prior approval referred to in Section 5.3 hereof are denied or
are approved in a manner which does not satisfy the requirements of Section
6.1(b) hereof, and the time period for appeals and requests for reconsideration
has run;
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(d) at any time, by any party hereto in writing, if the shareholders of
the Acquiror or the Company do not approve this Agreement after a vote taken
thereon at a meeting duly called for such purpose (or at any adjournment
thereof), unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate to perform or observe in any material respect its
agreements set forth herein to be performed or observed by such party at or
before the Effective Time;
(e) by either the Company or the Acquiror in writing if the Effective
Time has not occurred by the close of business on the first anniversary of the
date hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date (the Acquiror and the Acquiror Sub being treated as a
single entity for purposes of this Section 7.1(e)); and
(f) by the Company at any time during the five-day period following the
Pricing Period (as defined below) if the Average Closing Price (as defined
below) shall be less than $15.00, subject, however, to the following three
sentences. If the Company elects to exercise its termination right pursuant to
this Section 7.1(f), it shall give written notice to the Acquiror (provided that
such notice of election to terminate may be withdrawn at any time within the
aforementioned five-day period). During the five-day period commencing with its
receipt of such notice, the Acquiror shall have the option to increase the
consideration to be received by the holders of the Company Common Stock
hereunder by adjusting the Exchange Ratio to equal a number (calculated to the
nearest one-thousandth) obtained by dividing (a) $18.90 by (b) the Average
Closing Price. If the Acquiror so elects within such five-day period, it shall
give prompt written notice to the Company of such election and the revised
Exchange Ratio, whereupon no termination shall have occurred pursuant to this
Section 7.1(f) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified). For purposes
of this Section 7.1(f), (i) the term "Average Closing Price" means the average
of the daily closing prices of a share of Acquiror Common Stock, as reported by
the Nasdaq Stock Market's National Market (as reported in the Wall Street
Journal or, if not reported thereby, another authoritative source) during the
Pricing Period, (ii) "Pricing Period" means the period of ten consecutive
trading days following the Determination Date and (iii) the term "Determination
Date" means the earlier of (x) the date on which the last regulatory approval
required to consummate the Merger is obtained, and (y) December 1, 1996.
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Section 5.4 and
Section 8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section
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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 5.9, 5.10 and 5.11 hereof),
provided that the covenant of the Acquiror contained in Section 5.6(b)(iv)
hereof shall survive and be applicable following the Effective Time, and further
provided that no such representations, warranties or covenants shall be deemed
to be terminated or extinguished so as to deprive the Acquiror, the Acquiror Sub
or the Company (or any director, officer or controlling person thereof) of any
defense at law or in equity which otherwise would be available against the
claims of any person, including, without limitation, any shareholder or former
shareholder of either the Acquiror or the Company.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of the Acquiror and the Company) extend the time
for the performance of any of the obligations or other acts of the other party
hereto and may waive (i) any inaccuracies of the other party in the
representations or warranties contained in this Agreement or any document
delivered pursuant hereto, (ii) compliance with any of the covenants,
undertakings or agreements of the other party, (iii) to the extent permitted by
law, satisfaction of any of the conditions precedent to its obligations
contained herein or (iv) the performance by the other party of any of its
obligations set forth herein, provided that any such waiver granted, or any
amendment or supplement pursuant to Section 7.5 hereof executed after
shareholders of the Acquiror or the Company have approved this Agreement shall
not modify either the amount or form of the consideration to be provided hereby
to the holders of Company Common Stock upon consummation of the Merger or
otherwise materially adversely affect such shareholders without the approval of
the shareholders who would be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror, the Acquiror Sub and the Company, subject to the
proviso to Section 7.4 hereof. Any such amendment or supplement must be in
writing and authorized by or under the direction of their respective Boards of
Directors.
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ARTICLE VIII
MISCELLANEOUS
8.1 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel,
provided that (i) expenses of printing the Form S-4 and the registration fee to
be paid to the Commission in connection therewith shall be shared equally
between the Company and the Acquiror and (ii) notwithstanding anything to the
contrary contained in this Agreement, neither the Acquiror nor the Company shall
be released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
8.2 Entire Agreement
This Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and thereto and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors, any rights, remedies,
obligations or liabilities other than as set forth in Sections 5.9, 5.10 and
5.11(b) and (c) hereof.
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:
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If to the Acquiror or the Acquiror Sub:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to the Company:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, which shall not be
unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to modify the
structure of the acquisition of the Company set forth herein, provided that (i)
the federal income tax consequences of any transactions created by such
modification shall not be other than those set forth in Section 6.1(f) hereof,
(ii) consideration to be paid to the holders of the Company Common Stock is not
thereby changed in kind or reduced in amount as a result of such modification
and (iii) such
53
<PAGE> 154
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.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maine applicable to agreements made and entirely to be
performed within such jurisdiction.
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<PAGE> 155
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ Peter J. Verrill By:/s/ William J. Ryan
- ---------------------------------- ------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
PEOPLES HERITAGE MERGER CORP.
Attest:
/s/ Peter J. Verrill By:/s/ William J. Ryan
- ---------------------------------- ------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
FAMILY BANCORP
By:/s/ David D. Hindle
------------------------------------
Name: David D. Hindle
Title: President and Chief
Executive Officer
By:/s/ George E. Fahey
------------------------------------
Name: George E. Fahey
Title: Executive Vice President,
Treasurer and Chief
Financial Officer
55
<PAGE> 156
EXHIBIT A
EXHIBIT B
EXHIBIT C
Reference is made to Annexes II, III and IV
of the Prospectus/Joint Proxy Statement of which
this Annex I is a part for Exhibits A, B
and C to the Agreement, respectively.
56
<PAGE> 157
EXHIBIT D
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO THE COMPANY
PURSUANT TO SECTION 6.2(D) OF THE AGREEMENT]
(a)Each of the Acquiror, the Acquiror Sub and the Acquiror New
Hampshire Bank is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and the Acquiror is duly
registered as a bank holding company under the BHCA.
(b)The authorized capital stock of the Acquiror consists of 100,000,000
shares of Acquiror Common Stock, of which ___________ were issued and
outstanding of record as of the date hereof, and 5,000,000 shares of Acquiror
Preferred Stock, none of which are issued and outstanding as of the date hereof.
All of the outstanding shares of Acquiror Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable, and the shareholders of
the Acquiror have no preemptive rights with respect to any shares of capital
stock of the Acquiror. All of the outstanding shares of capital stock of the
Acquiror Subsidiaries which are Significant Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable (except as
otherwise provided with respect to the capital stock of the Acquiror Maine Bank
and the Acquiror National Bank by the MRSA and the National Bank Act,
respectively) and, to the knowledge of such counsel, are directly or indirectly
owned by the Acquiror free and clear of all liens, claims, encumbrances,
charges, restrictions or rights of third parties of any kind whatsoever. To such
counsel's knowledge, except (i) for shares of Acquiror Common Stock issuable
pursuant to the Acquiror Employee Stock Benefit Plans, (ii) Rights issued by the
Acquiror pursuant to the Acquiror Rights Agreement and (iii) by virtue of the
Agreement and the Acquiror Stock Option Agreement, there were no Rights
authorized, issued or outstanding with respect to the capital stock of the
Acquiror as of the date of the Agreement.
(c)The Agreement has been duly authorized, executed and delivered by
the Acquiror and the Acquiror Sub and, assuming due authorization, execution and
delivery by the Company, constitutes a valid and binding obligation of the
Acquiror and the Acquiror Sub enforceable in accordance with its terms, except
that the enforceability of the obligations of the Acquiror and the Acquiror Sub
may be limited by (i) bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors, (ii) equitable principles
limiting the right to obtain specific performance or other similar equitable
relief and (iii) considerations of public policy, and except that certain
remedies may not be available in the case of a nonmaterial breach of the
Agreement.
(d)The Branch Sale Agreement has been duly authorized, executed and
delivered by the Acquiror New Hampshire Bank and, assuming due authorization,
execution and delivery by the Bank, constitutes a valid and binding obligation
of the Acquiror New Hampshire Bank enforceable in accordance with its terms,
except that enforceability of the obligations
<PAGE> 158
of the Acquiror New Hampshire Bank may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors,
(ii) equitable principles limiting the right to obtain specific performance or
other similar equitable relief and (iii) considerations of public policy, and
except that certain remedies may not be available in the case of a nonmaterial
breach of the Branch Sale Agreement.
(e)All corporate and shareholder actions required to be taken by the
Acquiror and the Acquiror Sub by law and their respective Articles of
Incorporation and Bylaws to authorize the execution and delivery of the
Agreement and consummation of the Merger have been taken, and all corporate and
shareholder actions required to be taken by the Acquiror New Hampshire Bank by
law and its Certificate of Incorporation and Bylaws to authorize the execution
and delivery of the Branch Sale Agreement and consummation of the Branch Sale
have been taken.
(f)All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by (i) the
Acquiror and the Acquiror Sub to permit the execution, delivery and performance
of the Agreement and consummation of the Merger have been obtained and (ii) the
Acquiror New Hampshire Bank to permit the execution, delivery and performance of
the Branch Sale Agreement and consummation of the Branch Sale have been
obtained.
(g)The shares of Acquiror Common Stock to be issued pursuant to the
terms of the Agreement have been duly authorized by all necessary corporate
action on the part of the Acquiror and, when issued in accordance with the terms
of the Agreement, will be validly issued, fully paid and nonassessable and not
in violation of the preemptive rights of any person.
(h)Each Company Option outstanding and in effect immediately preceding
consummation of the Merger shall have become an option to purchase shares of
Acquiror Common Stock on the terms provided in Section 2.9 of the Agreement.
(i)To such counsel's knowledge, and except as Previously Disclosed or
as disclosed in the Acquiror's Securities Documents, there are no material legal
or governmental proceedings pending to which the Acquiror or any Acquiror
Subsidiary is a party or to which any property of the Acquiror or any Acquiror
Subsidiary is subject and no such proceedings are threatened by governmental
authorities or by others.
Such counsel also shall state that it has no reason to believe that the
information relating to the Acquiror or an Acquiror Subsidiary contained or
incorporated by reference in (i) the Form S-4, at the time the Form S-4 and any
amendment thereto became effective under the Securities Act, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the Proxy Statement, as of the
date(s) such Proxy Statement was mailed to shareholders of the Company and the
Acquiror and up
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<PAGE> 159
to and including the date(s) of the meetings of shareholders to which such Proxy
Statement relates, contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon (i) certificates of
governmental officials and, as to matters of fact, certificates of officers of
the Acquiror or any Acquiror Subsidiary and (ii) New Hampshire counsel
reasonably satisfactory to the Company with respect to matters of New Hampshire
law. The opinion of such counsel need refer only to matters of Maine, New
Hampshire and federal law, and may add other qualifications and explanations of
the basis of their opinion as may be reasonably acceptable to the Company.
Note:The receipt of an opinion covering the matters set forth above
relating to the Branch Sale and the Branch Sale Agreement shall not be a
condition to the Company's obligation to consummate the Merger.
3
<PAGE> 160
EXHIBIT E
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO THE ACQUIROR
PURSUANT TO SECTION 6.3(D) OF THE AGREEMENT]
(a)Each of the Company and the Bank is duly incorporated and validly
existing under the laws of the Commonwealth of Massachusetts and the United
States, respectively, and the Company is duly registered as a savings and loan
holding company under the HOLA.
(b) The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock, of which _________ shares are issued and
outstanding of record as of the date hereof, and 10,000,000 shares of Company
Preferred Stock, of which no shares are issued and outstanding as of the date
hereof. All of the outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, and the
shareholders of the Company have no preemptive rights with respect to any shares
of capital stock of the Company. All of the outstanding shares of capital stock
of the Bank have been duly authorized and validly issued, are fully paid and
nonassessable, and, to the knowledge of such counsel, are directly or indirectly
owned by the Company free and clear of all liens, claims, encumbrances, charges,
restrictions or rights of third parties of any kind whatsoever. To such
counsel's knowledge, except for the Company Stock Option Agreement and
outstanding Company Options to purchase ______ shares of Company Common Stock as
of the date hereof, there are no Rights authorized, issued or outstanding with
respect to the capital stock of the Company or a Company Subsidiary.
(c) The Agreement has been duly authorized, executed and delivered by
the Company and, assuming due authorization, execution and delivery by the
Acquiror and the Acquiror Sub, constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms, except that the enforceability
of the obligations of the Company may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors,
(ii) equitable principles limiting the right to obtain specific performance or
other similar equitable relief and (iii) considerations of public policy, and
except that certain remedies may not be available in the case of a nonmaterial
breach of the Agreement.
(d) The Branch Sale Agreement has been duly authorized, executed and
delivered by the Bank and, assuming due authorization, execution and delivery by
the Acquiror New Hampshire Bank, constitutes a valid and binding obligation of
the Bank enforceable in accordance with its terms, except that enforceability of
the obligations of the Bank may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors,
(ii) equitable principles limiting the right to obtain specific
<PAGE> 161
performance or other similar equitable relief and (iii) considerations of public
policy, and except that certain remedies may not be available in the case of a
nonmaterial breach of the Branch Sale Agreement.
(e) All corporate and shareholder actions required to be taken by the
Company by law and the Articles of Organization and Bylaws of the Company to
authorize the execution and delivery of the Agreement and consummation of the
Merger have been taken, and all corporate and shareholder actions required to be
taken by the Bank by law and its Charter and Bylaws to authorize the execution
and delivery of the Branch Sale Agreement and consummation of the Branch Sale
have been taken.
(f) All consents or approvals of or filings or registrations with any
federal or state banking agency which are necessary to be obtained by (i) the
Company to permit the execution, delivery and performance of the Agreement and
consummation of the Merger have been obtained and (ii) the Bank to permit the
execution, delivery and performance of the Branch Sale Agreement and
consummation of the Branch Sale have been obtained.
(g) To such counsel's knowledge, and except as Previously Disclosed or
as disclosed in the Company's Securities Documents, there are no material legal
or governmental proceedings pending to which the Company or a Company Subsidiary
is a party or to which any property of the Company or a Company Subsidiary is
subject and no such proceedings are threatened by governmental authorities or by
others.
Such counsel also shall state that it has no reason to believe that the
information relating to the Company or a Company Subsidiary contained or
incorporated by reference in (i) the Form S-4, at the time the Form S-4 and any
amendment thereto became effective under the Securities Act, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the Proxy Statement, as of the
date(s) such Proxy Statement was mailed to shareholders of the Company and the
Acquiror and up to and including the date(s) of the meetings of shareholders to
which such Proxy Statement relates, contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials, certificates or opinions of other counsel to the Company
or a Company Subsidiary reasonably satisfactory to the Acquiror and, as to
matters of fact, certificates of officers of the Company or a Company
Subsidiary. The opinion of such counsel need refer only to matters of
Massachusetts and federal law and may add other qualifications and explanations
of the basis of their opinion as may be reasonably acceptable to the Acquiror.
Note: The receipt of an opinion covering the matters set forth above
relating to the Branch Sale and the Branch Sale Agreement shall not be a
condition to the Acquiror's obligation to consummate the Merger.
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<PAGE> 162
ANNEX II
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 30, 1996 (the "Agreement"), by
and between Family Bancorp, a Massachusetts corporation ("Issuer"), and Peoples
Heritage Financial Group, Inc., a Maine corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer, Grantee and Peoples Heritage Merger Corp. ("PHMC"), a
wholly-owned subsidiary of Grantee, have entered into an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into PHMC (the "Merger"), with PHMC as the
surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the
Plan and this Agreement, Grantee has agreed to grant an option to Issuer on
terms and conditions which are substantially identical to those of the Option
and this Agreement with respect to approximately 6% of the common stock of
Grantee;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 832,000 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $0.10 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $20.50, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement
<PAGE> 163
or the Plan, and (ii) no preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect, Holder may
exercise the Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as hereinafter defined); provided
that the Option shall terminate and be of no further force and effect upon the
earliest to occur of (A) the Effective Time of the Merger, (B) termination of
the Plan in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event, other than a termination of the
Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default Termination"), (C) 12
months after the termination of the Plan by Grantee pursuant to a Default
Termination, and (D) 12 months after termination of the Plan (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event; and provided, further, that any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable laws, including without limitation the Bank Holding Company Act of
1956, as amended (the "BHC Act"), and the Home Owners' Loan Act, as amended
("HOLA"). The term "Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee. The rights set forth in Section 8
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 15% or more of the
consolidated assets of Issuer and its subsidiaries, or (C) the
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 15% or more of the voting power of Issuer or any of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined in Section 13(d)(3) of the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
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<PAGE> 164
(i) any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 10% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" and an "Exchange
Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Plan, in each case after it shall have
been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
the BHC Act, the HOLA, the Bank Merger Act, as amended, or the Change
in Bank Control Act of 1978, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan) after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary of
Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan terminates
or (z) any person (other than Grantee or any subsidiary of Grantee)
shall have filed an application or notice with any Governmental Entity
to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(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
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<PAGE> 165
(i) the total number of Option Shares it intends to purchase pursuant to such
exercise, and (ii) a place and date not earlier than three business days nor
later than 15 business days from the Notice Date for the closing (the "Closing")
of such purchase (the "Closing Date"). If prior notification to or approval of
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), the Office of Thrift Supervision ("OTS") or any other Governmental
Entity is required in connection with such purchase, Issuer shall cooperate with
Grantee in the filing of the required notice 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 MAY 30, 1996. A COPY
OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance
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<PAGE> 166
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.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Agreement or Bylaws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material
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<PAGE> 167
instrument or obligation to which Issuer is a party, or by which it or any of
its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Issuer or any of
its properties or assets.
(c) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance upon
exercise of the Option that number of shares of Issuer Common Stock equal to the
maximum number of shares of Issuer Common Stock at any time and from time to
time purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then
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outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Holder, of any of (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of Issuer Common Stock for which the Option
was theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price
per share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has
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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
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
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Common Stock are restricted securities, as defined in Rule 144 under the
Securities Act or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock with respect
to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or,
in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Federal Reserve Board, the OTS or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited
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from paying and promptly file the required notice or application for approval
and expeditiously process the same (and each party shall cooperate with the
other in the filing of any such notice or application and the obtaining of any
such approval). If the Federal Reserve Board, the OTS or any other Governmental
Entity disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If the
Federal Reserve Board, the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the Federal
Reserve Board, the OTS or other Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the date of termination of the
Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded, as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally-recognized investment banking firm selected
by Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire
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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 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
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Issuer shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer, and
Issuer shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan
pursuant to Article VII thereof, and (B) a Purchase Event or a
Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year and on
more than two occasions in total;
(iii) within 90 days after the effective date of a
registration referred to in Section 9(b) pursuant to which the Holder
or Holders concerned were afforded the opportunity to register such
shares under the Securities Act and such shares were registered as
requested; and
(iv) unless a request therefor is made to Issuer by the Holder
or Holders of at least 25% or more of the aggregate number of Option
Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, however, that Issuer
shall not be required to consent to general jurisdiction or to qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained 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
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omission, to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in reliance
upon, and in conformity with, information furnished in writing to Issuer by such
indemnified party expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified by such Holder,
or by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such Holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the
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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.
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
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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 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.
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(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Maine without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to Issuer:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
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(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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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
Attest: FAMILY BANCORP
/s/ George E. Fahey By:/s/ David D. Hindle
- ---------------------------------- -----------------------------------
Name: George E. Fahey Name: David D. Hindle
Title: Executive Vice President, Treasurer Title: President and Chief
and Chief Financial Officer Executive Officer
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ Peter J. Verrill By:/s/ William J. Ryan
- ---------------------------------- -----------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
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ANNEX III
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 30, 1996 (the "Agreement"), by
and between Peoples Heritage Financial Group, Inc., a Maine corporation
("Issuer"), and Family Bancorp, a Massachusetts corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee, Issuer and Peoples Heritage Merger Corp. ("PHMC"), a
wholly-owned subsidiary of Issuer, have entered into an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Plan"), providing for, among other
things, the merger of Grantee with and into PHMC (the "Merger"), with PHMC as
the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan and Grantee's agreement referred to in the next WHEREAS clause, Grantee has
required that Issuer agree, and Issuer has agreed, to grant to Grantee the
Option (as hereinafter defined); and
WHEREAS, as a condition and inducement to Issuer's execution of the
Plan and this Agreement, Grantee has agreed to grant an option to Issuer on
terms and conditions which are substantially identical to those of the Option
and this Agreement with respect to approximately 19.9% of the common stock of
Grantee;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 1,500,000 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $0.01 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $19.75, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 6.0% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option. Each Option Share issued upon exercise of the
Option shall be accompanied by Acquiror Rights as provided in the Acquiror
Rights Agreement.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement
<PAGE> 181
or the Plan, and (ii) no preliminary or permanent injunction or other order
against the delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect, Holder may
exercise the Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as hereinafter defined); provided
that the Option shall terminate and be of no further force and effect upon the
earliest to occur of (A) the Effective Time of the Merger, (B) termination of
the Plan in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event, other than a termination of the
Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default Termination"), (C) 12
months after the termination of the Plan by Grantee pursuant to a Default
Termination, and (D) 12 months after termination of the Plan (other than
pursuant to a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event; and provided, further, that any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable laws, including without limitation the Bank Holding Company Act of
1956, as amended (the "BHC Act"), and the Home Owners' Loan Act, as amended
("HOLA"). The term "Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee. The rights set forth in Section 8
hereof shall terminate when the right to exercise the Option terminates (other
than as a result of a complete exercise of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case 15% or more of the
consolidated assets of Issuer and its subsidiaries, or (C) the
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 15% or more of the voting power of Issuer or any of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined in Section 13(d)(3) of the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer
Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
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(i) any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 10% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" and an "Exchange
Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have
approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Plan or
(C) Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Plan, in each case after it shall have
been publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (x) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under
the BHC Act, the HOLA, the Bank Merger Act, as amended, or the Change
in Bank Control Act of 1978, as amended, for approval to engage in an
Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such
cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Plan) after (x) a bona fide
proposal is made by any person (other than Grantee or any subsidiary of
Grantee) to Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any subsidiary of
Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan terminates
or (z) any person (other than Grantee or any subsidiary of Grantee)
shall have filed an application or notice with any Governmental Entity
to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(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
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(i) the total number of Option Shares it intends to purchase pursuant to such
exercise, and (ii) a place and date not earlier than three business days nor
later than 15 business days from the Notice Date for the closing (the "Closing")
of such purchase (the "Closing Date"). If prior notification to or approval of
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), the Office of Thrift Supervision ("OTS") or any other Governmental
Entity is required in connection with such purchase, Issuer shall cooperate with
Grantee in the filing of the required notice 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 MAY 30, 1996. A COPY
OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance
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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.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Agreement or Bylaws or a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material
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instrument or obligation to which Issuer is a party, or by which it or any of
its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Issuer or any of
its properties or assets.
(c) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance upon
exercise of the Option that number of shares of Issuer Common Stock equal to the
maximum number of shares of Issuer Common Stock at any time and from time to
time purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 6.0% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(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
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<PAGE> 186
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Holder, of any of (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that controls the
Acquiring Corporation or (z) in the case of a merger described in clause (ii),
Issuer (such person being referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of Issuer Common Stock for which the Option
was theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, or (iii) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price
per share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has
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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 6.0% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 6.0% of the aggregate of the shares of Substitute Common Stock but
for the limitation in the first sentence of this Section 7(f), Substitute Option
Issuer shall make a cash payment to Holder equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in the first
sentence of this Section 7(f) over (ii) the value of the Substitute Option after
giving effect to the limitation in the first sentence of this Section 7(f). This
difference in value shall be determined by a nationally-recognized investment
banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section
7(b) unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section 7
are given full force and effect (including, without limitation, any action that
may be necessary so that the holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute
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<PAGE> 188
Common Stock are restricted securities, as defined in Rule 144 under the
Securities Act or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock with respect
to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or,
in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Federal Reserve Board, the OTS or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited
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from paying and promptly file the required notice or application for approval
and expeditiously process the same (and each party shall cooperate with the
other in the filing of any such notice or application and the obtaining of any
such approval). If the Federal Reserve Board, the OTS or any other Governmental
Entity disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If the
Federal Reserve Board, the OTS or any other Governmental Entity prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by the Federal
Reserve Board, the OTS or other Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the date of termination of the
Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded, as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally-recognized investment banking firm selected
by Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire
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<PAGE> 190
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 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
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<PAGE> 191
Issuer shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer, and
Issuer shall not be required to register Option Shares under the Securities Act
pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan
pursuant to Article VII thereof, and (B) a Purchase Event or a
Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year and on
more than two occasions in total;
(iii) within 90 days after the effective date of a
registration referred to in Section 9(b) pursuant to which the Holder
or Holders concerned were afforded the opportunity to register such
shares under the Securities Act and such shares were registered as
requested; and
(iv) unless a request therefor is made to Issuer by the Holder
or Holders of at least 25% or more of the aggregate number of Option
Shares (including shares of Issuer Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, however, that Issuer
shall not be required to consent to general jurisdiction or to qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained 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
12
<PAGE> 192
omission, to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in reliance
upon, and in conformity with, information furnished in writing to Issuer by such
indemnified party expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified by such Holder,
or by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue, or alleged untrue,
statement that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such Holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the
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<PAGE> 193
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.
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
14
<PAGE> 194
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 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.
15
<PAGE> 195
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Maine without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Attn: David D. Hindle
President and Chief Executive Officer
Fax: 508-374-5319
With a required copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Peter W. Coogan, Esq.
Fax: 617-832-7000
If to Issuer:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
16
<PAGE> 196
(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.
17
<PAGE> 197
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
PEOPLES HERITAGE
FINANCIAL GROUP, INC.
Attest:
/s/ Peter J. Verrill By:/s/ William J. Ryan
- ---------------------------------- -----------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President
Chief Operating Officer and Chief Executive Officer
and Chief Financial Officer
Attest: FAMILY BANCORP
/s/ George E. Fahey By:/s/ David D. Hindle
- ---------------------------------- -----------------------------------
Name: George E. Fahey Name: David D. Hindle
Title: Executive Vice President, Treasurer Title: President and Chief
and Chief Financial Officer Executive Officer
18
<PAGE> 198
ANNEX IV
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of May 30, 1996, by and among Peoples
Heritage Financial Group, Inc. (the "Acquiror"), a Maine corporation, and
certain stockholders of Family Bancorp (the "Company"), a Massachusetts
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror, Peoples Heritage Merger Corp. (the "Acquiror
Sub") and the Company have entered into an Agreement and Plan of Merger, dated
as of the date hereof (the "Agreement"), which is being executed simultaneously
with the execution of this Stockholder Agreement and provides for, among other
things, the merger of the Company with and into the Acquiror Sub (the "Merger");
and
WHEREAS, in order to induce the Acquiror to enter into the Agreement,
each of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacities as stockholders of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. OWNERSHIP OF COMPANY COMMON STOCK. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Company, par value $.10 per share
("Company Common Stock"), set forth opposite such Stockholder's name on Schedule
I hereto.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and
agrees that:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all
shares of Company Common Stock in which such stockholder has the right
to vote (whether owned as of the date hereof or hereafter acquired) in
favor of the Agreement and against any plan or proposal pursuant to
which the Company is to be acquired by or merged with, or pursuant to
which the Company proposes to sell all or substantially all of its
assets and liabilities to, any person entity or group (other than the
Acquiror or any subsidiary thereof);
(b) except as otherwise expressly permitted hereby, such
Stockholder shall not, prior to the meeting of the Company's
stockholders referred to in Section 2(a) hereof or the earlier
termination of the Agreement in accordance with its terms, sell,
pledge, transfer or otherwise dispose of the Stockholder's shares of
Company Common Stock; and
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<PAGE> 199
(c) such Stockholder shall not in his capacity as a
stockholder of the Company directly or indirectly encourage or solicit
or hold discussions or negotiations with, or provide any information
to, any person, entity or group (other than the Acquiror or an
affiliate thereof) concerning any merger, sale of substantial assets or
liabilities not in the ordinary course of business, sale of shares of
capital stock or similar transactions involving the Company or any
subsidiary of the Company (provided that nothing herein shall be deemed
to affect the ability of any Stockholder to fulfill his duties as a
director or officer of the Company).
Each Stockholder further agrees that the Company's transfer agent shall
be given an appropriate stop transfer order and shall not be required to
register any attempted transfer of shares of Company Common Stock, unless the
transfer has been effected in compliance with the terms of this letter
agreement.
3. SUCCESSORS AND ASSIGNS. A Stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Company Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before the
meeting of the Company's stockholders referred to in Section 2(a) hereof, such
Stockholder obtains the prior written consent of the Acquiror and that any
acquiror of such Company Common Stock agree in writing to be bound by the terms
of this Stockholder Agreement.
4. TERMINATION. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. NOTICES. Notices may be provided to the Acquiror and the
Stockholders in the manner specified in Section 8.4 of the Agreement, with all
notices to the Stockholders being provided to them at the Company in the manner
specified in such section.
6. GOVERNING LAW. This Stockholder Agreement shall be governed by the
laws of the State of Maine without giving effect to the principles of conflicts
of laws thereof.
7. COUNTERPARTS. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. HEADINGS AND GENDER. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender herein
shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
2
<PAGE> 200
IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and
each of the Stockholders have caused this Stockholder Agreement to be executed
as of the day and year first above written.
PEOPLES HERITAGE FINANCIAL
GROUP, INC.
By:/s/ William J. Ryan
-------------------------------------
Name: William J. Ryan
Title: Chairman, President and Chief
Executive Officer
COMPANY STOCKHOLDERS:
/s/ John E. Veasey
----------------------------------------
John E. Veasey
/s/ Elkin B. McCallum
----------------------------------------
Elkin B. McCallum
/s/ David D. Hindle
----------------------------------------
David D. Hindle
/s/ George E. Fahey
----------------------------------------
George E. Fahey
3
<PAGE> 201
/s/ Ronald G. Trombley
----------------------------------------
Ronald G. Trombley
/s/ Bruce Fenn, III
----------------------------------------
Bruce Fenn, III
/s/ David J. LaFlamme
----------------------------------------
David J. LaFlamme
/s/ Kenneth L. Paul
----------------------------------------
Kenneth L. Paul
/s/ Charles George, Jr.
----------------------------------------
Charles George, Jr.
4
<PAGE> 202
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares of
Company Common Stock
Name of Stockholder Beneficially Owned
- ------------------------------------------------ -----------------------------
<S> <C>
John E. Veasey 120,962
Elkin B. McCallum 57,150
David D. Hindle 28,122
George E. Fahey 23,859
Ronald G. Trombley 21,983
Bruce Fenn, III 11,120
David J. LaFlamme 33,182
Kenneth L. Paul 7,800
Charles George, Jr. 3,750
</TABLE>
5
<PAGE> 203
ANNEX V
[FORM OF MB&D
FAIRNESS OPINION]
The Board of Directors
Family Bancorp
153 Merrimack Street
Haverhill, MA 01830 _____________ ____, 1996
The Board of Directors:
You have requested our opinion as to the fairness from a financial
point of view to the shareholders of Family Bancorp ("Family") of the
consideration to be paid to the shareholders of Family in connection with the
proposed acquisition of Family by Peoples Heritage Financial Group, Inc.
("PHFG") pursuant to the Agreement and Plan of Merger (the "Agreement"), dated
as of May 30, 1996, among Family, PHFG and Peoples Heritage Merger Corp.
("PHMC"), a wholly-owned subsidiary of PHFG. Under the terms of the Agreement,
each share of common stock, $0.10 par value per share, of Family (the "Family
Common Stock") outstanding immediately prior to the Merger (other than any
dissenting shares under Massachusetts law and certain shares held by PHFG) will
be exchanged for 1.26 shares (the "Exchange Ratio") of common stock, $.01 par
value per share, of PHFG (the "PHFG Common Stock"), plus cash in lieu of any
fractional share interest. In addition, upon consummation of the Merger, each
option to purchase Family Common Stock which is outstanding at the effective
time, whether or not then exercisable, will be converted into options to
purchase shares of PHFG Common Stock in accordance with the provisions of the
Agreement.
The reader is urged to carefully read the Agreement, which is
reproduced in its entirety elsewhere in the accompanying Prospectus/Joint Proxy
Statement.
McConnell, Budd & Downes, Inc., as part of its investment banking
business, is engaged exclusively in the valuation of bank holding companies and
banks, thrift holding companies and thrifts and their securities in connection
with mergers and acquisitions, negotiated underwritings, private placements,
competitive bidding processes, market making as a NASD market maker, secondary
distributions of listed securities and valuations for corporate, estate and
other purposes. Our experience and familiarity with Family includes having
worked as a financial advisor to Family since July 1995 on a contractual basis
and specifically includes our participation in the process and negotiations
leading up to the proposed acquisition by PHFG. In the course of our role as
financial advisor to Family in connection with the Agreement we have received
fees for our services and will receive additional fees contingent on the
occurrence of certain defined events. We will receive a fee in connection with
the rendering of this opinion. In the ordinary course of our business, we may,
from time to time, trade the equity securities of Family in our capacity as a
NASD
<PAGE> 204
market maker, for our own account, for the accounts of our customers and for the
accounts of individual employees of McConnell, Budd & Downes, Inc. Accordingly
we may, from time to time, hold a long or short position in the equity
securities of Family.
In arriving at our opinion, we have reviewed the Agreement and
Prospectus/Joint Proxy Statement in substantially the form to be mailed to
Family and PHFG shareholders. We also have reviewed publicly available business,
financial and shareholder information relating to Family and its subsidiaries,
certain publicly available financial information relating to PHFG and certain
financial information relating to PHFG and its subsidiaries provided to Family
by PHFG management. In addition, we have reviewed certain other information,
including internal reports and documents of Family and PHFG and certain
management prepared financial information provided to us by Family and PHFG. We
have also met with and had discussions with members of the senior management of
Family and PHFG to discuss their past and current business operations, current
financial condition and future prospects. In connection with the foregoing, we
have reviewed the annual reports to shareholders and annual report on Form 10-K
of PHFG for the years ended December 31, 1993, 1994 and 1995. We have similarly
reviewed the annual reports of Family for the years ended December 31, 1992,
1993, 1994 and 1995. We have reviewed and studied the historical stock prices
and trading volumes of the common stock of Family and PHFG as well as the terms
and conditions of 12 recent acquisition transactions, selected from a larger
universe of 27 transactions involving New England banking institutions and
publicly traded financial institutions conducting business in the northeast
which can be compared to the proposed acquisition of Family by PHFG. We also
considered the current state of and future prospects for the economies of Maine,
New Hampshire and Massachusetts generally and the relevant market areas for PHFG
and Family in particular. We also have conducted such other studies, analyses
and investigations as we deemed appropriate under the circumstances surrounding
the proposed Merger.
In the course of our review and analysis we considered, among other
things, such topics as relative capitalization, capital adequacy, profitability,
availability of non-interest income, relative asset quality, adequacy of the
reserve for loan losses and the composition of the loan portfolio of each of
Family and PHFG. We also considered management's estimates of cost savings and
revenue enhancements which might result from a consolidation of Family and PHFG.
In the conduct of our review and analysis we have relied upon and assumed,
without independent verification, the accuracy and completeness of the financial
information provided to us by Family and PHFG and or otherwise publicly
obtainable. In reaching our opinion we have not assumed any responsibility for
the independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of either Family or PHFG, nor have
we obtained from any other source any current appraisals of the assets or
liabilities of either Family or PHFG. We have also relied on the management of
Family as to the reasonableness of various financial and operating forecasts and
of the assumptions on which they are based, which were provided to us for use in
our analyses.
In the course of rendering this opinion, which is being rendered prior
to the receipt of certain required regulatory approvals necessary before
consummation of the Merger, we have assumed that no conditions will be imposed
by any regulatory agency in connection with its approval of the Merger that will
have a material adverse effect on the results of
2
<PAGE> 205
operations, the financial condition or the prospects of PHFG following
consummation of the Merger.
Based upon and subject to the foregoing, it is our opinion, that as of
the date of this letter, the Exchange Ratio is fair to the shareholders of
Family from a financial point of view.
Very truly yours,
McConnell, Budd & Downes, Inc.
By:________________________________________
Name: David A. Budd
Title: Managing Director
3
<PAGE> 206
ANNEX VI
[FORM OF KEEFE BRUYETTE
FAIRNESS OPINION]
____________ __, 1996
Board of Directors
People's Heritage Financial Group, Inc.
One Portland Square
P.O. Box 9540
Portland, Maine 04112-9540
Members of the Board:
You have requested our opinion as investment bankers as to the fairness
from a financial point of view to the shareholders of Peoples Heritage Financial
Group, Inc. ("PHFG") of the exchange ratio in the proposed merger (the "Merger")
of Family Bancorp ("Family") with and into Peoples Heritage Merger Corp.
("PHMC"), a newly-formed, wholly-owned subsidiary of PHFG, pursuant to the
Agreement and Plan of Merger, dated as of May 30, 1996, among PHFG, PHMC and
Family (the "Agreement"). Under the terms of the Agreement, each share of common
stock, $0.10 par value per share, of Family (the "Family Common Stock")
outstanding immediately prior to the Merger (other than any dissenting shares
under Massachusetts law and certain shares held by PHFG) will be exchanged for
1.26 shares (the "Exchange Ratio") of common stock, $.01 par value per share, of
PHFG (the "PHFG Common Stock"), plus cash in lieu of any fractional share
interest. It is our understanding that the Merger will be structured as a
purchase transaction under generally accepted accounting practices.
Keefe, Bruyette & Woods, Inc., as part of its investment banking
business, is continually engaged in the valuation of banking businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking companies, we have
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of our business as a broker-dealer, we may, from time to time,
purchase securities from, and sell securities to, Family and PHFG and as a
market maker in securities we may from time to time have a long or short
position in, and buy or sell, debt or equity securities of Family and PHFG for
our own account and for the accounts of our customers. To the extent we have any
such position as of the date of this opinion it has been disclosed to PHFG. We
have acted for the Board of
<PAGE> 207
Board of Directors
___________, __, 1996
Page 2
Directors of PHFG in rendering this fairness opinion and will receive a fee from
PHFG for our services.
In connection with this opinion, we have reviewed, among other things,
the Agreement; the Registration Statement on Form S-4, including the
Prospectus/Joint Proxy Statement relating to the meetings of shareholders of
PHFG and Family at which such shareholders will be asked to approve the
Agreement; Annual Report to Shareholders of PHFG and Annual Reports on Form 10-K
of PHFG and Family for the year ended December 31, 1995; certain interim reports
to shareholders and Quarterly Reports on Form 10-Q of PHFG and Family and
certain internal financial analyses and forecasts for Family prepared by
management. In addition, we have compared certain financial and stock market
information for PHFG and Family with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the banking industry and
performed such other studies and analyses as we considered appropriate.
In conducting our review and arriving at our opinion, we have relied
upon and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of PHFG as to the reasonableness and achievability of
the financial and operating forecasts and projections (and the assumptions and
bases therefor) provided to us, and we have assumed that such forecasts and
projections reflect the best currently available estimates and judgments of PHFG
and that such forecasts and projections will be realized in the amounts and in
the time periods currently estimated by such management. We also have assumed
that the aggregate allowances for loan losses for PHFG and Family are adequate
to cover such losses. In rendering our opinion, we have not made or obtained any
evaluations or appraisals of the property of PHFG and Family, nor have we
examined any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of PHFG
and Family; (ii) the assets and liabilities of PHFG and Family; and (iii) the
nature and terms of certain other merger transactions involving banks and bank
holding companies and thrifts and thrift holding companies. We also have taken
into account our assessment of general economic, market and financial conditions
and our experience in other transactions, as well as our experience in
securities valuation and our knowledge of the banking industry generally. Our
opinion is necessarily based upon conditions as they exist and can be evaluated
on the date hereof and the information made available to us through the date
hereof.
<PAGE> 208
Board of Directors
___________, __, 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 holders of PHFG Common Stock.
Very truly yours,
KEEFE, BRUYETTE & WOODS, INC.
<PAGE> 209
ANNEX VII
TEXT OF SECTIONS 85 THROUGH 98 OF CHAPTER 156B OF
THE MASSACHUSETTS BUSINESS CORPORATION LAW
(S) 85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR
STOCK; EXCEPTION
A stockholder in any corporation organized under the laws of
Massachusetts which shall have duly voted to consolidate or merge with another
corporation or corporations under the provisions of sections seventy-eight or
seventy-nine who objects to such consolidation or merger may demand payment for
his stock from the resulting or surviving corporation and an appraisal in
accordance with the provisions of sections eight-six to ninety-eight, inclusive,
and such stockholder and the resulting or surviving corporation shall have the
rights and duties and follow the procedure set forth in those sections. This
section shall not apply to the holders of any shares of stock of a constituent
corporation surviving a merger if, as permitted by subsection (c) of section
seventy-eight, the merger did not require for its approval a vote of the
stockholders of the surviving corporation.
(S) 86. SELECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eight-seven to ninety-eight, inclusive, shall apply except as otherwise
specifically provided in any section of this chapter. Except as provided in
sections eighty-two and eighty-three, no stockholder shall have such right
unless (1) he files with the corporation before the taking of the vote of the
shareholders on such corporate action, written objection to the proposed action
stating that he intends to demand payment for his shares if the action is taken
and (2) his shares are not voted in favor of the proposed action.
(S) 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE
OF
MEETING; FORM
The notice of the meeting of stockholders at which the approval of
such proposed action is to be considered shall contain a statement of the rights
of objecting stockholders. The giving of such notice shall not be deemed to
create any rights in any stockholder receiving the same to demand payment for
his stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the
<PAGE> 210
taking of the vote on the approval of such action, written objection to the
proposed action stating that he intends to demand payment for his shares if the
action is taken and (2) whose shares are not voted in favor of such action has
or may have the right to demand in writing from the corporation (or, in the case
of a consolidation or merger, the name of the resulting or surviving corporation
shall be inserted), within twenty days after the date of mailing to him of
notice in writing that the corporate action has become effective, payment for
his shares and an appraisal of the value thereof. Such corporation and any such
stockholder shall in such cases have the rights and duties and shall follow the
procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
(S) 88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
(S) 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
(S) 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section
eighty-nine the corporation upon which such demand is made and any such
objecting stockholder fail to agree as to the value of such stock, such
corporation or any such stockholder may within four months after the expiration
of such thirty-day period demand a determination of the value of the stock of
all such objecting stockholders by a bill in equity filed in the superior court
in the county where the corporation in which such objecting stockholder held
stock had or has its principal office in the commonwealth.
(S) 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the
<PAGE> 211
corporation has not reached agreement as to the value thereof. If the bill is
filed by a stockholder, he shall bring the bill in his own behalf and in behalf
of all other stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
(S) 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT;
VALUATION DATE
After hearing the court shall enter a decree determining the fair
value of the stock of those stockholders who have become entitled to the
valuation of and payment for their shares, and shall order the corporation to
make payment of such value, together with interest, if any, as hereinafter
provided, to the stockholders entitled thereto upon the transfer by them to the
corporation of the certificates representing such stock if certificated or, if
uncertificated, upon receipt of an instruction transferring such stock to the
corporation. For this purpose, the value of the shares shall be determined as of
the day preceding the date of the vote approving the proposed corporate action
and shall be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
(S) 93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
(S) 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to
submit their certificates of stock to the corporation for the notation thereon
of the pendency of the bill and may order the corporation to note such pendency
in its records with respect to any uncertificated shares held by such
stockholder parties, and may on motion dismiss the bill as to any stockholder
who fails to comply with such order.
<PAGE> 212
(S) 95. COSTS; INTEREST
The cost of the bill, including the reasonable compensation and
expenses of any master appointed by the court, but exclusive of fees of counsel
or of experts retained by any party, shall be determined by the court and taxed
upon the partes to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
(S) 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided in
this chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the
resulting or surviving corporation, deliver to it a written
withdrawal of his objections to and an acceptance of such
corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
(S) 97. STATUS OF SHARES PAID FOR
The shares of the corporation paid for by the corporation pursuant to
the provisions of this chapter shall have the status of treasury stock, or in
the case of a consolidation or merger the shares or the securities of the
resulting or surviving corporation into which the shares of such objecting
stockholder would have been converted had he not objected to such consolidation
or merger shall have the status of treasury stock or securities.
(S) 98. EXCLUSIVE REMEDY; EXCEPTION
The enforcement by a stockholder of his right to receive payment for
his shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
<PAGE> 213
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.
II-1
<PAGE> 214
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:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Location
- ----------- ------- --------
<S> <C> <C>
2(a) Agreement and Plan of Merger, dated as of May 30,
1996, among PHFG, PHMC and Family,
including the forms of Exhibits A to E thereto (1)
2(b) Stock Option Agreement, dated as of May 30, 1996,
between PHFG (as grantee) and Family (as issuer) (1)
2(c) Stock Option Agreement, dated as of May 30, 1996,
between PHFG (as issuer) and Family (as grantee) (1)
2(d) Stockholder Agreement, dated as of May 30, 1996
among PHFG and certain shareholders of Family (1)
3(a)(1) Articles of Incorporation of PHFG (2)
3(a)(2) Articles of Amendment to Articles of Incorporation
of PHFG (3)
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 (4)
4(c) Form of Debenture due 2000 (4)
5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered *
8 Form of opinion of Foley, Hoag & Eliot LLP regarding
certain federal income tax consequences
10(a) Amended and Restated Severance Agreement between
PHFG and William J. Ryan, dated January 1, 1995 (5)
10(b) Amended and Restated Severance Agreement between
PHFG and Peter J. Verrill, dated January 1, 1995 (5)
10(c) Severance Agreement between PHFG and John W.
Fridlington, dated January 1, 1995 (6)
10(d) Severance Agreement between PHFG and Henry G.
Beyer, dated January 1, 1995 (6)
</TABLE>
II-2
<PAGE> 215
<TABLE>
<CAPTION>
Exhibit No. Exhibit Location
- ----------- ------- --------
<S> <C> <C>
10(e) Employment Agreement between PHFG and John E.
Menario, including the Severance Agreement included
as Attachment A, dated June 30, 1995 (5)
10(f) Supplemental Retirement Agreement among PHFG, its
subsidiaries and William J. Ryan, dated November 26,
1990 (7)
10(g) Supplemental Retirement Agreement among PHFG, its
subsidiaries and John E. Menario, dated November 26,
1990 (7)
10(h) Supplemental Retirement Agreement among PHFG, its
subsidiaries and Peter J. Verrill, dated November 26,
1990 (7)
10(i) Supplemental Retirement Agreement among PHFG, its
subsidiaries and Henry G. Beyer, dated November 26,
1990 (6)
10(j) Supplemental Retirement Agreement among PHFG, its
subsidiaries and John W. Fridlington, dated January 1,
1996 (5)
10(k) Senior Officers' Deferred Compensation Plan, as
amended (8)
10(l) Directors' Deferred Compensation Plan, as amended (8)
10(m) 1986 Stock Option and Stock Appreciation Rights
Plan (2)(9)
10(n) 1986 Employee Stock Purchase Plan (2)(9)
10(o) Restricted Stock Plan for Non-Employee Directors (10)
10(p) 1995 Stock Option Plan for Non-Employee Directors (11)
10(q)(1) Thrift Incentive Plan (12)
10(q)(2) First Amendment to Thrift Incentive Plan (5)
10(q)(3) Second Amendment to Thrift Incentive Plan (5)
10(r)(1) Profit Sharing Employee Stock Ownership Plan (12)
10(r)(2) First Amendment to Profit Sharing Employee
Stock Ownership Plan (5)
10(r)(3) Second Amendment to Profit Sharing Employee
Stock Ownership Plan (5)
10(s) 1996 Equity Incentive Plan (13)
</TABLE>
II-3
<PAGE> 216
<TABLE>
<CAPTION>
Exhibit No. Exhibit Location
- ----------- ------- --------
<S> <C> <C>
10(t) Agreement by and among PHFG, PHB and
Robert P. Bahre, dated January 1, 1989 (8)
10(u) Stockholders Rights Agreement, dated September 12,
1989, between PHFG and Mellon Securities Trust
Company, as Rights Agent (14)
21 Subsidiaries of PHFG (5)
23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P. *
(contained in the opinion included as Exhibit 5)
23(b) Consent of Foley, Hoag & Eliot LLP
(contained in the opinion included as Exhibit 8)
23(c) Consent of KPMG Peat Marwick LLP
23(d) Consent of Wolf & Company, P.C.
23(e) Consent of McConnell, Budd & Downes, 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 Family Special Meeting
99(c) Other PHFG solicitation materials
</TABLE>
(1) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on June 5, 1996. 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 10-Q report filed by PHFG
with the SEC on May 14, 1996.
(4) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on February 28, 1995.
(5) Exhibit is incorporated by reference to PHFG's Form 10-K report for the year
ended December 31, 1995, filed with the SEC on March 29, 1996.
(6) 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.
II-4
<PAGE> 217
(7) 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.
(8) 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.
(9) 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.
(10) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 16, 1990.
(11) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 24, 1995.
(12) 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.
(13) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 20, 1996.
(14) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on September 13, 1989.
* To be filed by amendment.
PHFG's management contracts or compensatory plans or arrangements
consist of Exhibit Nos. 10(a)-(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
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<PAGE> 218
or in the aggregate, represent a fundamental
change in the information set forth in the
registration statement; and
(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.
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<PAGE> 219
(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> 220
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 24th day of June 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: June 24, 1996
- ----------------------------------
Robert P. Bahre
Director
/s/ Everett W. Gray Date: June 24, 1996
- ----------------------------------
Everett W. Gray
Director
II-8
<PAGE> 221
/s/ Andrew W. Greene Date: June 24, 1996
- ----------------------------------
Andrew W. Greene
Director
/s/ Katherine M. Greenleaf Date: June 24, 1996
- ----------------------------------
Katherine M. Greenleaf
Director
/s/ Dana Levenson Date: June 25, 1996
- ----------------------------------
Dana Levenson
Director
/s/ Robert A. Marden, Sr. Date: June 24, 1996
- ----------------------------------
Robert A. Marden, Sr.
Vice Chairman
/s/ Malcolm W. Philbrook, Jr. Date: June 25, 1996
- ----------------------------------
Malcolm W. Philbrook, Jr.
Director
/s/ Pamela P. Plumb Date: June 24, 1996
- ----------------------------------
Pamela P. Plumb
Vice Chairman
/s/ William J. Ryan Date: June 24, 1996
- ----------------------------------
William J. Ryan
Chairman, President and Chief
Executive Officer
(principal executive officer)
/s/ Curtis M. Scribner Date: June 25, 1996
- ----------------------------------
Curtis M. Scribner
Director
/s/ Paul R. Shea Date: June 24, 1996
- ----------------------------------
Paul R. Shea
Director
II-9
<PAGE> 222
/s/ Davis P. Thurber Date: June 23, 1996
- ----------------------------------
Davis P. Thurber
Director
/s/ Peter J. Verrill Date: June 24, 1996
- ----------------------------------
Peter J. Verrill
Executive Vice President, Chief
Financial Officer and Treasurer
(principal financial and accounting officer)
II-10
<PAGE> 223
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Location
- ----------- ------- --------
<S> <C> <C>
2(a) Agreement and Plan of Merger, dated as of May 30,
1996, among PHFG, PHMC and Family,
including the forms of Exhibits A to E thereto (1)
2(b) Stock Option Agreement, dated as of May 30, 1996,
between PHFG (as grantee) and Family (as issuer) (1)
2(c) Stock Option Agreement, dated as of May 30, 1996,
between PHFG (as issuer) and Family (as grantee) (1)
2(d) Stockholder Agreement, dated as of May 30, 1996
among PHFG and certain shareholders of Family (1)
3(a)(1) Articles of Incorporation of PHFG (2)
3(a)(2) Articles of Amendment to Articles of Incorporation
of PHFG (3)
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 (4)
4(c) Form of Debenture due 2000 (4)
5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered *
8 Form of opinion of Foley, Hoag & Eliot LLP regarding
certain federal income tax consequences
10(a) Amended and Restated Severance Agreement between
PHFG and William J. Ryan, dated January 1, 1995 (5)
10(b) Amended and Restated Severance Agreement between
PHFG and Peter J. Verrill, dated January 1, 1995 (5)
10(c) Severance Agreement between PHFG and John W.
Fridlington, dated January 1, 1995 (6)
10(d) Severance Agreement between PHFG and Henry G.
Beyer, dated January 1, 1995 (6)
10(e) Employment Agreement between PHFG and John E.
Menario, including the Severance Agreement included
as Attachment A, dated June 30, 1995 (5)
10(f) Supplemental Retirement Agreement among PHFG, its
subsidiaries and William J. Ryan, dated November 26,
1990 (7)
</TABLE>
<PAGE> 224
<TABLE>
<CAPTION>
Exhibit No. Exhibit Location
- ----------- ------- --------
<S> <C> <C>
10(g) Supplemental Retirement Agreement among PHFG, its
subsidiaries and John E. Menario, dated November 26,
1990 (7)
10(h) Supplemental Retirement Agreement among PHFG, its
subsidiaries and Peter J. Verrill, dated November 26,
1990 (7)
10(i) Supplemental Retirement Agreement among PHFG, its
subsidiaries and Henry G. Beyer, dated November 26,
1990 (6)
10(j) Supplemental Retirement Agreement among PHFG, its
subsidiaries and John W. Fridlington, dated January 1,
1996 (5)
10(k) Senior Officers' Deferred Compensation Plan, as
amended (8)
10(l) Directors' Deferred Compensation Plan, as amended (8)
10(m) 1986 Stock Option and Stock Appreciation Rights
Plan (2)(9)
10(n) 1986 Employee Stock Purchase Plan (2)(9)
10(o) Restricted Stock Plan for Non-Employee Directors (10)
10(p) 1995 Stock Option Plan for Non-Employee Directors (11)
10(q)(1) Thrift Incentive Plan (12)
10(q)(2) First Amendment to Thrift Incentive Plan (5)
10(q)(3) Second Amendment to Thrift Incentive Plan (5)
10(r)(1) Profit Sharing Employee Stock Ownership Plan (12)
10(r)(2) First Amendment to Profit Sharing Employee
Stock Ownership Plan (5)
10(r)(3) Second Amendment to Profit Sharing Employee
Stock Ownership Plan (5)
10(s) 1996 Equity Incentive Plan (13)
10(t) Agreement by and among PHFG, PHB and
Robert P. Bahre, dated January 1, 1989 (8)
10(u) Stockholders Rights Agreement, dated September 12,
1989, between PHFG and Mellon Securities Trust
Company, as Rights Agent (14)
21 Subsidiaries of PHFG (5)
</TABLE>
2
<PAGE> 225
<TABLE>
<CAPTION>
Exhibit No. Exhibit Location
- ----------- ------- --------
<S> <C> <C>
23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P. *
(contained in the opinion included as Exhibit 5)
23(b) Consent of Foley, Hoag & Eliot LLP
(contained in the opinion included as Exhibit 8)
23(c) Consent of KPMG Peat Marwick LLP
23(d) Consent of Wolf & Company, P.C.
23(e) Consent of McConnell, Budd & Downes, 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 Family Special Meeting
99(c) Other PHFG solicitation materials
</TABLE>
(1) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on June 5, 1996. 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 10-Q report filed by PHFG
with the SEC on May 14, 1996.
(4) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on February 28, 1995.
(5) Exhibit is incorporated by reference to PHFG's Form 10-K report for the year
ended December 31, 1995, filed with the SEC on March 29, 1996.
(6) 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.
(7) 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.
(8) 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> 226
(9) 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.
(10) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 16, 1990.
(11) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 24, 1995.
(12) 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.
(13) Exhibit is incorporated by reference to the proxy statement filed by PHFG
with the SEC on March 20, 1996.
(14) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on September 13, 1989.
* To be filed by amendment.
4
<PAGE> 1
EXHIBIT 8
[Form of Opinion of Foley Hoag & Eliot LLP]
______________________ , 1996
Family Bancorp
153 Merrimack Street
Haverhill, Massachusetts 01830
Re: Federal Income Taxation of Proposed Merger
Ladies and Gentlemen:
We have acted as counsel to Family Bancorp, a Massachusetts corporation
("Family"), in connection with the merger (the "Merger") of Family with and into
Peoples Heritage Merger Corp. ("Merger Corp."), a Maine corporation and
wholly-owned subsidiary of Peoples Heritage Financial Group, Inc., a Maine
corporation ("Peoples"), in accordance with the Agreement and Plan of Merger
dated as of May 30, 1996, by and among Peoples, Merger Corp. and Family (the
"Merger Agreement"). Capitalized terms used but not defined herein shall have
the respective meanings ascribed to them in the Merger Agreement.
We have examined the law and such papers as deemed necessary to render
these opinions, including the Merger Agreement, the joint Proxy Statement of
Peoples and Family and the Prospectus of Peoples filed with the Securities and
Exchange Commission as part of a Registration Statement on Form S-4 (the "Proxy
Statement/Prospectus"). As to questions of fact material to our opinion, we have
relied upon representations of Family, Peoples, Merger Corp. and certain Family
stockholders contained in letters of even date addressed to us (the "Letters of
Representation"), without undertaking to verify the same by independent
investigation.
The Merger will be consummated pursuant to the Merger Agreement. Under
the Merger Agreement, each share of Family common stock par value $.10 per share
("Family Common Stock") (other than Dissenting Shares, if any, and other than
Family Common Stock then owned by Family, any Family subsidiary, Peoples, or any
Peoples subsidiary (in each case other than in a fiduciary capacity that are
beneficially owned by
<PAGE> 2
third parties or as a result of debts previously contracted, which shall be
cancelled and retired) will be converted into shares of Peoples common stock,
par value $.01 per share ("Peoples Common Stock"). As a result of the Merger,
Merger Corp., as the surviving institution, will continue to be a wholly-owned
subsidiary of Peoples and Family will cease to exist.
In our examination we have assumed that (i) each entity that is a party
to any of the documents (the "Documents") described in the preceding paragraph
has been duly organized under the laws of its state or country of organization,
is validly existing and in good standing under such laws, and is duly qualified
and in good standing in each jurisdiction in which it is required to be
qualified to engage in the transactions contemplated by the Documents; (ii) each
such entity has full power, authority, capacity and legal right to enter into
and perform the terms of the Documents and the transactions contemplated
thereby; (iii) the copies or originals of the Documents furnished to us are
authentic (if originals) or accurate (if copies), those that are contracts or
instruments are enforceable and effective in accordance with their terms against
all parities thereto, and all signatures are genuine; (iv) any representations
made in the Documents are, and will continue to be, true and complete, and no
default exists under any of the Documents; (v) the business and affairs of each
of the entities that is a party to any of the Documents will be conducted in
accordance with the Documents and all relevant laws; (vi) no actions will be
taken, no change in any of the Documents will occur, and no other events will
occur, after the date hereof, that would have the effect of altering the facts,
Documents or assumptions upon which these opinions are based; and (vii) the
business reasons for the Merger, as set forth in the Proxy Statement/Prospectus,
will constitute a valid business purpose, within the meaning of Treasury
Regulation section 1.368-1(b) and (c), for the Merger.
We express no opinion as to the federal income tax consequences other
than those described below, if any, to Family, Peoples, and Merger Corp. and
their respective stockholders with respect to the Merger or as to any state,
local or foreign income or other tax consequences, with respect to the Merger.
Based on the foregoing, we are of the opinion, as of the date hereof
and under existing law, that for United States federal income tax purposes:
1. The Merger will constitute a reorganization within the meaning of
section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
2. Except to the extent of cash received in lieu of fractional shares,
as described below, no gain or loss will be recognized by the stockholders of
Family upon the receipt in the Merger of shares of Peoples Common Stock in
exchange for their shares of Family Common Stock.
<PAGE> 3
3. Cash received in lieu of a fractional share of Peoples Common Stock
will be treated as if the fractional share had been distributed in exchange for
shares of Family Common Stock and then the fractional share had been redeemed by
Peoples. The cash will be treated as a distribution in full payment in exchange
for the fractional share interest, provided the redemption is not essentially
equivalent to a dividend, and will accordingly result in the recognition of
gain, if any, measured by the difference between the portion of the basis of the
shares of Family Common Stock allocable to such fractional share and the cash
received in full payment therefor. If such shares of Family Common Stock are
capital assets in the hands of the Family stockholder, then such gain will be
capital gain.
4. The aggregate basis of the Peoples Common Stock received by a Family
stockholder in the Merger will be the same as the aggregate basis of the Family
Common Stock surrendered in exchange therefor.
5. The holding period for each share of Peoples Common Stock received
by a Family stockholder in exchange for Family Common Stock will include the
period for which such stockholder held such Family Common Stock, so long as the
stockholder's Family Common Stock is held as a capital asset at the Effective
Time.
6. A Family stockholder who does not vote in favor of the Merger, who
exercises dissenters' rights as to all such holder's shares of Family Common
Stock and who is not deemed to be an owner of any shares of Family Common Stock
held by others will recognize gain or loss measured by the difference between
the basis of such stockholder's dissenting shares and the cash received in
exchange therefor. Such gain or loss will be capital gain or loss, provided that
the holder's dissenting shares are held as a capital asset at the Effective
Time.
While the accuracy of each representation set forth in the Letters of
Representation is essential to these opinions, we call your particular attention
to the fact that disposition of Peoples Common Stock received by Family
stockholders in the Merger may cause the Merger to become retroactively taxable
to each Family stockholder, even those who do not make such dispositions, and to
Family. In particular, Family stockholders must not, pursuant to a plan or
intent existing prior to the Effective Time, dispose of an amount of Peoples
Common Stock to be received in the Merger (including, under certain
circumstances, pre-Merger dispositions of Family Common Stock) such that the
Family stockholders do not retain a meaningful continuing equity ownership in
Peoples. Generally, so long as the Family stockholders have no plan or intention
to dispose of Peoples Common Stock to be received in the Merger that would
result in their retention, in the aggregate, of a continuing interest through
stock ownership in Peoples that is equal in value, as of the Effective Time to
less than fifty percent of the value of all of the formerly outstanding Family
Common Stock as of the same date, this requirement will be satisfied. If this
requirement is not satisfied, each Family stockholder would recognize gain or
loss with respect to each share of Family
<PAGE> 4
Common Stock surrendered equal to the difference between (i) the stockholder's
basis in the share and (ii) the fair market value of the Peoples Common Stock
received in exchange therefor plus cash received in lieu of any fractional share
interest. In such event, the stockholder's aggregate basis in the shares of
Peoples Common Stock received in the exchange would equal the fair market value
of such shares, and the stockholders' holding period for such Peoples Common
Stock would not include the period during which the stockholder held the Family
Common Stock exchanged therefor. In addition, Family would recognize taxable
gain in an amount equal to the difference between the fair market value of its
assets and its tax basis in such assets.
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 in
respect of the shares of Peoples 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 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,
FOLEY, HOAG & ELIOT LLP
By:_____________________________________
A partner
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Peoples Heritage Financial Group, Inc.
We consent to the use of our reports dated January 17, 1996 and June
25, 1996 incorporated herein by references and to the references to our firm
under the heading "Experts" in the Prospectus/Joint Proxy Statement. Our reports
refer to changes in the Company's methods of accounting for mortgage servicing
rights.
KPMG Peat Marwick LLP
Boston, Massachusetts
July 1, 1996
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Prospectus/Joint
Proxy Statement, of our report dated January 25, 1996, included in the Annual
Report on Form 10-K of Family Bancorp for the year ended December 31, 1995. We
also consent to the reference to us under the heading "Experts" in such
Prospectus/Joint Proxy Statement.
WOLF & COMPANY, P.C.
Boston, Massachusetts
July 1, 1996
<PAGE> 1
EXHIBIT 23(e)
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion of the Opinion of McConnell, Budd &
Downes, Inc. as an Annex to the Prospectus/Joint Proxy Statement filed as part
of the Form S-4 Registration Statement of Peoples Heritage Financial Group, Inc.
and to the references to our firm as financial advisor to Family Bancorp in the
text of said Prospectus/Joint Proxy Statement. In giving such consent we do not
thereby 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.
MCCONNELL, BUDD & DOWNES, INC.
By:/s/ David A. Budd
-------------------------------------
Name: David A. Budd
Title: Managing Director
Date: July 1, 1996
<PAGE> 1
EXHIBIT 23(f)
CONSENT OF FINANCIAL ADVISOR
July 1, 1996
We hereby consent to the use in this Registration Statement on Form S-4
of our letter to the Board of Directors of Peoples Heritage Financial Group,
Inc. included as Annex VI 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/ A.M. Senchak
-------------------------------------
Name: A.M. Senchak
Title: Executive Vice President
<PAGE> 1
EXHIBIT 99(a)
PEOPLES HERITAGE FINANCIAL GROUP, INC.
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
____________ ___, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of Common Stock of Peoples Heritage
Financial Group, Inc. ("PHFG"), hereby appoints ______________ and
________________ as Proxies, with the full power of substitution, to represent
and to vote as designated on the reverse of this card all of the shares of
Common Stock of PHFG which the undersigned is entitled to vote at the Special
Meeting of Shareholders to be held at the _______________________, Portland,
Maine, on _________ ___, 1996, at 9:00 a.m., Eastern Time, or any adjournment
thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
SHARES OF COMMON STOCK OF PHFG WILL BE VOTED AS SPECIFIED. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ADOPT AN
AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 30, 1996, BY AND AMONG PHFG,
PEOPLES HERITAGE MERGER CORP. AND FAMILY BANCORP. IF ANY OTHER MATTER IS
PROPERLY PRESENTED AT THE SPECIAL MEETING OF SHAREHOLDERS, THE PROXY WILL BE
VOTED IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS APPOINTED AS PROXIES.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE.
<PAGE> 2
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
I plan to attend
the meeting / /
Proposal to adopt an Agreement and Plan of Merger, dated as of May 30, 1996, by
and among PHFG, Peoples Heritage Merger Corp. ("PHMC") and Family Bancorp
("Family"), which provides, among other things, for (i) the merger of Family
with and into PHMC (the "Merger") and (ii) the conversion of each share of
Common Stock of Family outstanding immediately prior to the Merger (other than
any dissenting shares under Massachusetts law and certain shares held by PHFG)
into the right to receive 1.26 shares of Common Stock of PHFG, subject to
possible adjustment under certain circumstances, plus cash in lieu of any
fractional share interest.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS OF PHFG RECOMMENDS A VOTE FOR APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER. SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF
DIRECTORS.
Dated: _______________________________, 1996
Signature____________________________________
Signature____________________________________
(print name)
IMPORTANT: Please sign your name exactly as
it appears hereon. When shares are held as
joint tenants, either may sign. When signing
as an attorney, executor, administrator,
trustee or guardian, add such title to your
signature.
NOTE: If you receive more than one proxy
card, please date and sign each card and
return all proxy cards in the enclosed
envelope.
<PAGE> 1
EXHIBIT 99(b)
FAMILY BANCORP
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
__________ ___, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of Common Stock of Family Bancorp
("Family"), hereby appoints _____________________ and _____________________ as
Proxies, with the full power of substitution, to represent and to vote as
designated on the reverse of this card all of the shares of Common Stock of
Family which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held at the ________________________, ___________,
Massachusetts, on ________ ___, 1996, at 9:00 a.m., Eastern Time, or any
adjournment thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
SHARES OF COMMON STOCK OF FAMILY WILL BE VOTED AS SPECIFIED. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ADOPT AN
AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 30, 1996, BY AND AMONG PEOPLES
HERITAGE FINANCIAL GROUP, INC., PEOPLES HERITAGE MERGER CORP. AND FAMILY. IF ANY
OTHER MATTER IS PROPERLY PRESENTED AT THE SPECIAL MEETING OF SHAREHOLDERS, THE
PROXY WILL BE VOTED IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS APPOINTED AS
PROXIES.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE.
<PAGE> 2
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
I plan to attend
the meeting / /
Proposal to adopt an Agreement and Plan of Merger, dated as of May 30, 1996, by
and among Peoples Heritage Financial Group, Inc. ("PHFG"), Peoples Heritage
Merger Corp. ("PHMC") and Family, which provides, among other things, for (i)
the merger of Family with and into PHMC (the "Merger") and (ii) the conversion
of each share of Common Stock of Family outstanding immediately prior to the
Merger (other than any dissenting shares under Massachusetts law and certain
shares held by PHFG) into the right to receive 1.26 shares of Common Stock of
PHFG, subject to possible adjustment under certain circumstances, plus cash in
lieu of any fractional share interest.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS OF FAMILY RECOMMENDS A VOTE FOR APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER. SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF
DIRECTORS.
Dated: _______________________________, 1996
Signature____________________________________
Signature____________________________________
(print name)
IMPORTANT: Please sign your name exactly as
it appears hereon. When shares are held as
joint tenants, either may sign. When signing
as an attorney, executor, administrator,
trustee or guardian, add such title to your
signature.
NOTE: If you receive more than one proxy
card, please date and sign each card and
return all proxy cards in the enclosed
envelope.
<PAGE> 1
EXHIBIT 99(c)
[PHFG Letterhead]
________ ___, 1996
To: Participants in the Thrift Incentive Plan and
Profit Sharing Employee Stock Ownership Plan
of Peoples Heritage Financial Group, Inc.
As described in the enclosed materials, your proxy as a shareholder of
Peoples Heritage Financial Group, Inc. ("PHFG") is being solicited in connection
with an upcoming Special Meeting of Shareholders of PHFG, at which shareholders
of PHFG will consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of May 30, 1996 (the "Agreement"), by and among PHFG, Peoples
Heritage Merger Corp. ("PHMC"), a wholly-owned subsidiary of PHFG, and Family
Bancorp ("Family"), pursuant to which, among other things, Family will be merged
with and into PHMC (the "Merger"). If the Merger is approved and consummated,
each share of common stock of Family outstanding immediately prior to the Merger
(other than any dissenting shares under Massachusetts law and certain shares
held by PHFG) will be converted into the right to receive 1.26 shares of common
stock of PHFG, subject to possible adjustment under certain circumstances, plus
cash in lieu of any fractional share interest. I hope you will take advantage of
the opportunity to direct, on a confidential basis, the manner in which shares
of PHFG Common Stock allocated to your accounts under PHFG's Thrift Incentive
Plan and Profit Sharing Employee Stock Ownership Plan (together the "Plans")
will be voted.
Enclosed with this letter is a Prospectus/Joint Proxy Statement, which
describes the matter to be voted upon, a voting instruction ballot for each of
the Plans, which will permit you to vote the shares allocated to your accounts
under the Plans, and a stamped, pre-addressed return envelope. After you have
reviewed the Prospectus/Joint Proxy Statement, I urge you to vote your shares in
the Plans by marking, dating, signing and returning the enclosed voting
instruction ballots to the internal audit department of Peoples Heritage Bank.
Your voting instructions will remain completely confidential. Only PHFG's
internal auditor, who will tabulate the voting instructions, will have access to
your ballots. PHFG's internal auditor will certify the totals for the Plans to
Peoples Heritage Bank, which acts as Trustee for the Plans, for the purpose of
having those shares voted. No other person associated with PHFG or Peoples
Heritage Bank will see the individual voting instructions.
If your voting instructions are not received, the shares allocated to
your accounts will be voted in the same proportion as the shares under the
respective Plans have voted.
<PAGE> 2
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.
On behalf of the Board, I thank you for your attention to this
important matter.
Sincerely,
William J. Ryan
Chairman, President and
Chief Executive Officer
<PAGE> 3
EXHIBIT 99(c)
(cont.)
PEOPLES HERITAGE FINANCIAL GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
______________ ___, 1996
The undersigned, as a holder of Common Stock of Peoples Heritage
Financial Group, Inc. ("PHFG") pursuant to PHFG's Thrift Incentive Plan (the
"Plan"), hereby instructs Peoples Heritage Bank, as Trustee for the Plan, to
vote as designated on the reverse of this card all of the shares of Common Stock
of PHFG which the undersigned holds pursuant to the Plan at the Special Meeting
of Shareholders to be held at the __________________, Portland, Maine, on
________ __, 1996 at 9:00 a.m., Eastern Time, or any adjournment thereof.
SHARES OF COMMON STOCK OF PHFG WILL BE VOTED AS SPECIFIED. IF YOU
RETURN THIS BALLOT PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, SHARES HELD BY
YOU PURSUANT TO THE PLAN WILL BE VOTED FOR THE PROPOSAL TO ADOPT AN AGREEMENT
AND PLAN OF MERGER, DATED AS OF MAY 30, 1996, BY AND AMONG PHFG, PEOPLES
HERITAGE MERGER CORP. AND FAMILY BANCORP. IF YOU DO NOT RETURN THIS BALLOT,
SHARES HELD BY YOU PURSUANT TO THE PLAN WILL BE VOTED IN THE SAME PROPORTION AS
THE SHARES UNDER THE PLAN HAVE VOTED.
IMPORTANT: PLEASE DATE AND SIGN THIS BALLOT ON REVERSE SIDE.
<PAGE> 4
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
I plan to attend
the meeting / /
Proposal to adopt an Agreement and Plan of Merger, dated as of May 30, 1996, by
and among PHFG, Peoples Heritage Merger Corp. ("PHMC") and Family Bancorp
("Family"), which provides, among other things, for (i) the merger of Family
with and into PHMC (the "Merger") and (ii) the conversion of each share of
Common Stock of Family outstanding immediately prior to the Merger (other than
any dissenting shares under Massachusetts law and certain shares held by PHFG)
into the right to receive 1.26 shares of Common Stock of PHFG, subject to
possible adjustment under certain circumstances, plus cash in lieu of any
fractional share interest.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS OF PHFG RECOMMENDS A VOTE FOR APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER. SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF
DIRECTORS.
Dated: _______________________________, 1996
Signature____________________________________
Signature____________________________________
(print name)
IMPORTANT: Please sign your name exactly as
it appears hereon. When shares are held as
joint tenants, either may sign. When signing
as an attorney, executor, administrator,
trustee or guardian, add such title to your
signature.
<PAGE> 5
EXHIBIT 99(c)
(cont.)
PEOPLES HERITAGE FINANCIAL GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
______________ ___, 1996
The undersigned, as a holder of Common Stock of Peoples Heritage
Financial Group, Inc. ("PHFG") pursuant to PHFG's Profit Sharing Employee Stock
Ownership Plan (the "ESOP"), hereby instructs Peoples Heritage Bank, as Trustee
for the ESOP, to vote as designated on the reverse of this card all of the
shares of Common Stock of PHFG which the undersigned holds pursuant to the ESOP
at the Special Meeting of Shareholders to be held at the __________________,
Portland, Maine, on ________ __, 1996 at 9:00 a.m., Eastern Time, or any
adjournment thereof.
SHARES OF COMMON STOCK OF PHFG WILL BE VOTED AS SPECIFIED. IF YOU
RETURN THIS BALLOT PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, SHARES HELD BY
YOU PURSUANT TO THE ESOP WILL BE VOTED FOR THE PROPOSAL TO ADOPT AN AGREEMENT
AND PLAN OF MERGER, DATED AS OF MAY 30, 1996, BY AND AMONG PHFG, PEOPLES
HERITAGE MERGER CORP. AND FAMILY BANCORP. IF YOU DO NOT RETURN THIS BALLOT,
SHARES HELD BY YOU PURSUANT TO THE ESOP WILL BE VOTED IN THE SAME PROPORTION AS
THE SHARES UNDER THE ESOP HAVE VOTED.
IMPORTANT: PLEASE DATE AND SIGN THIS BALLOT ON REVERSE SIDE.
<PAGE> 6
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
I plan to attend
the meeting / /
Proposal to adopt an Agreement and Plan of Merger, dated as of May 30, 1996, by
and among PHFG, Peoples Heritage Merger Corp. ("PHMC") and Family Bancorp
("Family"), which provides, among other things, for (i) the merger of Family
with and into PHMC (the "Merger") and (ii) the conversion of each share of
Common Stock of Family outstanding immediately prior to the Merger (other than
any dissenting shares under Massachusetts law and certain shares held by PHFG)
into the right to receive 1.26 shares of Common Stock of PHFG, subject to
possible adjustment under certain circumstances, plus cash in lieu of any
fractional share interest.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS OF PHFG RECOMMENDS A VOTE FOR APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER. SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF
DIRECTORS.
Dated: _______________________________, 1996
Signature____________________________________
Signature____________________________________
(print name)
IMPORTANT: Please sign your name exactly as
it appears hereon. When shares are held as
joint tenants, either may sign. When signing
as an attorney, executor, administrator,
trustee or guardian, add such title to your
signature.
