<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1997
REGISTRATION NO. 333-
================================================================================
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)
<TABLE>
<S> <C> <C>
MAINE 6120 01-0437984
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) INDUSTRIAL CLASSIFICATION CODE IDENTIFICATION NO.)
NO.)
</TABLE>
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:
<TABLE>
<S> <C>
GERARD L. HAWKINS, ESQ. STEVEN KAPLAN, ESQ.
ELIAS, MATZ, TIERNAN & HERRICK L.L.P. ARNOLD & PORTER
734 15TH STREET, N.W. 555 12TH STREET, N.W.
WASHINGTON, D.C. 20005 WASHINGTON, D.C. 20004-1202
(202) 347-0300 (202) 942-5998
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OR UNIT(2) PRICE(2) REGISTRATION FEE(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share........... 16,815,868 shares $43.81 $736,671,176 $217,318
- --------------------------------------------------------------------------------------------------------------
Preferred Stock purchase
rights(3)................ 16,815,868 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 CFX Corporation ("CFX") with and into the
Registrant (the "Merger").
(2) Estimated solely for the purpose of calculation of the registration fee.
Pursuant to Rules 457(f)(1) 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
CFX common stock on the American Stock Exchange on December 23, 1997 (as
reported in The Wall Street Journal), and computed based on the estimated
maximum number of shares (25,211,197) that may be exchanged for the
securities being registered. Pursuant to Rule 457(b), the required fee is
reduced by the $143,222 filing fee paid at the time of filing preliminary
proxy materials by the Registrant and CFX in connection with the Merger on
December 10, 1997.
(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.
================================================================================
<PAGE> 2
PEOPLES HERITAGE FINANCIAL GROUP, INC.
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207) 761-8500
December 31, 1997
Dear Shareholder,
You are cordially invited to attend a Special Meeting of Shareholders of
Peoples Heritage Financial Group, Inc. ("PHFG") at 10:00 a.m., Eastern Time, on
Monday, February 9, 1998 at the Portland Marriott Hotel, 200 Sable Oaks Drive,
South Portland, Maine 04106 (the "Special Meeting"). This is a very important
meeting regarding your investment in PHFG.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated as of October 27,
1997 (the "Agreement"), between PHFG and CFX Corporation ("CFX"), a New
Hampshire corporation, pursuant to which, among other things, CFX will be merged
with and into PHFG (the "Merger"). If the Agreement is approved and the Merger
is consummated, each outstanding share of CFX common stock (except as otherwise
provided in the Agreement) will be converted into the right to receive 0.667 of
a share 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. 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. 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,
/s/ WILLIAM J. RYAN
-----------------------------
WILLIAM J. RYAN
Chairman, President and Chief
Executive Officer
<PAGE> 3
PEOPLES HERITAGE FINANCIAL GROUP, INC.
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207) 761-8500
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 9, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Peoples Heritage Financial Group, Inc. ("PHFG") will be held at
10:00 a.m., Eastern Time, on Monday, February 9, 1998 at the Portland Marriott
Hotel, 200 Sable Oaks Drive, South Portland, Maine 04106 for the following
purpose:
To consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of October 27, 1997, between PHFG and CFX Corporation
("CFX"), which provides, among other things, for (i) the merger of CFX with
and into PHFG and (ii) the conversion of each share of common stock of CFX
outstanding immediately prior to the Merger (other than any dissenting
shares under New Hampshire law and certain other shares) into the right to
receive 0.667 of a share 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 December 29, 1997 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
/s/ WILLIAM J. RYAN
-----------------------------
WILLIAM J. RYAN
Chairman, President and Chief
Executive Officer
Portland, Maine
December 31, 1997
- --------------------------------------------------------------------------------
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> 4
CFX CORPORATION
102 MAIN STREET
KEENE, NEW HAMPSHIRE 03431
(603) 352-2502
December 31, 1997
Dear Shareholder,
You are cordially invited to attend a Special Meeting of Shareholders of
CFX Corporation ("CFX") at 10:00 a.m., Eastern Time, on Monday, February 9, 1998
at the Keene Country Club, Base Hill Road, Keene, New Hampshire 03431 (the
"Special Meeting"). This is a very important meeting regarding your investment
in CFX.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated as of October 27,
1997 (the "Agreement"), between Peoples Heritage Financial Group, Inc. ("PHFG"),
a Maine corporation, and CFX, pursuant to which, among other things, CFX will be
merged with and into PHFG (the "Merger"). If the Agreement is approved and the
Merger is consummated, each outstanding share of CFX common stock (except as
otherwise provided in the Agreement) will be converted into the right to receive
0.667 of a share of PHFG common stock, subject to possible adjustment under
certain circumstances, plus cash in lieu of any fractional share interest. In
connection with the Merger, CFX's subsidiary banks, CFX Bank, Safety Fund
National Bank and Orange Savings Bank, will be merged with and into PHFG's
subsidiary banks, Bank of New Hampshire and Family Bank, FSB. On December 29,
1997, the closing per share price of the PHFG common stock on the Nasdaq Stock
Market's National Market was $47.00.
Your Board of Directors has determined the Merger to be fair to and in the
best interests of CFX 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. 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,
/s/ Peter J. Baxter
Peter J. Baxter
President and Chief Executive Officer
<PAGE> 5
CFX CORPORATION
102 MAIN STREET
KEENE, NEW HAMPSHIRE 03431
(603) 352-2502
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 9, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of CFX Corporation ("CFX") will be held at 10:00 a.m., Eastern Time,
on Monday, February 9, 1998 at the Keene Country Club, Base Hill Road, Keene,
New Hampshire 03431 for the following purpose:
To consider and vote upon a proposal to adopt an Agreement and Plan of
Merger, dated as of October 27, 1997, between Peoples Heritage Financial
Group, Inc. ("PHFG") and CFX, which provides, among other things, for (i)
the merger of CFX with and into PHFG and (ii) the conversion of each share
of common stock of CFX outstanding immediately prior to the Merger (other
than any dissenting shares under New Hampshire law and certain other
shares) into the right to receive 0.667 of a share 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 CFX, the Board of Directors has fixed the close
of business on December 29, 1997 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 CFX of record at the close of business on that date
will be entitled to notice of and to vote at the Special Meeting or any
adjournment or adjournments thereof.
If the Merger is approved and consummated, holders of CFX's common stock
will have the right to dissent from the Merger and to obtain payment of the fair
value of their shares by complying with New Hampshire Revised Statutes Sections
293-A:13.01 et seq. A copy of Sections 293-A:13.01 et seq. is attached as Annex
VI to the accompanying Prospectus/Joint Proxy Statement.
THE BOARD OF DIRECTORS OF CFX HAS DETERMINED THE MERGER TO BE FAIR TO AND
IN THE BEST INTERESTS OF CFX AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
By Order of the Board of Directors and
President
/s/ Christopher V. Bean
CHRISTOPHER V. BEAN
Secretary
Keene, New Hampshire
December 31, 1997
- -------------------------------------------------------------------------------
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> 6
<TABLE>
<CAPTION>
PROSPECTUS PROXY STATEMENT
- ------------------------------------------------------------------------------------------------------
<S> <C>
PEOPLES HERITAGE FINANCIAL PEOPLES HERITAGE FINANCIAL
GROUP, INC. GROUP, INC.
------------------ AND
COMMON STOCK CFX CORPORATION
(PAR VALUE $.01 PER SHARE) ------------------
SPECIAL MEETINGS OF SHAREHOLDERS TO BE
HELD ON FEBRUARY 9, 1998
</TABLE>
------------------------
This Prospectus/Joint Proxy Statement is being furnished in connection with
the solicitation of proxies by the Board of Directors of Peoples Heritage
Financial Group, Inc. ("PHFG") and the Board of Directors of CFX Corporation
("CFX") to be used at a special meeting of shareholders of PHFG and CFX,
respectively, to be held on Monday, February 9, 1998 (the "PHFG Special Meeting"
and the "CFX Special Meeting," respectively, and together the "Special
Meetings"). The purpose of the Special Meetings is to consider and vote upon an
Agreement and Plan of Merger, dated as of October 27, 1997, between PHFG and CFX
(the "Agreement"), which provides, among other things, for the merger of CFX
with and into PHFG (the "Merger"). This Prospectus/Joint Proxy Statement and the
applicable proxy card enclosed herewith are first being mailed to shareholders
of PHFG and CFX on or about January 5, 1998.
Upon consummation of the Merger, each share of common stock of CFX,
$.66 2/3 par value per share (the "CFX Common Stock"), outstanding immediately
prior to consummation of the Merger (other than (i) any dissenting shares under
New Hampshire law and (ii) any shares held by PHFG or CFX 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 0.667 of a share 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 CFX Common Stock upon consummation
of the Merger. Based on an aggregate of 25,211,197 shares of CFX Common Stock
outstanding on the date hereof and estimated to be issuable under CFX stock
option and stock purchase plans as of the date hereof, an estimated maximum of
16,815,868 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 SHARES OF PHFG COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND,
THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Prospectus/Joint Proxy Statement is December 31, 1997.
<PAGE> 7
AVAILABLE INFORMATION
Each of PHFG and CFX 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 CFX 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 Offices
located at: 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained at prescribed rates by writing to the
SEC, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
If available, such reports, proxy statements and other information also may be
obtained through the SEC's electronic data gathering, analysis and retrieval
system ("EDGAR") via electronic means, including the web site that the SEC
maintains at http://www.sec.gov. Reports, proxy statements and other information
filed by CFX also can be inspected at the offices of the American Stock
Exchange, Inc. ("AMEX"), 86 Trinity Place, New York, New York 10006, on which
exchange the CFX Common Stock is listed.
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
CFX 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 CFX ARE AVAILABLE WITHOUT CHARGE (OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR ORAL REQUEST FROM: CFX
CORPORATION, 102 MAIN STREET, KEENE, NEW HAMPSHIRE 03431, ATTENTION: GREGG R.
TEWKSBURY (TELEPHONE NUMBER (603) 355-8607). IN ORDER TO ENSURE TIMELY DELIVERY
OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JANUARY 27, 1998.
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 CFX. 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 CFX SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS/JOINT
PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN
OFFER TO SELL OR SOLICITATION TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by PHFG (File No. 0-16947) and CFX (File No.
1-10633) 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,
1996; and
(2) PHFG's Quarterly Reports on Form 10-Q for the three months ended
March 31, 1997, June 30, 1997 and September 30, 1997; and
2
<PAGE> 8
(3) PHFG's Current Reports on Form 8-K filed on January 22, 1997,
January 29, 1997, April 8, 1997, April 17, 1997, June 4, 1997, June 27,
1997, October 1, 1997, October 10, 1997, October 27, 1997 and November 3,
1997; and
(4) CFX's Annual Report on Form 10-K for the year ended December 31,
1996, as amended; and
(5) CFX's Quarterly Reports on Form 10-Q for the three months ended
March 31, 1997, June 30, 1997 and September 30, 1997; and
(6) CFX's Current Reports on Form 8-K, filed on February 21, 1997,
September 15, 1997, November 4, 1997 and December 12, 1997.
All documents and reports filed by PHFG and CFX 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.
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS/JOINT PROXY STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS
WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF
PHFG UPON CONSUMMATION OF THE MERGER, INCLUDING STATEMENTS RELATING TO: (A) THE
ESTIMATED COST SAVINGS AND ACCRETION TO REPORTED EARNINGS THAT WILL BE REALIZED
FROM THE MERGER; (B) THE ESTIMATED IMPACT ON REVENUES OF THE MERGER; AND (C) THE
RESTRUCTURING CHARGES EXPECTED TO BE INCURRED IN CONNECTION WITH THE MERGER.
THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. SEE
"SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA," "MANAGEMENT AND OPERATIONS OF
PHFG AFTER THE MERGER" AND "PRO FORMA COMBINED CONSOLIDATED FINANCIAL
INFORMATION." FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FOLLOWING POSSIBILITIES: (1) ESTIMATED COST SAVINGS FROM THE MERGER CANNOT BE
FULLY REALIZED WITHIN THE EXPECTED TIME FRAME; (2) REVENUES FOLLOWING THE MERGER
ARE LOWER THAN EXPECTED; (3) COMPETITIVE PRESSURE AMONG DEPOSITORY INSTITUTIONS
INCREASES SIGNIFICANTLY; (4) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF
THE BUSINESSES OF PHFG AND CFX ARE GREATER THAN EXPECTED; (5) CHANGES IN THE
INTEREST RATE ENVIRONMENT REDUCE INTEREST MARGINS; (6) GENERAL ECONOMIC
CONDITIONS, EITHER NATIONALLY OR IN THE MARKETS IN WHICH PHFG WILL BE DOING
BUSINESS, ARE LESS FAVORABLE THAN EXPECTED; OR (7) LEGISLATION OR CHANGES IN
REGULATORY REQUIREMENTS ADVERSELY AFFECT THE BUSINESSES IN WHICH PHFG WOULD BE
ENGAGED. PHFG'S FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE ON WHICH
SUCH STATEMENTS ARE MADE, AND BY MAKING FORWARD-LOOKING STATEMENTS PHFG ASSUMES
NO DUTY TO UPDATE THEM TO REFLECT NEW, CHANGING OR UNANTICIPATED EVENTS OR
CIRCUMSTANCES.
3
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 2
FORWARD-LOOKING STATEMENTS............................................................ 3
SUMMARY............................................................................... 6
MARKET FOR COMMON STOCK AND DIVIDENDS................................................. 13
COMPARATIVE PER SHARE DATA............................................................ 15
SELECTED CONSOLIDATED FINANCIAL DATA OF PHFG.......................................... 17
SELECTED CONSOLIDATED FINANCIAL DATA OF CFX........................................... 19
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA........................................ 21
GENERAL INFORMATION................................................................... 23
THE SPECIAL MEETINGS.................................................................. 23
Time and Place...................................................................... 23
Matters to be Considered............................................................ 23
Shares Outstanding and Entitled to Vote; Record Date................................ 23
Votes Required...................................................................... 23
Voting and Revocation of Proxies.................................................... 24
Solicitation of Proxies............................................................. 24
THE MERGER............................................................................ 25
General............................................................................. 25
Background of the Merger............................................................ 25
Reasons for the Merger; Recommendations of the Boards of Directors.................. 27
Opinions of Financial Advisors...................................................... 29
Exchange of CFX Common Stock Certificates........................................... 41
Assumption of CFX Stock Options..................................................... 42
Conditions to the Merger............................................................ 42
Regulatory Approvals................................................................ 43
Business Pending the Merger......................................................... 45
No Solicitation..................................................................... 46
Effective Time of the Merger........................................................ 46
Termination and Amendment........................................................... 47
Interests of Certain Persons in the Merger.......................................... 49
Certain Employee Matters............................................................ 51
Resale of PHFG Common Stock......................................................... 52
Certain Federal Income Tax Consequences............................................. 52
Accounting Treatment of the Merger.................................................. 54
Expenses of the Merger.............................................................. 54
Amendment and Restatement of PHFG's Articles of Incorporation....................... 54
Stock Option Agreements............................................................. 55
Letter Agreements................................................................... 56
Dissenters' Rights.................................................................. 56
MANAGEMENT AND OPERATIONS OF PHFG AFTER THE MERGER.................................... 59
Board of Directors and Management following the Merger.............................. 59
Consolidation of Operations; Projected Cost Savings, Revenue Enhancements and
Earnings......................................................................... 59
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION................................. 62
DESCRIPTION OF PHFG CAPITAL STOCK..................................................... 69
PHFG Common Stock................................................................... 69
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
PHFG Preferred Stock................................................................ 69
PHFG Rights......................................................................... 70
Other Provisions.................................................................... 71
Transfer Agent...................................................................... 71
COMPARISON OF THE RIGHTS OF SHAREHOLDERS.............................................. 71
Authorized Capital Stock............................................................ 72
Issuance of Capital Stock........................................................... 72
Voting Rights....................................................................... 72
Classification and Size of Board of Directors....................................... 72
Director Vacancies and Removal of Directors......................................... 73
Director Duties..................................................................... 73
Director Conflict of Interest Transactions.......................................... 74
Exculpation of Directors and Officers............................................... 74
Special Meetings of Shareholders.................................................... 74
Shareholder Nominations............................................................. 75
Shareholder Proposals............................................................... 75
Shareholder Action without a Meeting................................................ 76
Shareholder's Right to Examine Books and Records.................................... 76
Amendment of Governing Instruments.................................................. 76
Mergers, Consolidations and Sales of Assets......................................... 77
State Anti-takeover Statutes........................................................ 77
Dissenters' Rights of Appraisal..................................................... 78
Shareholder Rights Plans............................................................ 78
CERTAIN BENEFICIAL OWNERS OF PHFG COMMON STOCK........................................ 79
Security Ownership of Management.................................................... 79
Security Ownership of Certain Beneficial Owners..................................... 80
CERTAIN BENEFICIAL OWNERS OF CFX COMMON STOCK......................................... 81
Security Ownership of Management.................................................... 81
Security Ownership of Certain Beneficial Owners..................................... 82
LEGAL OPINION......................................................................... 82
EXPERTS............................................................................... 82
PROPOSALS FOR THE 1998 ANNUAL MEETINGS................................................ 83
</TABLE>
ANNEXES:
<TABLE>
<S> <C> <C>
Annex I -- Agreement and Plan of Merger, dated as of October 27, 1997, between PHFG and
CFX
Annex II -- Stock Option Agreement, dated as of October 27, 1997, between CFX (as
issuer) and PHFG (as grantee)
Annex III -- Stock Option Agreement, dated as of October 27, 1997, between PHFG (as
issuer) and CFX (as grantee)
Annex IV -- Opinion of Keefe, Bruyette & Woods, Inc.
Annex V -- Opinion of McConnell, Budd & Downes, Inc.
Annex VI -- Sections 293-A:13.01 et seq. of the New Hampshire Business Corporation Act
</TABLE>
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SUMMARY
The following summary of certain information contained elsewhere in this
Prospectus/Joint Proxy Statement and in the documents incorporated herein by
reference is not intended to be a complete statement of the matters described
herein or therein. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in this
Prospectus/Joint Proxy Statement and in the Annexes attached hereto, including
the Agreement, a copy of which is attached hereto as Annex I and incorporated
herein by reference, and the other 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 10:00 a.m., Eastern Time, on
Monday, February 9, 1998 at the Portland Marriott Hotel, 200 Sable Oaks Drive,
South Portland, Maine 04106, and the CFX Special Meeting will be held at the
same time and on the same date at the Keene Country Club, Base Hill Road, Keene,
New Hampshire 03431. Only the holders of record of outstanding shares of PHFG
Common Stock and CFX Common Stock at the close of business on December 29, 1997
(the "Record Date") are entitled to notice of and to vote at the PHFG Special
Meeting and the CFX Special Meeting, respectively. On the Record Date, there
were 27,739,090 shares of PHFG Common Stock and 24,058,307 shares of CFX Common
Stock outstanding and entitled to be voted at the PHFG Special Meeting and the
CFX Special Meeting, respectively.
At the Special Meetings, stockholders of PHFG and CFX will consider and
vote upon a proposal to approve the Agreement. The affirmative vote of the
holders of a majority of the outstanding shares of PHFG Common Stock and CFX
Common Stock, voting in person or by proxy, is necessary to approve the
Agreement on behalf of PHFG and CFX, respectively. Because approval of the
Agreement on behalf of each of PHFG and CFX 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 PHFG and CFX 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. Broker non-votes resulting from the
absence of such instructions also will have the same effect as votes against
approval of the Agreement.
In connection with the execution of the Agreement, PHFG and the directors
of CFX entered into an agreement pursuant to which, among other things, such
persons agreed to vote their shares of CFX Common Stock (which amount to 5.3% of
the shares of such stock outstanding, excluding shares subject to options) in
favor of the Agreement, and CFX and the directors of PHFG entered into an
agreement pursuant to which, among other things, such persons agreed to vote
their shares of PHFG Common Stock (which amount to 2.7% of the shares of such
stock outstanding, excluding shares subject to options) in favor of the
Agreement. See "The Special Meetings -- Votes Required" and "Certain Beneficial
Owners of PHFG Common Stock," "Certain Beneficial Owners of CFX Common Stock"
and "The Merger -- Letter Agreements."
PARTIES TO THE MERGER
PHFG. 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 142
offices located throughout the States of Maine and New Hampshire and northern
Massachusetts. At September 30, 1997, PHFG had consolidated assets of $6.1
billion, consolidated deposits of $4.3 billion and consolidated shareholders'
equity of $451.1 million. Based on total assets at September 30, 1997, PHFG is
the largest independent bank holding company headquartered in the State of
Maine.
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PHFG offers a broad range of commercial and consumer banking services and
products and trust and investment advisory services through three wholly-owned
banking subsidiaries: Peoples Heritage Bank ("PHB"), Bank of New Hampshire
("BNH") and Family Bank, FSB ("Family Bank"). PHB is a Maine-chartered universal
bank which operates 74 offices throughout Maine and, through subsidiaries,
engages in insurance brokerage, financial planning and equipment leasing
activities. At September 30, 1997, PHB had consolidated assets of $3.0 billion,
consolidated deposits of $2.1 billion and consolidated shareholder's equity of
$193.6 million. BNH is a New Hampshire-chartered commercial bank which operates
46 offices throughout the State of New Hampshire. At September 30, 1997, BNH had
consolidated assets of $2.0 billion, consolidated deposits of $1.5 billion and
consolidated shareholder's equity of $141.2 million. Family Bank is a
federally-chartered savings bank which operates 18 offices in northern
Massachusetts and four offices in southern New Hampshire. At September 30, 1997,
Family Bank had consolidated assets of $1.1 billion, consolidated deposits of
$774.0 million and consolidated shareholder's equity of $103.3 million.
Acquisitions have been and are expected to continue to be an important
component of PHFG's business strategy. See "-- Recent Acquisitions by PHFG and
CFX" 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.
CFX. CFX is a New Hampshire-chartered multi-bank holding company
registered under the BHCA. As used in this Prospectus/Joint Proxy Statement, the
term "CFX" refers to such corporation and, where the context requires, its
subsidiaries.
CFX conducts business from its headquarters in Keene, New Hampshire and 56
offices located throughout the State of New Hampshire and north-central
Massachusetts. At September 30, 1997, CFX had total assets of $2.8 billion,
deposits of $1.9 billion and shareholders' equity of $245.7 million.
CFX conducts its banking business through three wholly-owned subsidiaries:
CFX Bank, Safety Fund National Bank ("Safety Fund") and Orange Savings Bank. CFX
Bank is a New Hampshire-chartered savings bank which operates 43 offices in New
Hampshire. At September 30, 1997, CFX Bank had consolidated assets of $2.4
billion, consolidated deposits of $1.6 billion and consolidated shareholder's
equity of $173.4 million. Safety Fund is a national bank which operates 11
offices in north-central Massachusetts. At September 30, 1997, Safety Fund had
consolidated assets of $349.4 million, consolidated deposits of $271.2 million
and consolidated shareholder's equity of $23.7 million. Orange Savings Bank is a
Massachusetts-chartered savings bank which operates two offices in Orange and
Athol, Massachusetts. At September 30, 1997, Orange Savings Bank had
consolidated assets of $89.1 million, consolidated deposits of $77.7 million and
consolidated shareholder's equity of $9.7 million.
Acquisitions have been an important component of CFX's business strategy.
See "-- Recent Acquisitions by PHFG and CFX" below and "The Merger -- Background
of the Merger."
The principal executive offices of CFX are located at 102 Main Street,
Keene, New Hampshire, and its telephone number is (603) 352-2502.
THE MERGER AND THE BANK MERGERS
In accordance with the terms of and subject to the conditions set forth in
the Agreement, CFX will be merged with and into PHFG, with PHFG as the surviving
corporation of the Merger. The Agreement provides that, at the effective time of
the Merger, each outstanding share of CFX Common Stock (other than (i) any
dissenting shares under New Hampshire law and (ii) any shares held by PHFG or
CFX other than in a fiduciary capacity that are beneficially owned by third
parties or in satisfaction of a debt previously contracted) will be converted
into the right to receive 0.667 of a share of PHFG Common Stock (the "Exchange
Ratio"), subject to possible adjustment under certain circumstances, plus cash
in lieu of any fractional share interest. See "The Merger."
Pursuant to the Agreement, the three banking subsidiaries of CFX have
entered into merger agreements with two of PHFG's banking subsidiaries, which
set forth the terms and conditions, including consummation
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of the Merger, pursuant to which the banking subsidiaries of CFX would merge
with banking subsidiaries of PHFG. Specifically, CFX Bank and BNH have entered
into an Agreement and Plan of Merger pursuant to which CFX Bank will merge with
and into BNH, Safety Fund and Family Bank have entered into an Agreement and
Plan of Merger pursuant to which Safety Fund will merge with and into Family
Bank and Orange Savings Bank and Family Bank have entered into an Agreement and
Plan of Merger pursuant to which Orange Savings Bank will merge with and into
Family Bank (each such agreement a "Bank Merger Agreement" and collectively the
"Bank Merger Agreements", and each such merger a "Bank Merger" and collectively
the "Bank Mergers"). It is anticipated that the Bank Mergers will be consummated
substantially concurrently with the Merger.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF PHFG AND CFX
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.
CFX. The Board of Directors of CFX (the "CFX Board") has determined the
Merger to be fair to and in the best interests of CFX and its shareholders and
has unanimously approved the Agreement and the transactions contemplated
thereby, including the Merger. ACCORDINGLY, THE CFX BOARD UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
See "The Merger -- Reasons for the Merger; Recommendations of the Boards of
Directors."
OPINIONS OF FINANCIAL ADVISORS
Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette"), CFX's financial advisor,
has delivered to the CFX Board its written opinion, dated October 26, 1997, 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 CFX Common Stock.
McConnell, Budd & Downes, Inc. ("MB&D"), PHFG's financial advisor, has delivered
to the PHFG Board its written opinion, dated October 27, 1997, 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 Keefe Bruyette and MB&D, see "The Merger -- Opinions of Financial
Advisors." Shareholders are urged to read in their entirety the opinions of
Keefe Bruyette and MB&D, which are attached as Annexes IV and V to this
Prospectus/Joint Proxy Statement, respectively.
REGULATORY APPROVALS
Consummation of the Merger is subject to the prior receipt of all required
approvals and consents of the Merger and the Bank Mergers or waivers thereof by
all applicable federal and state regulatory authorities, including the Board of
Governors of the Federal Reserve System ("FRB"), the Federal Deposit Insurance
Corporation ("FDIC"), the Office of Thrift Supervision ("OTS"), the
Superintendent of the Bureau of Banking of the State of Maine (the "Maine
Superintendent"), the Bank Commissioner of the State of New Hampshire (the "New
Hampshire Bank Commissioner"), the Massachusetts Board of Bank Incorporation
(the "Massachusetts Board") and the Massachusetts Housing Partnership Fund
("MHPF"). Applications have been, or in the case of the FRB will be, filed with
such regulatory authorities for the required approval or consent of the Merger
and the Bank Mergers or waiver thereof. There can be no assurance that the
necessary regulatory approvals, consents or waivers will be obtained or as to
the timing or conditions of such approvals, consents or waivers. See "The
Merger -- Regulatory Approvals."
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CONDITIONS TO THE MERGER
The obligations of PHFG and CFX to consummate the Merger are subject to
satisfaction of a number of conditions, including approval of the Agreement by
the shareholders of PHFG and CFX and the receipt of all required approvals or
consents required of the Merger and the Bank Mergers or waivers thereof by all
applicable federal and state regulatory authorities. See "The
Merger -- Conditions to the Merger." Pursuant to the terms of the Agreement,
except for shareholder and regulatory approvals, and certain conditions to
consummation of the Merger and the Bank Mergers that cannot be waived as a
matter of law, including the existence of an effective registration statement or
an exemption therefrom, the absence of a government order enjoining or
prohibiting consummation of the Merger or the Bank Mergers and the receipt of
all required "blue sky" permits or other authorizations, all of the conditions
to consummation of the Merger and the Bank Mergers 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 CFX shall change the amount or form of the consideration which CFX's
shareholders are entitled to receive in the Merger. If the Merger is not
consummated on or before October 27, 1998, PHFG and CFX may terminate the
Agreement.
EFFECTIVE TIME OF THE MERGER
The Merger shall become effective upon the filing of (i) articles of merger
with the Secretary of State of the State of Maine pursuant to the Maine Business
Corporation Act ("MBCA") and (ii) articles of merger with the Secretary of State
of the State of New Hampshire pursuant to the New Hampshire Business Corporation
Act ("NHBCA"), unless a different date and time is specified as the effective
time (the "Effective Time") in such articles of merger (collectively, the
"Articles of Merger"). Articles of Merger will be filed only after the receipt
of all requisite regulatory approvals of the Merger and the Bank Mergers,
approval of the Agreement by the requisite votes of the shareholders of PHFG and
CFX and the satisfaction or waiver of all other conditions to the Merger and the
Bank Mergers set forth in the Agreement. See "The Merger -- Effective Time of
the Merger."
PRICE-BASED TERMINATION; POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
CFX will have the option to terminate the Agreement if the price of the
PHFG Common Stock has declined by more than 20% since October 27, 1997, the date
the Agreement was entered into and publicly announced, and the percentage
decline in the PHFG Common Stock exceeds the percentage decline in the weighted
average common stock price of a peer group of 22 bank holding companies by more
than 15%, unless PHFG elects to increase the Exchange Ratio in the manner
provided in the Agreement. See "The Merger -- Termination and Amendment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Arnold & Porter, special tax counsel to CFX, has delivered its opinion to
CFX that, for federal income tax purposes, the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), provided the Merger is consummated in
accordance with the terms of the Agreement and certain related documentation.
Arnold & Porter further opined that, for federal income tax purposes: (i) except
for cash received in lieu of fractional share interests, holders of CFX Common
Stock who receive PHFG Common Stock pursuant to the Merger will not recognize
gain or loss, (ii) the basis of such PHFG stock received will equal the basis of
the CFX Common Stock surrendered in exchange therefor, reduced by any amount
allocable to a fractional share interest for which cash is received, and (iii)
provided that the surrendered CFX Common Stock was held as a capital asset on
the date of the Merger, the holding period of the PHFG Common Stock received
will include the holding period of the CFX Common Stock surrendered. Arnold &
Porter's opinion is based on facts, representations and assumptions that were
provided by CFX and PHFG and that are consistent with the state of facts that
CFX and PHFG believe will be existing as of the Effective Time. In addition, (i)
it is a condition precedent to the obligation of CFX to effect the Merger that
it receive an opinion from Arnold & Porter, dated as of the Effective Time, as
to certain federal income tax consequences of the Merger, and (ii) it is a
condition precedent to the obligation of PHFG
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to effect the Merger that it receive an opinion of Elias, Matz, Tiernan &
Herrick L.L.P., dated as of the Effective Time, as to certain federal income tax
consequences of the Merger and the Bank Mergers. See "The Merger -- Certain
Federal Income Tax Consequences."
EACH CFX SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
CONCERNING THE FEDERAL AND ANY FOREIGN, STATE AND LOCAL INCOME TAX AND OTHER TAX
CONSEQUENCES OF THE MERGER APPLICABLE TO SUCH SHAREHOLDER.
ACCOUNTING TREATMENT OF THE MERGER
It is intended that the Merger qualify as a pooling of interests for
accounting and financial reporting purposes. It is a condition to the
obligations of PHFG and CFX to consummate the Merger that the independent public
accountants of PHFG issue a letter to the parties dated as of the closing date
of the Merger to the effect that the Merger qualifies as a pooling of interests
under generally accepted accounting principles. See "The Merger -- Accounting
Treatment of the Merger."
ASSUMPTION OF CFX STOCK OPTIONS
Options to purchase CFX Common Stock outstanding on the date of the
Agreement ("CFX Options") 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 CFX Stock
Options."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Pursuant to the Agreement, PHFG agreed (i) that at the Effective Time (x)
the directors of PHFG shall include five persons serving as directors of CFX
immediately prior to the Effective Time (including Peter J. Baxter, President
and Chief Executive Officer of CFX) designated by CFX and who both meet the
director qualification requirements set forth in the Bylaws of PHFG and are
otherwise acceptable to PHFG and (y) Mr. Baxter shall be Vice Chairman of the
PHFG Board and an Executive Vice President and Chief Operating Officer of PHFG;
(ii) to honor, and to cause its appropriate subsidiaries to honor, various
employment agreements and change-in-control agreements which have been entered
into by CFX and its subsidiaries, including (A) the three-year employment
agreements between CFX and each of Mr. Baxter, Mark A. Gavin, Douglas Crichfield
and Christopher W. Bramley, each of whom would be entitled to receive a lump sum
cash payment in an amount equal to 299% of the executive's base annual salary
plus the amount of any discretionary bonuses paid to the executive within the
preceding 12 months in the event of termination of the executive's employment
without cause or by the executive for specified reasons, which amounts
(exclusive of certain gross-up tax payments) are estimated to amount to $1.2
million, $633,880, $678,141 and $913,041 as of December 31, 1997 in the case of
Messrs. Baxter, Gavin, Crichfield and Bramley, respectively, (B) the change of
control agreements between CFX and each of Edwin L. Herbert, David Rasmussen and
Gregg R. Tewksbury, each of whom generally would be entitled to receive a lump
sum cash payment equal to 150%, 100% and 200%, respectively, of the executive's
annual base salary plus the gross amount of the incentive payment paid to the
executive under the CFX 1997 Incentive Compensation Plan in the event the
executive's employment is terminated without cause or by the executive for
specified reasons within 12 months of the occurrence of a change in control of
CFX, which amounts are estimated to amount to $165,000, $167,000 and $238,500,
respectively, and (C) the employment and change of control agreement between CFX
and Stephen R. Shirley, which generally requires that CFX or its successor
continue to pay Mr. Shirley his annual base salary, which currently amounts to
$152,000, for a period of one year following the occurrence of a change of
control of CFX in the event of the termination of his employment without cause
or by the executive for specified reasons; and (iii) to continue rights to
indemnification and liability insurance for directors and officers of CFX and
its subsidiaries for specified periods. Other than as set forth above, no
director or executive officer of CFX has any direct or indirect material
interest in the Merger, except insofar as ownership of CFX Common Stock and CFX
Options might be deemed such an interest. See "The Merger -- Interests of
Certain Persons in the Merger."
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AMENDMENT AND RESTATEMENT OF PHFG'S ARTICLES OF INCORPORATION
By virtue of adopting the Agreement, shareholders of PHFG will be adopting
the Amended and Restated Articles of Incorporation of PHFG (the "PHFG Restated
Articles") included as Exhibit A to the Agreement, which is included as Annex I
to this Prospectus/Joint Proxy Statement. The PHFG Restated Articles reflect two
amendments being adopted in connection with the Merger, as well as an amendment
to PHFG's Articles of Incorporation to increase the authorized capitalization of
PHFG which was previously adopted by PHFG and its shareholders. Specifically,
the PHFG Restated Articles reflect an amendment to Article 7 of the PHFG
Articles of Incorporation to increase the maximum number of directors of PHFG
from 15 to 25, which will enable PHFG to fulfill its agreement to add five
persons from the CFX Board to the PHFG Board upon consummation of the Merger. In
addition, the PHFG Restated Articles reflect an amendment to Article 10 of the
PHFG Articles of Incorporation to provide that the supermajority (75%) voting
requirement set forth therein for amendment to certain provisions of the PHFG
Articles, including Articles 7 and 10, shall not be applicable if the amendment
is approved by the affirmative vote of at least two thirds of the Whole Board of
Directors and a majority of the Continuing Directors (in each case as defined in
Article 9 of the PHFG Articles of Incorporation). PHFG believes that Article 10
of its Articles of Incorporation does not restrict its ability to amend certain
provisions of its Articles of Incorporation by a plan of merger in accordance
with the MBCA, and has obtained an opinion of Maine counsel to the effect that
the PHFG Restated Articles, which are identical to the current Articles of
Incorporation of PHFG except for the two above-described amendments adopted in
connection with the Agreement, will be duly and validly adopted by the
shareholders of PHFG in the event that they approve the Agreement by the
requisite majority vote.
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 CFX 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 MBCA, and CFX
is a New Hampshire corporation subject to the provisions of the NHBCA. Upon
consummation of the Merger, shareholders of CFX 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 CFX. 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 CFX under
applicable federal securities laws. In addition, "affiliates" of PHFG and CFX
will be subject to certain restrictions on resale of PHFG Common Stock in order
to ensure that the Merger will be accounted for as a pooling of interests under
generally accepted accounting principles. See "The Merger -- Resale of PHFG
Common Stock."
STOCK OPTION AGREEMENTS
As an inducement and a condition to PHFG's entering into the Agreement,
PHFG and CFX also entered into a Stock Option Agreement, dated as of October 27,
1997 (the "CFX Option Agreement"), pursuant to
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which CFX granted PHFG an option (the "CFX Option"), upon the occurrence of
certain events (none of which has occurred as of the date hereof to the
knowledge of PHFG and CFX), to purchase up to 4,793,062 shares of CFX Common
Stock, representing 19.9% of the outstanding shares of CFX Common Stock, at a
price of $22.69 per share, subject to adjustment in certain circumstances and
termination within certain periods. As an inducement and a condition to CFX's
entering into the Agreement, PHFG and CFX also entered into a Stock Option
Agreement, dated as of October 27, 1997 (the "PHFG Option Agreement," and
together with the CFX Option Agreement, the "Stock Option Agreements"), pursuant
to which PHFG granted CFX an option (the "PHFG Option"), upon the occurrence of
certain events (none of which has occurred as of the date hereof to the
knowledge of PHFG and CFX), to purchase up to 2,769,736 shares of PHFG Common
Stock, representing 10.0% of the outstanding shares of PHFG Common Stock at the
date of execution of the PHFG Option Agreement, at a price of $43.13 per share,
subject to adjustment in certain circumstances and termination within certain
periods. The Stock Option Agreements are intended to increase the likelihood
that the Merger will be consummated in accordance with the terms of the
Agreement and may have the effect of discouraging competing offers to the
Merger. Copies of the CFX Option Agreement and the PHFG Option Agreement are
included as Annexes II and III to this Prospectus/Joint Proxy Statement,
respectively, and reference is made thereto for the complete terms thereof. See
"The Merger -- Stock Option Agreements."
DISSENTERS' RIGHTS
Pursuant to Sections 293-A:13.01 et seq. of the NHBCA, holders of CFX
Common Stock who (i) file with CFX prior to the vote on the Agreement at the CFX
Special Meeting a written notice of intention to demand payment for their shares
if the Merger is effected and (ii) do not vote in favor of the Agreement will be
entitled to be paid the fair value of their shares as agreed upon with CFX, or
if the fair value remains unsettled, as determined by a New Hampshire court,
provided that the Merger is consummated and such shareholders properly comply
with certain statutory procedures. Fair value of dissenting shares means the
value immediately before the Effective Time, excluding any change in value in
anticipation of the Merger if such exclusion is not inequitable (which amount
may be more, less or the same as the consideration to be provided pursuant to
the Agreement). The written notice required to be delivered to CFX by a
dissenting shareholder is in addition to and separate from any proxy or vote
against the Merger. The further procedures which must be followed in connection
with the exercise of dissenters' rights by dissenting shareholders are described
herein under "The Merger -- Dissenters' Rights" and in Sections 293-A:13.01 et
seq. of the NHBCA, a copy of which is attached as Annex VI to this
Prospectus/Joint Proxy Statement. Failure to take any step in connection with
the exercise of such rights may result in termination or waiver thereof.
Holders of PHFG Common Stock do not have rights under the MBCA or otherwise
to dissent from the Merger and obtain the fair value of their shares of PHFG
Common Stock.
RECENT ACQUISITIONS OF PHFG AND CFX
Since September 30, 1997, PHFG has completed two acquisitions. On October
1, 1997, PHFG completed the acquisition of Atlantic Bancorp ("Atlantic"), a bank
holding company headquartered in Portland, Maine, and immediately thereafter
merged its banking subsidiary, Atlantic Bank, N.A., into PHB. At the date of
acquisition, Atlantic had consolidated assets of approximately $462.9 million
and consolidated shareholders' equity of $37.7 million. On October 10, 1997,
PHFG, through PHB, completed the acquisition of MPN Holdings ("MPN"), which
engages in insurance brokerage activities through Morse, Payson & Noyes
Insurance, Maine's largest insurance agency with approximately $125 million in
policy premiums, and other subsidiaries. PHFG's acquisitions of Atlantic and MPN
(collectively, the "PHFG Acquisitions") were accounted for under the purchase
method for accounting and financial reporting purposes and, as a result, the
financial information of PHFG contained in this Prospectus/Joint Proxy Statement
has not been restated to reflect the historical financial condition or results
of operations of the acquired entities. PHFG recorded $46.2 million and $10.2
million of goodwill in connection with acquisitions of Atlantic and MPN,
respectively.
On August 29, 1997, CFX completed the acquisition of (i) Portsmouth Bank
Shares, Inc. ("Portsmouth") through the merger of Portsmouth with and into CFX
and immediately thereafter merged
- --------------------------------------------------------------------------------
12
<PAGE> 18
- ------------------------------------------------------------------------------
Portsmouth Savings Bank, Portsmouth's wholly-owned banking subsidiary, with and
into CFX Bank (collectively, the "Portsmouth Acquisition") and (ii) Community
Bankshares, Inc. ("Community") through the merger of Community with and into CFX
and immediately thereafter merged Concord Savings Bank and Centerpoint Bank,
Community's wholly-owned banking subsidiaries, with and into CFX Bank
(collectively, the "Community Acquisition," and together with the Portsmouth
Acquisition, the "CFX Acquisitions"). An aggregate of 5,502,000 shares and
5,259,000 shares of CFX Common Stock were issued to former holders of Portsmouth
common stock and Community common stock, respectively, in connection with the
Portsmouth Acquisition and the Community Acquisition, respectively. At June 30,
1997, Portsmouth had consolidated assets of $259.5 million and consolidated
shareholders' equity of $67.3 million and Community had consolidated assets of
$615.8 million and consolidated shareholder's equity of $43.1 million.
Each of the CFX Acquisitions was accounted for as a pooling of interests
for accounting and financial reporting purposes and, as a result, all financial
information relating to CFX contained herein reflects the combined financial
position and results of operations of CFX, Portsmouth and Community as if each
of the CFX Acquisitions had taken place prior to the periods covered by such
information. For additional information in this regard, reference is made to the
supplemental consolidated financial statements and related financial information
of CFX contained in the Current Report on Form 8-K filed by CFX on December 12,
1997. The supplemental audited consolidated financial statements of CFX at
December 31, 1996 and 1995 and for the years ended December 31, 1996, 1995 and
1994 included in such Current Report on Form 8-K have been prepared to give
retroactive effect to the CFX Acquisitions on August 29, 1997. Although these
audited financial statements do not extend through the date of consummation of
the Acquisitions, they effectively constitute the historical consolidated
financial statements of CFX.
MARKET FOR COMMON STOCK AND DIVIDENDS
The PHFG Common Stock is listed on the Nasdaq Stock Market's National
Market under the symbol "PHBK," and the CFX Common Stock is listed on the AMEX
under the symbol "CFX." As of the Record Date, there were 27,739,090 shares of
PHFG Common Stock outstanding, which were held by approximately 5,800
shareholders of record, and there were 24,058,307 shares of CFX Common Stock
outstanding, which were held by approximately 6,100 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.
- ------------------------------------------------------------------------------
13
<PAGE> 19
- --------------------------------------------------------------------------------
The following table sets forth during the periods indicated the high and
low prices of the PHFG Common Stock and the CFX Common Stock as reported on the
Nasdaq Stock Market's National Market and the AMEX, respectively, and the
dividends declared per share of PHFG Common Stock and CFX Common Stock.
<TABLE>
<CAPTION>
PHFG CFX
---------------------------- ---------------------------
MARKET PRICE DIVIDENDS MARKET PRICE DIVIDENDS
---------------- DECLARED ---------------- DECLARED
1997 HIGH LOW PER SHARE HIGH LOW PER SHARE
- ---- ------- ------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter................................ $ 32.50 $25.875 $.18 $18.625 $15.125 $ .22
Second Quarter............................... 38.00 26.00 .18 21.00 15.50 .22
Third Quarter................................ 43.125 36.00 .19 21.75 18.625 .22
Fourth Quarter (through December 29, 1997)... 47.625 37.875 .21 31.125 20.625 --
1996
- ----
First Quarter................................ 22.75 19.00 .17 15.375 12.875 .1714
Second Quarter............................... 22.25 19.375 .17 14.375 12.25 --(1)
Third Quarter................................ 23.625 19.00 .17 15.25 11.625 .1905
Fourth Quarter............................... 28.625 22.50 .18 16.625 13.625 .2095
1995
- ----
First Quarter................................ 14.00 11.75 .11 11.75 9.50 .1391
Second Quarter............................... 16.75 12.375 .13 15.375 11.00 .1451
Third Quarter................................ 20.50 15.25 .13 16.50 13.50 .1451
Fourth Quarter............................... 22.875 18.25 .15 16.625 13.25 .3266
</TABLE>
- ---------------
(1) The dividend for the second quarter of 1996 was omitted in order for CFX's
acquisitions of The Safety Fund Corporation and Milford Cooperative Bank to
be accounted for as a pooling-of-interests under generally accepted
accounting principles.
Set forth below is information regarding the closing price per share of
PHFG Common Stock and CFX Common Stock on (i) October 24, 1997, the last trading
day preceding public announcement of the Agreement, and (ii) December 29, 1997,
the last practicable trading day prior to the printing of this Prospectus/Joint
Proxy Statement. The historical prices are as reported on the Nasdaq Stock
Market's National Market in the case of PHFG and on the AMEX in the case of CFX.
<TABLE>
<CAPTION>
HISTORICAL MARKET
VALUE PER SHARE
------------------ EQUIVALENT MARKET VALUE
DATE PHFG CFX PER SHARE OF CFX(1)
- ---- ------- ------ -----------------------
<S> <C> <C> <C>
October 24, 1997.................................... $43.125 $22.69 $ 28.76
December 29, 1997................................... $ 47.00 $30.63 $ 31.35
</TABLE>
- ---------------
(1) Equivalent market value per share of CFX Common Stock represents the
historical market value per share of PHFG Common Stock multiplied by the
Exchange Ratio.
Shareholders are advised to obtain current market quotations for the PHFG
Common Stock and the CFX Common Stock. Because the consideration to be provided
to shareholders of CFX in connection with the Merger is based on a fixed number
of shares of PHFG Common Stock, shareholders of CFX are not assured of receiving
a specific market value of PHFG Common Stock (and thus a specific market value
for their shares of CFX 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.
- --------------------------------------------------------------------------------
14
<PAGE> 20
- -------------------------------------------------------------------------------
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share, pro forma
combined per share and pro forma equivalent per share information with respect
to the PHFG Common Stock and the CFX Common Stock at the dates and for the
periods indicated, giving effect to the Merger using the pooling of interests
method of accounting, assuming that the Merger was consummated as of the
beginning of each of the periods indicated. See "The Merger -- Accounting
Treatment of the Merger" and "Pro Forma Combined Consolidated Financial
Information."
The selected 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 CFX, including the related notes, incorporated herein by
reference, the supplemental consolidated financial statements, including the
related notes, of CFX 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.
<TABLE>
<CAPTION>
PHFG COMMON STOCK CFX COMMON STOCK
------------------------ ------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Income per share(1):
Nine months ended September 30, 1997........... $ 1.92 $ 1.56 $ 0.63(5) $ 1.04
Year ended December 31, 1996................... 2.10 1.87 1.01 1.25
Year ended December 31, 1995................... 1.80 1.64 0.93 1.09
Year ended December 31, 1994................... 1.37 1.27 0.73 0.85
Dividends declared per share(2):
Nine months ended September 30, 1997........... 0.55 0.55 0.66 0.37
Year ended December 31, 1996................... 0.65 0.65 0.58 0.43
Year ended December 31, 1995................... 0.46 0.46 0.53 0.31
Year ended December 31, 1994................... 0.23 0.23 0.39 0.15
Book value per share(3):
September 30, 1997............................. 16.42 15.74 10.25 10.50
December 31, 1996.............................. 15.48 15.40 10.17 10.27
Tangible book value per share(4):
September 30, 1997............................. 14.01 14.01 9.88 9.34
December 31, 1996.............................. 12.95 13.56 9.78 9.04
</TABLE>
- ---------------
(1) The pro forma combined income per share of PHFG Common Stock is based upon
the combined historical income for PHFG and CFX, divided by the pro forma
combined average number of shares of PHFG Common Stock outstanding. The pro
forma equivalent income per share of CFX Common Stock represents the pro
forma combined income per share of PHFG Common Stock multiplied by the
Exchange Ratio.
(2) The pro forma combined dividends declared per share of PHFG Common Stock
assumes no change in the historical cash dividends paid on the PHFG Common
Stock. The pro forma equivalent dividends declared per share of CFX Common
Stock represents the PHFG pro forma combined dividend rates multiplied by
the Exchange Ratio. The current annualized dividend rate per share of PHFG
Common Stock, based upon the most recent quarterly dividend rate of $.21 per
share payable on November 10, 1997, would be $.84. On a pro forma equivalent
basis per share of CFX Common Stock, such current annualized PHFG dividend
per share of CFX Common Stock would be $.56, based on the Exchange Ratio.
- -------------------------------------------------------------------------------
15
<PAGE> 21
- -------------------------------------------------------------------------------
(3) The pro forma combined book value per share of PHFG Common Stock is based
upon the historical total shareholder's equity for PHFG and CFX, divided by
the pro forma combined period-end shares of PHFG Common Stock outstanding.
The pro forma equivalent book value per share of CFX Common Stock represents
the pro forma combined book value per share of PHFG Common Stock multiplied
by the Exchange Ratio.
(4) The pro forma combined tangible book value per share of PHFG Common Stock is
based upon the historical total shareholder's equity for PHFG and CFX, less
goodwill and other intangibles (which do not include mortgage servicing
rights), divided by the pro forma combined period-end shares of PHFG Common
Stock outstanding. The pro forma equivalent tangible book value per share of
CFX Common Stock represents the pro forma combined tangible book value per
share of PHFG Common Stock multiplied by the Exchange Ratio.
(5) Includes $11.0 million of one-time pre-tax reorganization and restructuring
costs related to the CFX Acquisitions. On an after-tax basis, such costs
amounted to $.35 per share of CFX Common Stock during the indicated period.
- -------------------------------------------------------------------------------
16
<PAGE> 22
- -------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA OF PHFG
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected historical consolidated financial data for the five
years ended December 31, 1996 is derived in part from the audited consolidated
financial statements of PHFG. The historical consolidated financial data for the
nine months ended September 30, 1997 and 1996 is derived from unaudited
consolidated financial statements and does not include financial information
relating to the PHFG Acquisitions, which were consummated subsequent to
September 30, 1997. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, which PHFG considers
necessary for a fair presentation of the financial position and the results of
operations for these periods. Operating results for the nine months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for any other interim period or the entire year ending December 31,
1997. The consolidated financial data set forth below should be read in
conjunction with, and is qualified in its entirety by, the 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,
SEPTEMBER 30, --------------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets...................... $ 6,056,083 $5,398,398 $4,058,126 $3,737,906 $3,624,641 $3,523,094
Debt and equity securities,
net(1).......................... 1,174,210 1,045,069 766,648 719,194 717,467 557,787
Total loans, net(2)............... 3,855,488 3,587,112 2,717,608 2,575,902 2,638,348 2,425,020
Goodwill and other intangibles.... 66,052 71,649 22,792 20,713 22,758 22,310
Deposits.......................... 4,268,555 4,185,289 3,197,138 2,885,845 2,939,826 2,948,549
Borrowings........................ 1,171,841 690,969 456,932 505,347 359,935 288,024
Shareholders' equity.............. 451,071 437,010 354,925 304,439 287,438 249,862
Nonperforming assets(3)........... 45,692 46,229 52,340 71,985 113,910 177,282
Book value per share.............. 16.42 15.48 14.16 12.26 11.61 10.73
Tangible book value per share..... 14.01 12.95 13.25 11.42 10.69 9.77
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest and dividend income..... $317,751 $250,345 $341,172 $305,849 $256,597 $243,452 $272,596
Interest expense................. 138,150 110,431 150,599 134,895 108,002 112,305 150,458
-------- -------- -------- -------- -------- -------- --------
Net interest income.............. 179,601 139,914 190,573 170,954 148,595 131,147 122,138
Provision for loan losses........ -- 900 900 4,230 3,374 14,047 32,025
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses...... 179,601 139,014 189,673 166,724 145,221 117,100 90,113
-------- -------- -------- -------- -------- -------- --------
Net securities gains (losses).... 51 503 507 116 (254) 1,183 2,859
Net gains on sales of consumer
loans.......................... -- -- -- -- 33 2,576 --
Other noninterest income......... 38,895 27,966 37,941 31,301 27,847 24,842 26,747
Noninterest expense.............. 135,051 110,424 148,073 130,280 125,137 122,391 125,091
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income tax
expense and cumulative effect
of a change in accounting
principle...................... 83,496 57,059 80,048 67,861 47,710 23,310 (5,372)
Cumulative effect on years prior
to 1992 of a change in
accounting principle........... -- -- -- -- -- -- 1,100
Income tax expense............... 30,092 20,118 27,568 23,375 13,662 799(4) 1,510
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................ $ 53,404 $ 36,941 $ 52,480 $ 44,486 $ 34,048 $ 22,511 $ (5,782)
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share...... $ 1.92 $ 1.47 $ 2.10 $ 1.80 $ 1.37 $ 0.95 $ (0.36)
Dividends per share.............. $ 0.55 $ 0.48 $ 0.65 $ 0.46 $ 0.23 $ 0.01 $ --
</TABLE>
- -------------------------------------------------------------------------------
17
<PAGE> 23
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------- ---------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA(5):
Return on average assets.................... 1.29% 1.16% 1.21% 1.16% 0.94% 0.64% (0.16)%
Return on average equity(6)................. 16.20 13.52 14.41 13.53 11.42 8.57 (2.69)
Average equity to average assets(6)......... 8.01 8.61 8.37 8.55 8.21 7.50 5.98
Interest rate spread(6)(7).................. 4.11 4.16 4.12 4.20 4.01 3.76 3.41
Net interest margin(6)(7)................... 4.74 4.74 4.71 4.79 4.44 4.11 3.71
Tier I leverage capital ratio at end of
period.................................... 8.62 7.84 7.96 8.33 7.96 7.63 7.00
Dividend payout ratio....................... 28.49 32.75 30.36 25.42 16.45 1.44 --
Nonperforming assets as a percent of total
assets at end of period(3)................ 0.75 1.03 1.01 1.40 2.10 3.31 5.29
</TABLE>
- ---------------
(1) All securities were classified as available for sale at September 30, 1997
and December 31, 1996, 1995, 1994 and 1993.
(2) Does not include loans held for sale.
(3) Nonperforming assets consist of nonperforming loans, other real estate owned
and repossessed assets, net of related reserves where appropriate.
Nonperforming loans consist of non-accrual loans and troubled debt
restructurings.
(4) PHFG's results of operations for 1993 reflect the elimination of the
valuation allowance relating to deferred income tax assets of $6.5 million.
(5) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(6) Excludes the effect of unrealized gains or losses on securities available
for sale.
(7) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing
demand accounts), and net interest margin represents net interest income as
a percent of average interest-earning assets, in each case calculated on a
fully-taxable equivalent basis.
- -------------------------------------------------------------------------------
18
<PAGE> 24
- ------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA OF CFX
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected supplemental historical consolidated financial data
for the five years ended December 31, 1996 is derived in part from the audited
supplemental consolidated financial statements of CFX, which give retroactive
effect to the CFX Acquisitions. The historical consolidated financial data for
the nine months ended September 30, 1997 and 1996 is derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which CFX considers necessary for a fair presentation of the financial position
and the results of operations for these periods. Operating results for the nine
months ended September 30, 1997 are not necessarily indicative of the results
that may be expected for any other interim period or the entire year ending
December 31, 1997. The consolidated financial data set forth below should be
read in conjunction with, and is qualified in its entirety by, the consolidated
financial statements of CFX, including the related notes, incorporated herein by
reference. See "Available Information" and "Incorporation of Certain Documents
by Reference."
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets...................... $ 2,821,182 $2,369,257 $2,110,155 $1,935,530 $1,870,169 $1,801,247
Debt and equity securities,
net(1).......................... 622,848 519,578 541,119 586,075 638,901 566,933
Total loans, net(2)............... 1,891,969 1,574,067 1,311,779 1,164,122 1,052,069 1,066,396
Goodwill and other intangibles.... 8,856 9,235 9,884 10,476 11,121 9,781
Deposits.......................... 1,935,614 1,751,141 1,637,831 1,541,002 1,517,393 1,546,135
Borrowings........................ 613,246 351,343 217,762 165,482 90,702 32,518
Shareholders' equity.............. 245,691 239,837 231,575 210,984 208,084 199,815
Nonperforming assets(3)........... 15,528 14,132 15,054 17,310 31,741 53,782
Book value per share.............. 10.25 10.17 10.00 9.29 9.33 8.95
Tangible book value per share..... 9.88 9.78 9.58 8.83 8.83 8.51
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest and dividend income..... $146,496 $124,122 $168,305 $148,808 $126,796 $125,936 $139,612
Interest expense................. 73,232 58,394 79,583 67,865 51,654 53,001 72,110
-------- -------- -------- -------- -------- -------- --------
Net interest income.............. 73,264 65,728 88,722 80,943 75,142 72,935 67,502
Provision for loan losses........ 3,385 3,210 4,285 3,814 3,622 14,030 9,950
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses...... 69,879 62,518 84,437 77,129 71,520 58,905 57,552
-------- -------- -------- -------- -------- -------- --------
Net securities gains (losses).... 1,421 1,823 2,780 2,383 655 * *
Other noninterest income......... 16,122 14,280 19,482 15,355 13,745 15,453 10,907
Noninterest expense.............. 65,419(4) 54,012 71,270 63,251 61,709 58,980 53,611
-------- -------- -------- -------- -------- -------- --------
Income before income tax
expense........................ 22,003 24,609 35,429 31,616 24,211 15,378 14,848
Income tax expense............... 7,013 8,575 11,876 10,062 7,474 2,573 4,875
-------- -------- -------- -------- -------- -------- --------
Net income....................... $ 14,990(4) $ 16,034 $ 23,553 $ 21,554 $ 16,737 $ 12,805 $ 9,973
======== ======== ======== ======== ======== ======== ========
Net income per share............. $ 0.63(4) $ 0.68 $ 1.01 $ 0.93 $ 0.73 $ 0.57 $ 0.49
Dividends per share.............. $ 0.66 $ 0.36 $ 0.58 $ 0.53 $ 0.39 $ 0.37 $ 0.32
</TABLE>
- ------------------------------------------------------------------------------
19
<PAGE> 25
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------- ---------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA(5):
Return on average assets................... 0.76% 0.96% 1.04% 1.06% 0.86% 0.70% 0.54%
Return on average equity................... 8.09 9.20 10.03 9.77 7.80 6.12 4.83
Average equity to average assets........... 9.42 10.44 10.36 10.88 11.02 11.42 11.25
Interest rate spread(6).................... 3.50 3.68 3.68 3.76 3.85 * *
Net interest margin(6)..................... 4.06 4.27 4.25 4.33 4.30 4.38 4.07
Tier I leverage capital ratio at end of
period................................... 8.38 10.23 9.74 10.83 10.72 10.98 10.69
Dividend payout ratio...................... 104.85 53.08 57.43 56.89 53.42 64.91 65.31
Nonperforming assets as a percent of total
assets at end of period(3)............... 0.55 0.60 0.60 0.71 0.89 1.70 2.99
</TABLE>
- ---------------
(1) All securities were classified as available for sale at September 30, 1997
and December 31, 1996 and 1995, except for $37.4 million, $104.7 million and
$164.7 million of securities which were classified as held for investment at
such dates, respectively.
(2) Does not include loans held for sale.
(3) Nonperforming assets consist of nonperforming loans, other real estate owned
and repossessed assets, net of related reserves where appropriate.
Nonperforming loans consist of non-accrual loans and troubled debt
restructurings.
(4) Includes $11.0 million of one-time pre-tax reorganization and restructuring
costs related to the CFX Acquisitions. On an after-tax basis, such costs
amounted to $.35 per share of CFX Common Stock during the indicated period.
(5) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(6) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing
demand accounts), and net interest margin represents net interest income as
a percent of average interest-earning assets, in each case calculated on a
fully-taxable equivalent basis.
* Information is not available.
- ------------------------------------------------------------------------------
20
<PAGE> 26
- ------------------------------------------------------------------------------
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 CFX at the dates and for the periods indicated,
giving effect to the Merger using the pooling of interests method of accounting,
assuming that the Merger was consummated as of the beginning of each of the
periods indicated. See "The Merger -- Accounting Treatment of the Merger" and
"Pro Forma Combined Consolidated Financial Information." The selected
consolidated financial data set forth below should be read in conjunction with,
and is qualified in its entirety by, the historical consolidated financial
statements of PHFG and CFX, including the related notes, incorporated by
reference herein, the supplemental consolidated financial statements of CFX,
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 does not reflect information relating to
the PHFG Acquisitions or cost savings, operating synergies and revenue
enhancements which are expected to be realized subsequent to consummation of the
Merger and the Bank Mergers. See "Management and Operations of PHFG after the
Merger." 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>
DECEMBER 31,
SEPTEMBER 30, --------------------------------------------------------------
1997(1) 1996 1995 1994 1993 1992
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets...................... $ 8,877,265 $7,767,655 $6,168,281 $5,673,436 $5,494,810 $5,324,341
Debt and equity securities, net... 1,797,088 1,564,647 1,307,767 1,305,269 1,356,368 1,124,720
Total loans, net(2)............... 5,747,457 5,161,179 4,029,387 3,740,024 3,690,417 3,491,416
Goodwill and other intangibles.... 74,908 80,884 32,676 31,189 33,879 32,091
Deposits.......................... 6,204,169 5,936,430 4,834,969 4,397,647 4,457,219 4,494,684
Borrowings........................ 1,785,087 1,042,312 674,694 670,829 450,637 320,542
Shareholders' equity.............. 683,992 676,847 586,500 515,423 495,522 449,677
Nonperforming assets(3)........... 61,220 60,361 67,394 89,215 145,651 231,064
Book value per share.............. 15.74 15.40 14.48 12.89 12.50 9.32
Tangible book value per share..... 14.01 13.56 13.67 12.11 11.65 10.75
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest and dividend income.... $464,247 $374,467 $509,477 $454,657 $383,393 $369,388 $412,208
Interest expense................ 211,382 168,825 230,182 202,760 159,656 165,306 222,568
-------- -------- -------- -------- -------- -------- --------
Net interest income............. 252,865 205,642 279,295 251,897 223,737 204,082 189,640
Provision for loan losses....... 3,385 4,110 5,185 8,044 6,996 28,077 41,975
-------- -------- -------- -------- -------- -------- --------
Net interest income (loss) after
provision for loan losses..... 249,480 201,532 274,110 243,853 216,741 176,005 147,665
Net securities gains (losses)... 1,472 2,326 3,287 2,499 401 1,183 2,859
Net gains on sales of consumer
loans......................... -- -- -- -- 33 2,576 --
Other noninterest income........ 55,017 42,246 57,423 46,656 41,592 40,295 37,654
Noninterest expense............. 200,470 164,436 219,343 193,531 186,846 181,371 178,702
-------- -------- -------- -------- -------- -------- --------
Income before income tax expense
and cumulative effect of a
change in accounting
principle..................... 105,499 81,668 115,477 99,477 71,921 38,688 9,476
Cumulative effect on years prior
to 1992 of a change in
accounting principle.......... -- -- -- -- -- -- 1,100
Income tax expense.............. 37,105 28,693 39,444 33,437 21,136 3,372(4) 6,385
-------- -------- -------- -------- -------- -------- --------
Net income...................... $ 68,394 $ 52,975 $ 76,033 $ 66,040 $ 50,785 $ 35,316 $ 4,191
======== ======== ======== ======== ======== ======== ========
Income per share(5)............. $ 1.56 $ 1.30 $ 1.87 $ 1.64 $ 1.27 $ 0.92 $ 0.13
Dividends per share............. $ 0.55 $ 0.48 $ 0.65 $ 0.46 $ 0.23 $ 0.01 $ --
</TABLE>
- ------------------------------------------------------------------------------
21
<PAGE> 27
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------- ----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA(5):
Return on average assets................... 1.12% 1.09% 1.15% 1.12% 0.91% 0.66% 0.07%
Return on average equity(6)................ 13.27 11.83 12.69 12.03 9.92 7.50 0.94
Average equity to average assets(6)........ 8.46 9.24 9.05 9.35 9.18 8.83 7.73
Interest rate spread(7).................... 3.92 4.00 3.97 4.05 3.96 * *
Net interest margin(7)..................... 4.52 4.58 4.55 4.63 4.40 4.21 3.83
Tier I leverage capital ratio at end of
period................................... 8.54 8.65 8.56 9.17 8.90 8.77 8.22
Dividend payout ratio...................... 45.23 38.90 38.75 35.69 28.49 24.14 161.62
Nonperforming assets as a percent of total
assets at end of period(3)............... 0.69 0.88 0.78 1.09 1.57 2.65 4.34
</TABLE>
- ---------------
(1) The consolidated balance sheet data at September 30, 1997 reflects an
estimated $12.8 million, net of taxes, of one-time reorganization and
restructuring costs related to the Merger and the Bank Mergers. 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. See "Management and Operations of PHFG after the
Merger."
(2) Does not include loans held for sale.
(3) Nonperforming assets consist of nonperforming loans, other real estate owned
and repossessed assets, net of related reserves where appropriate.
Nonperforming loans consist of non-accrual loans and troubled debt
restructurings.
(4) Reflects PHFG's elimination of the valuation allowance relating to deferred
income tax assets of $6.5 million.
(5) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(6) Average equity excludes the effect of unrealized gains or losses on
securities available for sale.
(7) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities (which do not include non-interest bearing
demand accounts), and net interest margin represents net interest income as
a percent of average interest-earning assets, in each case calculated on a
fully-taxable equivalent basis.
* Information is not available.
- ------------------------------------------------------------------------------
22
<PAGE> 28
GENERAL INFORMATION
This Prospectus/Joint Proxy Statement is being furnished to the holders of
PHFG Common Stock and CFX Common Stock in connection with the solicitation of
proxies by the Boards of Directors of PHFG and CFX for use at the PHFG Special
Meeting and the CFX 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 CFX 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 CFX has been supplied by CFX.
This Prospectus/Joint Proxy Statement and the applicable proxy card
enclosed herewith are first being mailed to shareholders of PHFG and CFX on or
about January 5, 1998.
THE SPECIAL MEETINGS
TIME AND PLACE
The PHFG Special Meeting will be held at 10:00 a.m., Eastern Time, on
Monday, February 9, 1998 at the Portland Marriott Hotel, 200 Sable Oaks Drive,
South Portland, Maine 04106. The CFX Special Meeting will be held at 10:00 a.m.,
Eastern Time, on Monday, February 9, 1998, at the Keene Country Club, Base Hill
Road, Keene, New Hampshire 03431.
MATTERS TO BE CONSIDERED
At the Special Meetings, shareholders of PHFG and CFX 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 CFX, respectively, no other
business may properly come before the PHFG Special Meeting and the CFX Special
Meeting and any adjournment or adjournments thereof.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on December 29, 1997 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 27,739,090 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 December 29, 1997 has been fixed by the CFX Board
as the Record Date for the determination of holders of CFX Common Stock entitled
to notice of and to vote at the CFX Special Meeting and any adjournment or
adjournments thereof. At the close of business on the Record Date, there were
24,058,307 shares of CFX Common Stock outstanding and entitled to vote. Each
share of CFX Common Stock entitles the holder thereof to one vote at the CFX
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 CFX 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 CFX Special Meeting, as the case may be. The affirmative
vote of the holders of a majority of the outstanding shares of PHFG Common Stock
and CFX Common Stock, voting in person or by proxy, is necessary to approve the
Agreement on behalf of PHFG and CFX, respectively.
23
<PAGE> 29
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 CFX
Special Meeting will be considered in determining the presence of a quorum at
the PHFG Special Meeting and the CFX Special Meeting, respectively, but will not
be counted as a vote cast for the Agreement. Because the proposal to adopt the
Agreement is required to be approved by the holders of a majority of the
outstanding shares of each of the PHFG Common Stock and the CFX Common Stock,
abstentions and broker "non-votes" will have the same effect as a vote against
this proposal at the Special Meetings.
In connection with the execution of the Agreement, PHFG and the directors
of CFX entered into an agreement pursuant to which, among other things, such
persons agreed to vote their shares of CFX Common Stock (which amount to 5.3% of
the shares of such stock outstanding, excluding shares subject to options) in
favor of the Agreement, and CFX and the directors of PHFG entered into an
agreement pursuant to which, among other things, such persons agreed to vote
their shares of PHFG Common Stock (which amount to 2.7% of the shares of such
stock outstanding, excluding shares subject to options) in favor of the
Agreement. See "Certain Beneficial Owners of PHFG Common Stock," "Certain
Beneficial Owners of CFX Common Stock" and "The Merger -- Letter Agreements."
VOTING AND REVOCATION OF PROXIES
Each copy of this Prospectus/Joint Proxy Statement mailed to holders of
PHFG Common Stock and CFX Common Stock is accompanied by a form of proxy for use
at the PHFG Special Meeting or the CFX 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 CFX (in the case of a CFX shareholder) at the address of PHFG or
CFX 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 CFX 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 CFX (and not revoked) by a holder of PHFG
Common Stock and CFX Common Stock, respectively, will be voted in accordance
with the instructions indicated thereon. If no instructions are indicated, the
proxy will be voted for approval of the Agreement. Proxies marked "FOR" approval
of the Agreement and executed but unmarked proxies will be voted in the
discretion of the persons named in the accompanying proxies as to any proposed
adjournment of the PHFG Special Meeting or the CFX Special Meeting. Proxies
which are voted against approval of the Agreement will not be voted in favor of
any motion to adjourn the PHFG Special Meeting or the CFX Special Meeting, as
applicable, to solicit more votes in favor of approval of the Agreement.
It is not expected that any matter other than those referred to herein will
be brought before either of the Special Meetings. If other matters are properly
presented, however, the persons named as proxies will vote in accordance with
their judgment with respect to such matters.
SOLICITATION OF PROXIES
Each of PHFG and CFX 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 CFX 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
CFX, as the case may be, will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
24
<PAGE> 30
Each of PHFG and CFX has retained Morrow & Co., a professional proxy
solicitation firm, to assist it in the solicitation of proxies. The fee payable
to such firm in connection with the Merger is $6,000 for each of PHFG and CFX,
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, CFX will be merged with and into PHFG, with PHFG as the surviving
corporation of the Merger. The Agreement provides that at the Effective Time
each outstanding share of CFX Common Stock (other than (i) any dissenting shares
under the NHBCA and (ii) any shares held by PHFG or CFX other than in a
fiduciary capacity that are beneficially owned by third parties 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 0.667 of a share of PHFG Common Stock, subject to possible
adjustment under certain circumstances, as discussed below, plus cash in lieu of
any fractional share interest.
No fractional shares of PHFG Common Stock shall be issued in the Merger to
holders of shares of CFX Common Stock. Each holder of shares of CFX 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 CFX 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 the Nasdaq Stock Market's National
Market on the business day preceding the Effective Time.
Subsequent to execution of the Agreement, the three banking subsidiaries of
CFX entered into Bank Merger Agreements with two of PHFG's banking subsidiaries.
Pursuant to the Bank Merger Agreements, and subject to consummation of the
Merger and the other conditions set forth therein, CFX Bank will merge with and
into BNH and each of Orange Savings Bank and Safety Fund will merge with and
into Family Bank. It is anticipated that the Bank Mergers will be consummated
substantially concurrently with the Merger.
Each of the PHFG Board and the CFX 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 CFX, respectively, and its
respective shareholders. ACCORDINGLY, THE BOARD OF DIRECTORS OF EACH OF PHFG AND
CFX UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF PHFG AND CFX, RESPECTIVELY, VOTE
"FOR" APPROVAL OF THE AGREEMENT.
BACKGROUND OF THE MERGER
For a number of years, CFX has pursued a business strategy that emphasizes
a number of complementary objectives which include (1) continuing the company's
long history of providing community banking services in its market areas, (2)
diversifying and enlarging its customer and asset bases, expanding its market
share in existing markets, and expanding its market areas in southern New
Hampshire, north central Massachusetts and surrounding areas, (3) offering new
and existing customers a broader array of financial products and services on a
more cost-effective basis, (4) increasing the company's capitalization to
attract more institutional investors and to improve liquidity in CFX common
stock and (5) building a profitable banking franchise and creating more value
for its shareholders.
To a large extent, the board of directors and management of CFX have sought
to implement this business strategy by growth through acquisitions and mergers.
Accordingly, CFX has undertaken a comprehensive review of attractive acquisition
and merger candidates, based on size, market areas, asset quality, deposit base,
25
<PAGE> 31
funding costs, earnings, product and service mix, opportunities for cost
savings, and other relevant considerations. This review has resulted in several
bank acquisitions by CFX in recent years.
In early 1995, CFX acquired Orange Savings Bank, a Massachusetts
state-chartered savings bank based in Orange, Massachusetts. In mid-1996, CFX
completed two acquisitions. In the first transaction, CFX merged with The Safety
Fund Corporation, a bank holding company, and therein acquired Safety Fund
Corporation's wholly owned subsidiary, Safety Fund, a national banking
association based in Fitchburg, Massachusetts. In the second transaction, CFX
acquired Milford Co-operative Bank, a New Hampshire state-chartered co-operative
bank based in Milford, New Hampshire, through a merger of Milford Co-operative
Bank with and into CFX Bank. During the third quarter of 1997, CFX merged with
two other bank holding companies, Community and Portsmouth, and therein acquired
their respective bank subsidiaries, Concord Savings Bank, a New Hampshire
state-chartered savings bank based in Concord, New Hampshire, Centerpoint Bank,
a New Hampshire state-chartered commercial bank based in Bedford, New Hampshire,
and Portsmouth Savings Bank, a New Hampshire state-chartered savings bank based
in Portsmouth, New Hampshire, each of which was merged with and into CFX Bank.
CFX believes that these acquisitions, both individually and in the
aggregate, have advanced the Company's overall business plan. In this respect,
from the end of 1994 through September 30, 1997, on a consolidated basis, CFX's
total assets have grown from $756 million to $2.8 billion, its total market
capitalization has increased from $37 million to $515 million, and its common
stock price has more than doubled from $9.52 to $21.44 per share (adjusted to
reflect stock splits and stock dividends).
During this period, CFX also engaged in discussions from time to time with
a number of other potential merger or acquisition partners. One of these other
parties was PHFG. The respective managements of CFX and PHFG first discussed the
possibility of a business combination involving the two companies in the Fall of
1994. Those discussions were exploratory in nature and did not result in any
firm merger proposals or other similar understandings. A year later, in the Fall
of 1995, CFX and PHFG revisited the idea of merging with one another. Those
discussions ended when PHFG announced its agreement to acquire Bank of New
Hampshire Corporation, a New Hampshire-chartered bank holding company based in
Manchester, New Hampshire.
The current merger proposal is the product of a series of preliminary and
informal meetings between CFX and PHFG that began in the Fall of 1997. During
those meetings, the parties discussed, among other things, the increasingly
competitive environment for banking and other financial services in the New
England area and throughout the country; the anticipated challenges facing
independent community banks such as CFX and PHFG; the likely effects of
continued consolidations in the banking industry; the rising cost structures,
including the high costs of technology, required to compete with much larger
competitors; the general economic conditions in CFX's and PHFG's respective and
nearby market areas; the increased efficiencies and cost savings that could be
obtained from a consolidation of CFX and PHFG; and the other advantages,
including the increases to shareholder value, that were likely to result from a
combination of the two companies and the subsequent combination of their
respective subsidiaries. The two companies also discussed a number of
alternative structures for any potential business combination.
Following these discussions, and subsequent discussions that included CFX's
financial and legal advisors (Keefe Bruyette and Arnold & Porter, respectively),
the management of CFX concluded that the merger of CFX and PHFG could be
accretive to shareholder value for both companies. On October 20, 1997, the
management of CFX met with CFX's Executive Committee to inform the members of
the committee of the merger discussions between CFX and PHFG, to review with
them the anticipated financial and other effects of the proposed merger, and to
obtain the committee's consent to continue to explore the possibility of a
business combination with PHFG.
Thereafter, the parties commenced negotiations regarding the structure of
the proposed merger of CFX and PHFG and the proposed consolidation of their
respective subsidiaries. In addition, CFX and PHFG, together with their
respective advisors, began to conduct due diligence on one another.
26
<PAGE> 32
The management of CFX met with the entire CFX Board on two consecutive
days, October 25 and 26, 1997, to discuss the proposed merger. During the
meeting on the first day, CFX management described the discussions and
negotiations between CFX and PHFG regarding the possible business combination of
the two companies. The CFX Board discussed the proposed merger, considered
whether the merger was compatible with CFX's business strategy, and deliberated
whether remaining independent or consummating other alternative proposals, such
as an acquisition or merger transaction with another company or the sale of CFX
to another company, would be as or more beneficial to CFX and its shareholders.
The consensus of the CFX Board at the end of the meeting was that the management
of CFX should continue exploring the possibility of a merger with PHFG, reach an
understanding regarding the structure of the merger and complete its due
diligence investigation of PHFG.
At the second CFX Board meeting, the management of CFX, CFX's independent
auditors, Wolf & Company, P.C., and certain of CFX's other advisors reported the
findings of CFX's due diligence investigations of PHFG. CFX's financial advisor,
Keefe Bruyette, reviewed certain historical financial information relating to
CFX and PHFG and certain projected financial information with respect to the
combined company. Keefe Bruyette also gave its opinion that the Exchange Ratio
was fair to CFX's shareholders from a financial point of view. CFX's legal
advisor, Arnold & Porter, discussed with the CFX Board the proposed structure of
the merger, the terms of the Agreement, the CFX Option Agreement, the PHFG
Option Agreement and the proposed letter agreements to be executed by the
respective directors and executive officers of CFX and PHFG with respect to the
proposed merger, and the CFX Board's fiduciary obligations with respect to CFX
and its shareholders in evaluating the merger proposal.
After consideration and discussion of the proposed transaction and
consultation with CFX management and the company's financial and legal advisors,
the CFX Board concluded that, by merging with PHFG, CFX could continue to pursue
its business strategy. Accordingly, the CFX Board approved the Merger, the
Agreement and the CFX Option Agreement as being in the best interests of CFX and
its shareholders and other constituencies, and directed that the Merger and each
of the foregoing agreements be submitted for approval by the holders of CFX
Common Stock at a special meeting of the shareholders of CFX.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
CFX. In reaching its decision to approve the Agreement and the
transactions contemplated thereby, the CFX Board considered a number of factors,
including:
(i) the respective business, operations, asset quality, financial
condition, earnings, strategic business plans, histories of successful
acquisitions, competitive positions and stock price performance of CFX and
PHFG (see "Summary -- Recent Acquisitions of PHFG and CFX," "-- Background
of the Merger," "Selected Consolidated Financial Data of PHFG" and
"Selected Consolidated Financial Data of CFX");
(ii) the similar community banking cultures and business philosophies
of the two companies, particularly with respect to customer satisfaction,
efficiency and credit quality and serving the banking needs of small towns
and semi-rural communities, and the companies' compatible management teams;
(iii) the projected market capitalization and market position of the
combined entity, the diversification of the companies' asset and deposit
bases, and the ability of the combined company to compete more effectively
in New England and elsewhere (see "Selected Pro Forma Consolidated
Financial Data" and "Pro Forma Combined Consolidated Financial
Information");
(iv) the pro forma financial effects of the proposed transactions,
including the cost savings (resulting from back office efficiencies, branch
closures, layoffs, consolidations and other cost savings) and enhanced
revenue anticipated to result from the Merger and the Bank Mergers, and the
effects of the Merger and the Bank Mergers on the risk-based and leverage
capital ratios of the combined company and its subsidiary New Hampshire and
Massachusetts banks (see "Selected Pro Forma Consolidated Financial Data,"
"Pro Forma Combined Consolidated Financial Information" and "Management and
Operations of PHFG after the Merger -- Consolidation of Operations;
Projected Cost Savings, Revenue Enhancements and Earnings");
27
<PAGE> 33
(v) the likely impact of the proposed Merger on the employees and
customers of CFX and its subsidiaries, on the communities in which CFX
presently conducts its business, and on CFX's other constituencies;
(vi) the current and prospective economic, regulatory and competitive
climate facing independent community banking organizations, including the
consolidation currently underway in the banking industry and competition
from larger institutions and from nonbank providers of financial services;
(vii) the exchange ratio in the Merger from a number of valuation
perspectives, as presented by Keefe Bruyette, and the current market value
of the Merger to CFX's shareholders (see "-- Opinions of Financial
Advisors");
(viii) the October 26, 1997 opinion of Keefe Bruyette that the
exchange ratio is fair to CFX's shareholders from a financial point of view
(see "-- Opinions of Financial Advisors");
(ix) the terms of the Agreement, including the proposed board
representation and management structure of the combined company, and the
termination provisions applicable in the event of a significant decline in
the price of PHFG Common Stock relative to a market index prior to the
consummation of the Merger (see "-- Termination and Amendment" and
"Management and Operations of PHFG after the Merger -- Board of Directors
and Management following the Merger");
(x) the terms of the CFX Option Agreement and the PHFG Option
Agreement (see "-- Stock Option Agreements");
(xi) the regulatory and shareholder approvals required for the
consummation of the Merger and the Bank Mergers (see "-- Regulatory
Approvals");
(xii) the treatment of the Merger as a pooling of interests for
financial accounting purposes and as a tax-free reorganization for federal
income tax purposes (see "-- Certain Federal Income Tax Consequences" and
"-- Accounting Treatment of the Merger");
(xiii) the restructuring charges of approximately $12.8 million on an
after tax basis that the combined company is expected to take in connection
with the Merger and the impact of these charges on the combined company's
earnings (see "Management and Operations of PHFG after the Merger --
Consolidation of Operations; Projected Cost Savings, Revenue Enhancements
and Earnings"); and
(xiv) the fact that the Merger is expected to be accretive to the
combined company's earnings during the first full year of operations (see
"Management and Operations of PHFG after the Merger -- Consolidation of
Operations; Projected Cost Savings, Revenue Enhancements and Earnings").
The foregoing discussion of the information and factors considered by the
CFX Board is not intended to be exhaustive but includes all material factors
considered by the CFX Board. In reaching its determination to approve and
recommend the Merger, the CFX Board did not assign relative or specific weights
to the foregoing factors, and individual directors may have given differing
weights to different factors.
FOR THE REASONS DESCRIBED ABOVE, THE CFX BOARD HAS DETERMINED THE MERGER TO
BE FAIR TO AND IN THE BEST INTERESTS OF CFX AND ITS SHAREHOLDERS, CUSTOMERS AND
COMMUNITIES SERVED. ACCORDINGLY, THE CFX BOARD HAS UNANIMOUSLY APPROVED THE
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
PHFG. PHFG's acquisition strategy consists of identifying financial
institutions which have business philosophies which are similar to those of
PHFG, operate in strong markets that are geographically compatible with the
markets in which PHFG operates, are financially sound and can be acquired with
reasonable cost. Acquisitions also are evaluated in terms of asset quality,
interest rate risk, potential operating efficiencies and revenue enhancements
and management capabilities.
28
<PAGE> 34
In reaching its determination to approve the Agreement and the transactions
contemplated thereby, the PHFG Board considered a number of factors, including:
(i) the PHFG Board's review, with the assistance of management and of
MB&D, of the financial condition, results of operations, business and
overall prospects of CFX;
(ii) the fact that CFX's strong banking franchise is contiguous to
PHFG's existing banking franchise in New Hampshire and Massachusetts with
little overlap in each case;
(iii) the enhanced ability of the combined entity to compete against
larger competitors;
(iv) the financial presentations of senior management and MB&D and the
opinion of MB&D as to the fairness of the Exchange Ratio from a financial
point of view to the PHFG shareholders (see "The Merger -- Opinions of
Financial Advisors -- PHFG");
(v) the anticipated cost savings, operating synergies and revenue
enhancements available to the combined institution subsequent to
consummation of the Merger and the Bank Mergers (see "Management and
Operations of PHFG after the Merger");
(vi) the expectation that the Merger and each Bank Merger will be a
tax-free transaction to PHFG and its subsidiaries (see "The
Merger -- Certain Federal Income Tax Consequences");
(vii) the expectation that the Merger will qualify for pooling of
interests accounting treatment (see "The Merger -- Accounting Treatment of
the Merger"); and
(viii) the nature of, and likelihood of obtaining, the regulatory
approvals that would be required in order to consummate the Merger and the
Bank Mergers (see "The Merger -- Regulatory Approvals").
The foregoing discussion of the information and factors discussed by the
PHFG Board is not meant to be exhaustive but includes all material factors
considered by the PHFG Board. In reaching its determination to approve and
recommend the Merger, the PHFG Board did not assign relative or specific weights
to the foregoing factors and individual directors may have given differing
weights to different factors.
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. THE PHFG
BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
CFX. On October 20, 1997 CFX engaged Keefe Bruyette to act as its
exclusive financial advisor in connection with the Merger. Pursuant to the terms
of its engagement, Keefe Bruyette agreed to assist CFX in analyzing,
structuring, negotiating and effecting a transaction with PHFG. CFX selected
Keefe Bruyette because Keefe Bruyette is a nationally-recognized investment
banking firm with substantial experience in transactions similar to the Merger
and is familiar with CFX and its business. As part of its investment banking
business, Keefe Bruyette is continually engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions.
Keefe Bruyette was retained by the CFX Board as an independent contractor
to act as financial adviser to CFX with respect to the Merger. Keefe Bruyette,
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, Keefe Bruyette has experience in, and knowledge
of, the valuation of banking enterprises. In the ordinary course of its business
as a broker-dealer, Keefe Bruyette may, from time to time, purchase securities
from, and sell securities to, CFX and PHFG and as a market maker in securities
Keefe Bruyette may from time to time have a long or short position in, and buy
or sell, debt or equity securities of CFX and PHFG for Keefe Bruyette's own
account and for the accounts of its customers. In addition, in the
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ordinary course of business Keefe Bruyette provides financial advisory and
investment banking services to PHFG. In recent years these services have
included acting as a financial advisor in connection with certain acquisitions
by PHFG and as a financial advisor and a standby underwriter in connection with
a public offering of PHFG Common Stock.
On October 26, 1997, at the meeting at which the CFX Board approved and
adopted the Agreement and the transactions contemplated thereby, Keefe Bruyette
rendered its oral opinion to the CFX Board (which was subsequently confirmed in
writing) that, as of such date, the Exchange Ratio was fair, from a financial
point of view, to the holders of CFX Common Stock. That opinion was updated as
of the date of this Prospectus/Joint Proxy Statement.
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 IV 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. KEEFE
BRUYETTE'S OPINION WAS NECESSARILY BASED UPON CONDITIONS AS THEY EXISTED AT THE
TIME OF THE OPINION AND SHOULD BE EVALUATED AS OF THE DATE OF THE OPINION AND
THE INFORMATION MADE AVAILABLE TO KEEFE BRUYETTE THROUGH SUCH DATE.
KEEFE BRUYETTE'S OPINION IS DIRECTED TO THE CFX BOARD AND ADDRESSES ONLY
THE EXCHANGE RATIO. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION TO
PROCEED WITH THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY CFX
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE CFX SPECIAL MEETING
WITH RESPECT TO THE MERGER OR ANY OTHER MATTER RELATED THERETO.
Keefe Bruyette has informed CFX that, in arriving at its written opinion,
Keefe Bruyette, among other things: (1) reviewed CFX's Annual Reports on Form
10-K and related audited financial information for the three fiscal years ended
December 31, 1996 and CFX's quarterly reports on Form 10-Q and related unaudited
financial information for the quarterly periods ended September 30, 1997, June
30, 1997 and March 31, 1997; (2) reviewed PHFG's Annual Reports on Form 10-K and
related audited financial information for the three fiscal years ended December
31, 1996 and PHFG's quarterly reports on Form 10-Q and related unaudited
financial information for the quarterly periods ended September 30, 1997, June
30, 1997 and March 31, 1997 (3) reviewed certain limited financial information,
including financial forecasts, relating to the respective businesses, earnings,
assets and prospects of CFX and PHFG furnished to Keefe Bruyette by senior
management of CFX and PHFG as well as projected cost savings and related
expenses expected to result from the Merger (the "Expected Savings") furnished
to it by senior management of PHFG; (4) conducted certain limited discussions
with members of senior management of CFX and PHFG concerning the respective
businesses, financial condition, earnings, assets, liabilities, operations,
regulatory condition, financial forecasts, contingencies and prospects of CFX
and PHFG and their respective views as to the future financial performance of
CFX, PHFG, and the combined entity, as the case may be, following the Merger;
(5) reviewed the historical market prices and trading activity for CFX Common
Stock and PHFG Common Stock and compared them with that of certain publicly
traded companies which Keefe Bruyette deemed to be relevant; (6) compared the
respective results of operations of CFX and PHFG with those of certain companies
which Keefe Bruyette deemed to be relevant; (7) compared the proposed financial
terms of the Merger contemplated by the Merger Agreement with the financial
terms of certain other mergers and acquisitions which Keefe Bruyette deemed to
be relevant; (8) reviewed the amount and timing of the Expected Savings
following the Merger as prepared, and discussed with it, by senior management of
PHFG; (9) considered, based upon information provided by PHFG's senior
management, the pro forma impact of the Merger on the earnings and book value
per share, consolidated capitalization and certain balance sheet and
profitability ratios of PHFG; (10) reviewed the Merger Agreement; and (11)
reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as Keefe Bruyette deemed
necessary.
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In preparing its opinion, Keefe Bruyette, with CFX's consent, assumed and
relied on the accuracy and completeness of all financial and other information
supplied or otherwise made available to it by CFX and PHFG, including that
contemplated in the numbered items above, and Keefe Bruyette has not assumed
responsibility for independently verifying such information or undertaken an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of CFX or PHFG or any of their subsidiaries, nor has it been
furnished any such evaluation or appraisal. Keefe Bruyette is not an expert in
the evaluation of allowances for loan losses, and, with CFX's consent, it has
not made an independent evaluation of the adequacy of the allowance for loan
losses of CFX or PHFG, nor has it reviewed any individual credit files relating
to CFX or PHFG, and, with CFX's consent, it assumed that the respective
aggregate allowances for loan losses for both CFX and PHFG are adequate to cover
such losses and will be adequate on a pro forma basis for the combined entity.
In addition, it has not conducted any physical inspection of the properties or
facilities of CFX or PHFG. With CFX's consent, Keefe Bruyette also assumed and
relied upon the senior management of CFX and PHFG as to the reasonableness and
achievability of the financial forecasts (and the assumptions and bases
therefore) provided to, and discussed with, Keefe Bruyette. In that regard,
Keefe Bruyette has assumed with CFX's consent that such forecasts, including
without limitation, financial forecasts, evaluations of contingencies, Expected
Savings and operating synergies resulting from the Merger and projections
regarding underperforming and non-performing assets, net charge-offs, adequacy
of reserves, future economic conditions and results of operations reflect the
best currently available estimates and judgments of the senior management of CFX
and PHFG and/or the combined entity, as the case may be. Keefe Bruyette's
opinion is predicated on the Merger receiving the tax and accounting treatment
contemplated in the Merger Agreement. Keefe Bruyette's opinion was necessarily
based on economic, market and other conditions as in effect on, and the
information made available to it as of, the date of its opinion.
Keefe Bruyette's opinion was rendered without regard to the necessity for,
or level of, any restrictions, obligations, undertakings or divestitures which
may be imposed or required in the course of obtaining any regulatory approval
for the Merger.
In connection with rendering its opinion dated October 26, 1997, Keefe
Bruyette performed a variety of financial analyses, consisting of those
summarized below. The summary set forth below does not purport to be a complete
description of the analyses performed by Keefe Bruyette in this regard, although
it describes all material analyses performed by Keefe Bruyette. The preparation
of a fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to a partial analysis or summary description. Accordingly,
notwithstanding the separate factors summarized below, Keefe Bruyette believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and factors considered by it, without considering all analyses and
factors, or attempting to ascribe relative weights to some or all such analyses
and factors, could create an incomplete view of the evaluation process
underlying Keefe Bruyette's opinion.
In performing its analyses, Keefe Bruyette made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of PHFG, CFX and Keefe
Bruyette. The analyses performed by Keefe Bruyette are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. Such analyses were prepared
solely as part of Keefe Bruyette's analysis of the fairness to the stockholders
of CFX of the Exchange Ratio and were provided to the CFX Board in connection
with the delivery of Keefe Bruyette's opinion. Keefe Bruyette gave the various
analyses described below approximately similar weight and did not draw any
specific conclusions from or with regard to any one method of analysis. With
respect to the comparison of selected companies analysis and the analysis of
selected merger transactions summarized below, no company utilized as a
comparison is identical to CFX or PHFG. Accordingly, an analysis of comparable
companies and comparable business combinations is not mathematical; rather it
involves complex considerations and judgements concerning the differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading values or announced merger transaction values,
as the case may be, of the companies concerned. The analyses do not purport to
be appraisals or to reflect the process at which CFX and PHFG might actually be
sold or the prices at which any
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securities may trade at the present time or at any time in the future. In
addition, as described above, Keefe Bruyette's opinion is just one of many
factors taken into consideration by the CFX Board.
The projections furnished to Keefe Bruyette and used by it in certain of
its analyses were prepared by the senior management of CFX and PHFG. CFX and
PHFG do not publicly disclose internal management projections of the type
provided to Keefe Bruyette in connection with its review of the Merger, and as a
result, such projections were not prepared with a view towards public
disclosure. The projections were based on numerous variables and assumptions
which are inherently uncertain, including, without limitation, factors related
to general economic and competitive conditions, and accordingly, actual results
could vary significantly from those set forth in such projections.
The following is a summary of the material analyses presented by Keefe
Bruyette to the CFX Board on October 26, 1997 in connection with its October 26,
1997 opinion.
Summary of Proposal. Keefe Bruyette calculated multiples which were based
on the assumed per share purchase price of $28.76 (derived by multiplying the
Exchange Ratio of 0.667 by $43.125, the last reported sale price for the PHFG
Common Stock before the public announcement of the execution of the Merger
Agreement). CFX's September 30, 1997 stated book value was $10.25, tangible book
value was $9.88, 1997 and 1998 earnings per share estimates (provided by Keefe
Bruyette's Research Department) were $1.40 and $1.60, respectively, and its
trailing 12 months (September 30, 1996 to September 30, 1997) earnings per share
was $1.08. Based on this data, the price to stated book value multiple was 2.81
times, the price to fully diluted tangible book value multiple was 2.91 times,
the price to the 1997 and 1998 earnings estimates per share was 20.54 and 17.97
times, respectively, and the multiple of price to the trailing 12 months
earnings was 26.63 times.
Analysis of Selected Merger Transactions. Keefe Bruyette reviewed certain
financial data related to comparable nationwide acquisitions of bank and thrift
holding companies with assets between $500 million and $5 billion in 1996 and
1997 year to date, nationwide acquisitions of high performing (ROA greater than
1.00%) bank and thrift holding companies with assets between $500 million and $5
billion in 1996 and 1997 year to date, and acquisitions of high performing New
England bank and thrift holding companies in 1994, 1995, 1996 and 1997 year to
date.
Keefe Bruyette calculated averages of the 1996 and 1997 nationwide thrift
groups' multiples of price to the targets' earnings (trailing 12 months) as
21.45 in 1997 and 16.72 in 1996 compared to a multiple of 26.63 for the Merger;
an average premium to the targets' stated book value of 215% in 1997 and 156% in
1996 compared to a premium of 281% associated with the Merger; an average
premium to the targets' tangible book value of 220% in 1997 and 165% in 1996
compared to a premium of 291% associated with the Merger; an average premium to
the targets' core deposits (net of tangible equity) of 16.93% in 1997 and 8.17%
in 1996 compared to 24.80% associated with the Merger and average price to
assets of 18.47% in 1997 and 13.08% in 1996 compared to 25.40% associated with
the Merger.
Keefe Bruyette calculated averages of the 1996 and 1997 nationwide bank
groups' multiples of price to the targets' earnings (trailing 12 months) as
22.10 in 1997 and 17.46 in 1996 compared to a multiple of 26.63 for the Merger;
an average premium to the targets' stated book value of 270% in 1997 and 220% in
1996 compared to a premium of 281% associated with the Merger; an average
premium to the targets' tangible book value of 292% in 1997 and 234% in 1996
compared to a premium of 291% associated with the Merger; an average premium to
the targets' core deposits (net of tangible equity) of 21.84% in 1997 and 15.57%
in 1996 compared to 24.80% associated with the Merger and an average price to
assets of 24.40% in 1997 and 20.20% in 1996 compared to 25.40% associated with
the Merger.
Keefe Bruyette calculated averages of the 1996 and 1997 nationwide high
performing thrift groups' multiples of price to the targets' earnings (trailing
12 months) as 18.46 in 1997 and 13.19 in 1996 compared to a multiple of 26.63
for the Merger; an average premium to the targets' stated book value of 244% in
1997 and 161% in 1996 compared to a premium of 281% associated with the Merger;
an average premium to the targets' tangible book value of 251% in 1997 and 167%
in 1996 compared to a premium of 291% associated with the Merger; an average
premium to the targets' core deposits (net of tangible equity) of 20.96% in 1997
and
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12.35% in 1996 compared to 24.80% associated with the Merger and average price
to assets of 20.29% in 1997 and 17.56% in 1996 compared to 25.40% associated
with the Merger.
Keefe Bruyette calculated averages of the 1996 and 1997 nationwide high
performing bank groups' multiples of price to the targets' earnings (trailing 12
months) as 21.50 in 1997 and 15.71 in 1996 compared to a multiple of 26.63 for
the Merger; an average premium to the targets' stated book value of 287% in 1997
and 230% in 1996 compared to a premium of 281% associated with the Merger; an
average premium to the targets' tangible book value of 312% in 1997 and 245% in
1996 compared to a premium of 291% associated with the Merger; an average
premium to the targets' core deposits (net of tangible equity) of 23.92% in 1997
and 16.71% in 1996 compared to 24.80% associated with the Merger and average
price to assets of 25.69% in 1997 and 21.37% in 1996 compared to 25.40%
associated with the Merger.
Keefe Bruyette calculated averages of the 1994, 1995, 1996 and 1997 New
England high performing thrift groups' multiples of price to the targets'
earnings (trailing 12 months) as 18.55 in 1997, 16.16 in 1996, 10.62 in 1995 and
14.46 in 1994 compared to a multiple of 26.63 for the Merger; an average premium
to the targets' stated book value of 181% in 1997, 169% in 1996, 149% in 1995
and 169% in 1994 compared to a premium of 281% associated with the Merger; an
average premium to the targets' tangible book value of 188% in 1997, 196% in
1996, 149% in 1995 and 171% in 1994 compared to a premium of 291% associated
with the Merger; an average premium to the targets' core deposits (net of
tangible equity) of 17.13% in 1997, 11.38% in 1996, 7.62% in 1995 and 8.18% in
1994 compared to 24.80% associated with the Merger and average price to assets
of 27.99% in 1997, 15.77% in 1996, 15.98% in 1995 and 17.81% in 1994 compared to
25.40% associated with the Merger.
Keefe Bruyette calculated averages of the 1994, 1995, 1996 and 1997 New
England high performing bank groups' multiples of price to the targets' earnings
(trailing 12 months) as 13.17 in 1997, 12.08 in 1996, 13.67 in 1995 and 10.67 in
1994 compared to a multiple of 26.63 for the Merger; an average premium to the
targets' stated book value of 209% in 1997, 203% in 1996, 208% in 1995 and 165%
in 1994 compared to a premium of 281% associated with the Merger; an average
premium to the targets' tangible book value of 210% in 1997, 203% in 1996, 212%
in 1995 and 165% in 1994 compared to a premium of 291% associated with the
Merger; an average premium to the targets' core deposits (net of tangible
equity) of 12.49% in 1997, 11.53% in 1996, 10.34% in 1995 and 5.38% in 1994
compared to 24.80% associated with the Merger and average price to assets of
19.30% in 1997, 18.03% in 1996, 16.51% in 1995 and 12.06% in 1994 compared to
25.40% associated with the Merger.
No company or transaction used as a comparison in the above analysis is
identical to CFX, PHFG or the Merger. Accordingly, an analysis of the results of
the foregoing is not mathematical; rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other factors that could affect the public trading value of
the companies to which they are being compared.
Selected Peer Groups Analyses. Keefe Bruyette compared the financial
performance and market performance of CFX based on various financial measures of
earnings performance, operating efficiency, capital adequacy and asset quality
and various measures of market performance, including market/book values, price
to earnings and dividend yields to those of groups of comparable thrift and bank
holding companies. For purposes of such analysis, the financial information used
by Keefe Bruyette was as of and for the quarter ended September 30, 1997 for CFX
and PHFG and June 30, 1997 for the comparable institutions. Market price
information was as of October 24, 1997. The companies in the thrift peer group
were People's Mutual Holding Company, Webster Financial Corporation, SIS
Bancorp, Inc., and Affiliated Community Bancorp, Inc. The companies in the bank
peer group were North Fork Bancorporation, Inc., ONBANCorp, Inc., UST
Corporation, HUBCO, Inc., Banknorth Group, Inc., Vermont Financial Services
Corp., Chittenden Corporation, Community Bank System, Inc., BSB Bancorp, Inc.,
NBT Bancorp, Inc., Evergreen Bancorp, Inc. and Arrow Financial Corporation.
Keefe Bruyette's analysis showed the following concerning CFX and PHFG's
financial performance: that its return on equity on an annualized basis was
12.82% and 16.78%, respectively, compared with an average of 13.34% and 15.76%
for the thrift and bank peer groups, respectively; that its return on assets on
an annualized
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basis was 1.15% and 1.30%, respectively, compared with an average of 0.98% and
1.28% for the thrift and bank peer groups, respectively; that its net interest
margin on an annualized basis was 3.86% and 4.70%, respectively, compared with
an average of 3.45% and 4.61% for the thrift and bank peer groups, respectively;
that its efficiency ratio on an annualized basis was 59.93% and 61.81%,
respectively, compared with an average of 59.14% and 53.98% for the thrift and
bank peer groups, respectively; that its equity to assets ratio was 8.71% and
6.88%, respectively, compared to an average of 7.62% and 8.04% for the thrift
and bank peer groups, respectively; that its ratio of nonperforming assets to
total loans and other real estate owned was 0.81% and 1.16% respectively,
compared to an average of 1.11% and 0.98% for the thrift and bank peer groups,
respectively; that its ratio of loan loss reserve to nonperforming loans was
180% and 163%, respectively, compared to an average of 184% and 233% for the
thrift and bank peer groups, respectively.
Keefe Bruyette's analysis further showed the following concerning CFX and
PHFG's market performance: that CFX and PHFG's price to earnings multiple based
on 1997 estimated earnings was 16.21 and 16.69 times, respectively, compared to
an average of 21.53 and 16.85 times for the thrift and bank peer groups,
respectively; that their price to book value multiples were 2.21 and 2.63 times,
respectively, compared to an average of 2.43 and 2.52 times for the thrift and
bank peer groups, respectively; their dividend yields were 3.88% and 1.72%,
respectively, compared to an average of 1.49 and 2.18 times for the thrift and
bank peer groups, respectively. For purposes of the above calculations, all
earnings estimates are based upon the published estimates of Keefe Bruyette's
Research Department.
Contribution Analysis. Keefe Bruyette analyzed the relative contribution
of each of CFX and PHFG to the pro forma balance sheet and income statement
items of the combined entity, including assets, common equity, market
capitalization, deposits and estimated 1998 net income. Keefe Bruyette compared
the relative contribution of such balance sheet and income statement items with
the estimated pro forma ownership of 37% for CFX Corporation based on an
Exchange Ratio of 0.667. The contribution showed that CFX would contribute
approximately 30% of the combined assets, 35% of the combined common equity, 29%
of the combined deposits, and 32% of the combined estimated 1998 net income.
Financial Impact Analysis. Keefe Bruyette performed pro forma merger
analysis that combined projected income statement and balance sheet information.
Assumptions regarding the accounting treatment, acquisition adjustments, cost
savings, and revenue enhancements were used to calculate the financial impact
that the Merger would have on certain projected financial results of PHFG. This
analysis indicated that the Merger is expected to decrease estimated earnings
per share in 1998 and be accretive thereafter; increase estimated return on
equity, fully diluted tangible book value and the leverage ratio, and decrease
fully diluted book value. This analysis was based on analyst and the respective
managements' estimates of CFX and PHFG's 1998 earnings per share and on PHFG
managements' estimates of expected cost savings, revenue enhancements and a
non-recurring merger and restructuring charge to be realized or incurred by PHFG
in connection with the Merger. These projections were discussed with the
management of each of PHFG and CFX. The actual results achieved by PHFG
following the Merger will vary from the projected results, and the variations
may be material.
Pro Forma Dividend Analysis. Based on the Exchange Ratio of 0.667, Keefe
Bruyette performed an analysis showing the implied pro forma dividend to
shareholders of CFX Common Stock. Given PHFG's announced annualized dividend of
$0.84 per share, CFX's 1997 dividend per share equivalent would be $0.56, a 36%
decrease from its stand-alone 1997 dividend of $0.88. Keefe Bruyette calculated
a dividend payout ratio of 29% for PHFG. Keefe Bruyette compared this dividend
payout ratio to an average industry ratio of 35% for 210 banking companies
followed by Keefe Bruyette's Research Department. Keefe Bruyette further
compared this average ratio to the 67% dividend payout ratio for CFX based on
estimated 1997 earnings.
Discounted Cash Flow Analysis. Keefe Bruyette estimated the present value
of the future cash flows that would accrue to a holder of a share of CFX Common
Stock assuming the stockholder held the stock through the year 2002 and then
sold it at the end of year 2002. The analysis was based on several assumptions,
including an earnings per share of $1.56 in 1998 and a 10% earnings per share
growth rate. A 60% dividend payout ratio was assumed for CFX through the year
2002. A terminal value was calculated for 2002 by multiplying CFX's projected
2002 earnings by a price-to-earnings multiple of 16 times trailing earnings. The
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terminal valuation and the estimated dividends were discounted at a rate of 12%,
producing a present value of $25.49. Keefe Bruyette also presented a table
showing the foregoing analysis with a range of discount rates from 10% to 18%
and a range of price-to-earnings multiples of 14 times to 19 times, resulting in
a range of present values for a share of CFX Common Stock of $17.94 to $32.12.
These values were determined by adding (i) the present value of the estimated
future dividend stream that CFX could generate over the period beginning January
1998 and ending in December 2002, and (ii) the present value of the "terminal
value" of the CFX Common Stock.
Keefe Bruyette repeated this analysis for CFX with a scenario of completed
acquisitions in 1999 and 2000 that each would be 2.00% accretive to earnings and
break even to book value. Maintaining a 10% earnings per share growth rate and
other assumptions produced a present value of $26.36. The table showed a range
of present values from $18.54 to $33.22.
Keefe Bruyette repeated the stand-alone analysis using an earnings growth
rate of 8.4% for CFX. The result of this analysis was a present value of $22.91
at a 16 times trailing earnings terminal multiple and a 12% discount rate. Keefe
Bruyette also presented a table showing the foregoing analysis with a range of
discount rates from 10% to 18% and a range of price-to-earnings multiples of 14
times to 19 times, resulting in a range of present values for a share of CFX
Common Stock of $16.16 to $28.83.
Keefe Bruyette repeated this analysis for CFX with a scenario of completed
acquisitions in 1999 and 2000 that each would be 2.00% accretive to earnings and
break even to book value. Maintaining a 8.4% earnings per share growth rate and
other assumptions produced a present value of $24.21. The table showed a range
of present values from $17.05 to $30.48.
Keefe Bruyette also estimated the present value of future cash flows that
would accrue to a holder of a share of PHFG pro forma for the Merger, assuming
the stockholder held the stock through the year 2002 and then sold it at the end
of 2002. This analysis was based on several assumptions, including a pro forma
1998 earnings per share of $2.90. A 35% dividend payout ratio was assumed for
PHFG pro forma through the year 2002. A terminal value was calculated for 2002
by multiplying PHFG's pro forma projected 2002 earnings by a price-to-earnings
multiple of 16.5 times trailing earnings. The terminal valuation and the
estimated dividends were discounted at a rate of 12%. This analysis was also
applied to a current CFX shareholder who receives shares of PHFG in the merger.
using the 0.667 Exchange Ratio. The result of this analysis was a present value
of $44.12 and $29.43, respectively at a 16.5 times trailing earnings terminal
multiple and a 12% discount rate. Keefe Bruyette also presented a table showing
the CFX equivalent analysis with a range of discount rates from 12% to 14% and a
range of price-to-earnings multiples of 16.5 times to 20 times, resulting in a
range of present values for the CFX equivalent of $27.04 to $35.06.
Keefe Bruyette stated that the discounted cash flow analysis is a
widely-used valuation methodology but noted that it relies on numerous
assumptions, including asset and earnings growth rates, dividend payout rates,
terminal values and discount rates. The analysis did not purport to be
indicative of the actual values or expected values of CFX Common Stock or PHFG
Common Stock.
In connection with its opinion dated as of the date of this
Prospectus/Joint Proxy Statement, Keefe Bruyette performed procedures to update,
as necessary, certain of the analyses described above and reviewed the
assumptions on which such analyses described above were based and the factors
considered in connection therewith. No limitations were imposed by the CFX Board
upon Keefe Bruyette with respect to the investigations made or procedures
followed by Keefe Bruyette in rendering its opinions.
CFX and Keefe Bruyette have entered into a letter agreement, dated October
20, 1997 (the "Keefe Bruyette Engagement Letter"), relating to the services to
be provided by Keefe Bruyette in connection with the Merger. Pursuant to the
Keefe Bruyette Engagement Letter, CFX agreed to pay Keefe Bruyette $200,000 upon
execution of the Agreement, an additional $200,000 upon mailing of this
Prospectus/Joint Proxy Statement, and a fee equal to 0.65% of the market value
at the date of closing of the Merger of the PHFG Common Stock to be issued in
connection therewith, net of amounts previously paid by CFX to Keefe Bruyette
pursuant to the Keefe Bruyette Engagement Letter. Based on the per share closing
price of the PHFG Common Stock on December 29, 1997, the last practicable
trading day prior to the printing of this
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Prospectus/Joint Proxy Statement, CFX estimates that the total fee payable by
CFX to Keefe Bruyette upon consummation of the Merger under the Keefe Bruyette
Engagement Letter will be approximately $5.1 million. In the Keefe Bruyette
Engagement Letter, CFX also agreed to reimburse Keefe Bruyette for its
reasonable and out-of-pocket expenses and to indemnify against certain
liabilities, including liabilities under the federal securities laws.
PHFG. In October 1997, PHFG retained MB&D to provide certain financial
advisory and investment banking services to PHFG in connection with the Merger,
including the rendering of an opinion with respect to the fairness of the
Exchange Ratio from a financial point of view to PHFG shareholders. MB&D was
retained based on its qualifications and experience in the financial analysis of
banking and thrift institutions, knowledge of the Maine, Massachusetts and New
Hampshire banking markets in particular and New England banking markets in
general, and its extensive experience with merger and acquisition transactions
involving banking institutions. MB&D was retained by PHFG after the basic terms
of the Agreement had been established by the parties and, as a result, MB&D did
not participate in any negotiations leading to the Exchange Ratio.
MB&D was retained by the PHFG Board as an independent contractor to act as
financial advisor to PHFG with respect to the Merger. In the ordinary course of
its business, MB&D may from time to time have long or short positions in, and
buy or sell, equity securities or options on securities of PHFG and CFX. In
addition, as part of its ongoing financial advisory business, MB&D had
previously entered into, and maintained, a non-exclusive financial advisory
relationship with CFX in 1995. This contractual relationship was terminated by
mutual agreement in 1996 as MB&D represented The Safety Fund Corporation in
connection with its merger with and into CFX. Subsequently, in March 1997, MB&D
represented Community in connection with its merger with and into CFX. In the
context of the Merger, MB&D rendered financial advisory services exclusively to
PHFG.
On October 27, 1997, at the meeting at which the PHFG Board approved and
adopted the Agreement and the transactions contemplated thereby, MB&D rendered
its oral opinion to the PHFG Board (which was subsequently confirmed in writing)
that, as of such date, the Exchange Ratio was fair to PHFG shareholders from a
financial point of view. That opinion was updated as of the date of this
Prospectus/Joint Proxy Statement.
THE FULL TEXT OF THE OPINION OF MB&D WHICH SETS FORTH A DESCRIPTION OF THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE
REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROSPECTUS/JOINT PROXY STATEMENT AS ANNEX
V AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS ARE URGED TO READ THE
OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF THE OPINION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. MB&D'S OPINION WAS
NECESSARILY BASED UPON CONDITIONS AS THEY EXISTED AT THE TIME OF THE OPINION AND
SHOULD BE EVALUATED AS OF THE DATE OF THE OPINION AND THE INFORMATION MADE
AVAILABLE TO MB&D THROUGH SUCH DATE.
MB&D'S OPINION IS DIRECTED TO THE PHFG BOARD AND ADDRESSES ONLY THE
EXCHANGE RATIO. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION TO PROCEED
WITH THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY PHFG SHAREHOLDER
AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE PHFG SPECIAL MEETING WITH RESPECT
TO THE MERGER OR ANY OTHER MATTER RELATED THERETO.
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 PHFG
shareholders; (ii) reviewed publicly available business and financial
information with respect to both PHFG and CFX and certain internal financial
information and financial projections prepared by the managements of PHFG and
CFX; (iii) held discussions with members of the senior management of PHFG and
the PHFG Board concerning the past and current results of operations of PHFG,
its current financial condition and management's opinion of its future
prospects; (iv) reviewed the historical reported price and record of trading
volume for both the PHFG Common Stock and the CFX Common Stock; (v) held
discussions with executive management of CFX concerning the current and past
results of operations of CFX, its current financial condition and management's
opinion of its
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future prospects; (vi) considered the current state of and future prospects for
the economies of Maine, Massachusetts and New Hampshire generally and the
relevant market areas for PHFG and CFX in particular; (vii) reviewed the
specific acquisition analysis models employed by MB&D to evaluate the potential
business combination with CFX; (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.
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 bank 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 PHFG and CFX, including the adequacy of the reserve for loan
losses established by each company, and does not assume any responsibility for
the independent verification of such information. In the course of rendering its
opinion, MB&D has not completed any independent valuation or appraisal of any of
the assets or liabilities of PHFG or CFX and has not been provided with any such
valuations or appraisals from any other source. 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 CFX and
PHFG as to the most likely future performance of their respective companies.
The following is a summary of material analyses presented by MB&D to the
PHFG Board in connection with its October 27, 1997 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 matters considered by MB&D
in arriving at its opinion, although it describes all material analyses
performed by MB&D. 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. Consequently, 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 feels 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 PHFG or CFX. 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.
Analysis of the Anticipated Merger and the Exchange Ratio in Relation to
CFX. The anticipated consideration to be paid in the Merger for each
outstanding share of CFX Common Stock is 0.667 of a share of PHFG Common Stock.
As provided in the Agreement, the Agreement may be terminated by CFX under
certain circumstances and, in such event, the Exchange Ratio may be adjusted in
the discretion of PHFG according to a formula described therein, in which case
CFX's right to terminate under the specified circumstances shall no longer be
applicable. See " -- Termination and Amendment."
When valued at $42.56, the closing bid price of the PHFG Common Stock on
October 24, 1997, the last business day preceding announcement of the Merger, as
well as at $41.90, the 20-day average closing bid price of the PHFG Common Stock
computed through October 24, 1997, the consideration represents the following
transaction multiples:
- Transaction Value: $28.39 per share of CFX Common Stock based upon the
single-day PHFG closing bid price on October 24, 1997. Based upon the
20-day average closing bid price for the PHFG Common Stock for the period
ended October 24, 1997, the transaction value is $27.95 per share of CFX
Common Stock.
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- Multiple of Earnings based upon the October 24, 1997 PHFG single-day
closing bid price: 21.7 times CFX's annualized earnings per share,
adjusted to remove one-time merger expenses, for the nine months ended
September 30, 1997.
- Multiple of Earnings based upon the 20-day average closing bid price for
PHFG for the period ended October 24, 1997: 21.3 times CFX's annualized
earnings per share, adjusted to remove one-time merger expenses, for the
nine months ended September 30, 1997.
- Multiple of Tangible Book Value based upon the October 24, 1997 PHFG
single-day closing bid price: 2.87 times CFX's tangible book value per
share as of September 30, 1997.
- Multiple of Tangible Book Value based upon the 20-day average closing bid
price for PHFG for the period ended October 24, 1997: 2.83 times CFX's
tangible book value per share as of September 30, 1997.
- Multiple of Accounting Book Value based upon the October 24, 1997 PHFG
single day closing bid price: 2.77 times CFX's book value per share as
of September 30, 1997.
- Multiple of Accounting Book Value based upon the 20-day average closing
price for PHFG for the period ended October 24, 1997: 2.73 times CFX's
book value per share as of June 30, 1997.
- Multiples of CFX's Market Value based upon the October 24, 1997 PHFG
single-day closing bid price: The approximate $28.39 in market value of
the consideration for each share of CFX Common Stock, based upon the PHFG
closing bid price on October 24, 1997, represents a 25.1% premium over
the closing trade price of the CFX Common Stock reported on the AMEX on
October 24, 1997.
- Multiples of CFX's Market Value based upon the 20-day average closing
price for PHFG for the period ended October 24, 1997: The approximate
$27.95 in market value of the consideration for each share of CFX Common
Stock, based upon the PHFG 20-day average closing bid price for the
period ended on October 24, 1997, represents a 23.2% premium over the
closing trade price of the CFX Common Stock reported on the AMEX on
October 24, 1997.
Stock Trading Analysis. MB&D examined the historical trading prices,
volumes, price/book values and price/earnings multiples of the PHFG Common Stock
and the CFX Common Stock to the stocks of other select publicly-traded banking
institutions.
Acquisition Price/Exchange Ratio Analysis. MB&D reviewed a range of
possible acquisition prices, with resulting exchange ratios, and the possible
pro forma financial impact of those varying exchange ratios on PHFG using
performance assumptions provided by the managements of PHFG and CFX.
Specific Acquisition Analysis. MB&D employs proprietary analytic models to
examine hypothetical transactions involving banking and/or thrift companies. The
models involve the use of forecast earnings data, selected current period
balance sheet, fully diluted common share information and income statement data,
current and historic 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 combined uses of common equity, cash, debt or other securities,
to fund a transaction) to evaluate a hypothetical 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 while employing a specified transaction
structure. The models also permit evaluation of various levels of potential
non-interest expense savings which might be achieved and potential
implementation timetables for such savings as well as the possibility of revenue
enhancement opportunities which may arise in a hypothetical transaction. The
models also permit an examination of pro forma capital adequacy.
In this transaction, MB&D evaluated an exchange ratio of 0.667 of a share
of PHFG Common Stock for each share of CFX Common Stock in a common stock merger
transaction which is to be accounted for as a pooling of interests. MB&D
believes that the proposed transaction is financially feasible from an earnings
per share dilution perspective, generating prospective earnings per share
dilution which can be eliminated by a
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reduction of slightly less than 25% of the annualized non-interest expense of
CFX. PHFG management believes that this reduction of expenses is an achievable
objective for the combined PHFG and CFX and that the transaction can become
accretive to the prospective earnings per share of PHFG during the first twelve
months of combined operations following consummation of the Merger. See
"Management and Operations of PHFG after the Merger."
Based on its financial analysis of the Merger, MB&D concluded that the pro
forma capitalization of PHFG will be adequate after consummation of the Merger.
Impact Analysis. MB&D analyzed the Merger in terms of its pro forma effect
on PHFG's internally-projected earnings per share, book value, tangible book
value and capital ratios. MB&D based its analysis and review on PHFG's and CFX's
projected 1997 and 1998 earnings and cost savings, revenue enhancements and
leveraging opportunities projected by PHFG management. Based upon the projected
earnings provided by PHFG and CFX and an exchange ratio of 0.667, the analysis
showed that the acquisition, excluding one-time transaction related expenses,
and including certain consolidation economies, would be accretive to PHFG's
projected earnings per share for the first four combined fiscal quarters after
the transaction's consummation. Based upon PHFG's and CFX's balance sheets at
September 30, 1997 and including adjustments for PHFG's acquisition of Atlantic
on October 1, 1997, the Merger would be accretive to PHFG's tangible book value
by 7.0% and would increase PHFG's leverage ratio by 98 basis points on a pro
forma basis. Actual results may vary materially from pro forma model results and
projections.
Analysis of Comparable Transactions. MB&D is reluctant to place undue
emphasis on "comparables analysis" as a valuation methodology due to what it
considers to be inherent limitations of the process, which renders application
of the results to specific cases questionable. It has observed that such
analyses as performed by some industry observers and financial advisors often
fail 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 comparables are
doing business. Comparables analysis also rarely seems to take into
consideration the degree or absence of facilities overlap between the acquiror'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 serious limitations and
should not be relied upon to any material extent by members of management, a
board of directors or shareholders in considering the merits of a proposed
transaction.
Nevertheless, in the course of its analysis of the proposed Merger, MB&D
reviewed two universes of publicly-announced transactions in the financial
institutions industry in which either a savings bank or thrift (or their
respective holding companies) were acquired by another financial institution.
These transactions were announced after January 1, 1997 and prior to October 24,
1997. In the first universe, all of the examined transactions involved entities
doing business in New England. In the second universe, select transactions
involving companies doing business in the eastern and central states were used.
The first universe was comprised of the following 14 New England
transactions announced in 1997: Eastern Bank Corp.'s acquisition of Emerald Isle
Bancorp, New England Community's acquisition of Community Savings Bank, People's
Bank's acquisition of Norwich Financial Corp., Hubco, Inc.'s acquisition of The
Bank of Southington, SIS Bancorp's acquisition of Glastonbury Bank & Trust Co.,
North Fork Bancorp.'s acquisition of Branford Savings Bank, PHFG's acquisition
of Atlantic, Granite State Bankshares, Inc.'s acquisition of Primary Bank,
Citizens Financial's acquisition of BNH Bancshares, CFX's acquisition of
Community, MASSBANK Corp.'s acquisition of Glendale Co-op Bank, New England
Community's
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acquisition of First Bank of West Hartford, CFX's acquisition of Portsmouth and
Eagle Financial Corp.'s acquisition of MidConn Bank.
Within the group of 14 New England transactions announced in 1997, for the
six transactions announced after June 30, 1997, the median multiple of tangible
book value paid by the acquiror was 223.5%, the maximum multiple paid was 239.5%
and the minimum multiple was 111.0%. These statistics can be compared to
multiples derived using the indicated value as of October 24, 1997 of 287% based
upon the nominal present value of the fixed Exchange Ratio of approximately
$28.39 based upon the closing bid price of the PHFG Common Stock on October 24,
1997. Based upon the trailing 20-day average closing bid price of the PHFG
Common Stock through October 24, 1997, the same ratio was 282.5% using the
nominal present value of the fixed Exchange Ratio of approximately $27.95.
Within the group of 14 New England transactions announced in 1997, for the
eight transactions announced before June 30, 1997, the median multiple of
tangible book value paid by the acquiror was 200.0%, the maximum multiple paid
was 227.8% and the minimum multiple was 115.5%. These statistics can be compared
to multiples derived using the indicated value as of October 24, 1997 of 287%
based upon the nominal present value of the fixed Exchange Ratio of
approximately $28.39 based upon the closing bid price of PHFG on October 24,
1997. Based upon the trailing 20-day average closing bid price of the PHFG
Common Stock through October 24, 1997, the same ratio was 283% using the nominal
present value of the fixed Exchange Ratio of approximately $27.95.
With respect to trailing 12-months earnings multiples for this same data
sample of 14 New England transactions announced in 1997, for the six
transactions announced after June 30, 1997, the median price/earnings multiple
paid was 19.2, the maximum multiple was 27.3 and the minimum multiple was 13.9.
These statistics can be compared to multiples derived using the indicated value
on October 24, 1997, which can be derived for the proposed acquisition of CFX by
PHFG as 21.5 based upon the nominal present value of the fixed Exchange Ratio of
approximately $28.39 based upon the closing price of PHFG on October 24, 1997
and 21.2 based upon the nominal present value of the fixed Exchange Ratio of
approximately $27.95 based upon the trailing 20-day average closing price of the
PHFG Common Stock through October 24, 1997.
With respect to trailing 12-months earnings multiples for this same data
sample of 14 New England transactions announced in 1997, for the eight
transactions announced before June 30, 1997, the median price/earnings multiple
paid was 20.1, the maximum multiple was 35.2 and the minimum multiple was 13.9.
These statistics can be compared to multiples derived using the indicated value
on October 24, 1997, which can be derived for the proposed acquisition of CFX by
PHFG as 21.5 based upon the nominal present value of the fixed Exchange Ratio of
approximately $28.39 based upon the closing bid price of the PHFG Common Stock
on October 24, 1997 and 21.2 based upon the nominal present value of the fixed
Exchange Ratio of approximately $27.95 based upon the trailing 20-day average
closing bid price of the PHFG Common Stock through October 24, 1997.
The second universe was comprised of the following 14 eastern and central
state transactions announced in 1997: North Fork Bancorp's acquisition of New
York Bancorp, Sovereign Bancorp's acquisition of ML Bancorp, NationsBank Corp.'s
acquisition of Barnett Banks Inc., Fulton Financial's acquisition of Keystone
Heritage Group, Union Planters Corp.'s acquisition of Capital Bancorp, First
Union Corp.'s acquisition of Signet Banking Corp., Charter One Financial's
acquisition of RCSB Financial, Huntington Bancshares' acquisition of First
Michigan Bank Corp., Astoria Financial Corp.'s acquisition of Greater NY Savings
Bank, Marshall & Ilsley's acquisition of Security Capital Corp., Sovereign
Bancorp's acquisition of Banker's Corp., Summit Bancorp's acquisition of
Collective Bancorp, CCB Financial Corp.'s acquisition of American Federal Bank
FSB and Allied Irish Banks' acquisition of Dauphin Deposit Corp.
Within the group of 14 eastern and central state transactions announced in
1997, the median multiple of tangible book value paid by the acquiror was 235%,
the maximum multiple paid was 481% and the minimum multiple was 161%. These
statistics can be compared to multiples derived using the indicated value as of
October 24, 1997, which can be derived for the proposed acquisition of CFX by
PHFG as 287% based upon the nominal present value of the fixed Exchange Ratio of
approximately $28.39 based upon the closing bid price of the PHFG Common Stock
on October 24, 1997. Based upon the trailing 20-day average closing bid
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price of the PHFG Common Stock through October 24, 1997, the same ratio was
282.5% using the nominal present value of the fixed Exchange Ratio of
approximately $27.95.
With respect to trailing 12-months earnings multiples for this same data
sample of 14 eastern and central state transactions announced in 1997, the
median price/earnings multiple paid was 20.7 and the maximum multiple was 34.6,
while the minimum multiple was 15.3. These statistics can be compared to
multiples derived using the indicated values on October 24, 1997, which can be
derived for the proposed acquisition of CFX by PHFG as 21.5 based upon the
nominal present value of the fixed Exchange Ratio of approximately $28.39 based
upon the closing bid price of the PHFG Common Stock on October 24, 1997 and 21.2
based upon the nominal present value of the fixed Exchange Ratio of
approximately $27.95 based upon the 20-day average closing bid price of the PHFG
Common Stock through October 24, 1997.
For the reasons detailed above, MB&D does not believe that the comparables
analysis set forth above should be viewed as the most meaningful analytic tool
with respect to the fairness of the Exchange Ratio to the shareholders of PHFG
from a financial point of view.
In connection with its opinion dated the date of this Prospectus/Joint
Proxy Statement, MB&D confirmed the appropriateness of its reliance on the
analysis used to render its October 27, 1997 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 MB&D with respect to the
investigations made or procedures followed by MB&D in rendering its opinions.
PHFG and MB&D have entered into a letter agreement, dated October 27, 1997
(the "MB&D Engagement Letter"), relating to the services to be provided by MB&D
in connection with the Merger. Pursuant to the MB&D Engagement Letter, PHFG
agreed to pay MB&D $60,000 upon execution of the Agreement and an additional
$90,000 upon mailing of this Prospectus/Joint Proxy Statement and the
accompanying MB&D fairness opinion. In the MB&D Engagement Letter, PHFG also
agreed to reimburse MB&D for its reasonable out-of-pocket expenses and to
indemnify against certain liabilities, including liabilities under the federal
securities laws.
EXCHANGE OF CFX COMMON STOCK CERTIFICATES
At the Effective Time, each holder of a certificate or certificates
theretofore evidencing issued and outstanding shares of CFX 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 CFX Common Stock theretofore represented by the certificate or
certificates so surrendered shall have been converted by virtue of the Merger.
As promptly as practicable after the Effective Time, the Exchange Agent shall
mail to each holder of record of an outstanding certificate which immediately
prior to the Effective Time evidenced shares of CFX Common Stock, and which is
to be exchanged for PHFG Common Stock by virtue of the Merger, a form of letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such certificate shall pass, only upon delivery of such
certificate to the Exchange Agent) advising such holder of the terms of the
exchange effected by the Merger and of the procedure for surrendering to the
Exchange Agent such certificate in exchange for a certificate or certificates
evidencing PHFG Common Stock. Upon surrender to the Exchange Agent of one or
more certificates evidencing shares of CFX 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 CFX Common Stock previously represented
by such certificate or certificates surrendered shall have been converted
pursuant to the Agreement, provided that certificates evidencing CFX Common
Stock surrendered for exchange by any affiliate of CFX (as defined in the
Agreement) shall not be exchanged for certificates representing shares of PHFG
Common Stock in accordance with the terms of the Agreement until PHFG has
received a letter agreement from such person contemplated by the Agreement and
which generally is intended to ensure compliance with applicable securities laws
and that the Merger will qualify as a pooling of interests under generally
accepted accounting
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principles. PHFG shall be entitled, after the Effective Time, to treat
certificates representing shares of CFX Common Stock as evidencing ownership of
the number of full shares of PHFG Common Stock into which the shares of CFX
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 CFX of certificates representing shares of CFX Common Stock. If any such
certificates are presented to CFX or the transfer agent for the CFX 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 his or her certificate or certificates
representing shares of CFX Common Stock in exchange for a certificate or
certificates evidencing shares of PHFG Common Stock, at which time such
dividends shall be remitted to such person, without interest.
No fractional shares of PHFG Common Stock shall be issued in the Merger to
holders of shares of CFX Common Stock. Each holder of shares of CFX 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 CFX 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 the Nasdaq Stock Market's National
Market on the business day preceding the Effective Time.
ASSUMPTION OF CFX STOCK OPTIONS
At the Effective Time, each CFX Option which is then outstanding, whether
or not exercisable, shall cease to represent a right to acquire shares of CFX
Common Stock and shall be converted automatically into an option to purchase
shares of PHFG Common Stock, and PHFG shall assume each CFX Option, in
accordance with the terms of the applicable CFX stock option plan (inclusive of
certain plans of acquired companies) and stock option agreement by which it is
evidenced, except that from and after the Effective Time, (i) PHFG and the PHFG
Board or a duly authorized committee thereof shall be substituted for CFX and
the CFX Board or duly authorized committee thereof administering such CFX stock
option plan, (ii) each CFX 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 CFX Option shall be equal to the number of shares of CFX Common
Stock subject to such CFX 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 CFX Option
shall be adjusted by dividing the per share exercise price under each such CFX
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 CFX Option which is an "incentive stock option" shall be adjusted
as required by Section 424 of the Code. PHFG also has agreed to register the
shares of PHFG Common Stock issuable upon exercise of the foregoing PHFG stock
options under the Securities Act.
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 CFX) necessary to authorize the execution
and delivery of the Agreement and the Bank Agreements and consummation of the
transactions contemplated thereby shall have been duly and validly taken; (ii)
the receipt of all necessary regulatory approvals and consents required to
consummate the Merger and the Bank Mergers by any governmental authority, and
the expiration of all notice periods and waiting periods with
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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 CFX
or their respective subsidiaries shall be subject to any statute, rule,
regulation, order or decree which prohibits, restricts or makes illegal the
consummation of the Merger or the Bank Mergers and there shall be no pending
proceeding initiated by a governmental or regulatory authority to seek an order,
injunction or decree which prevents consummation of the Merger or a Bank Merger;
(iv) the Registration Statement shall have become effective under the Securities
Act, and PHFG shall have received all permits, authorizations or exemptions
necessary under all state securities laws to issue PHFG Common Stock in
connection with the Merger, and neither the Registration Statement nor any such
permit, authorization or exemption shall be subject to a stop order or
threatened stop order by any governmental authority; (v) the shares of PHFG
Common Stock to be issued in connection with the Merger shall have been approved
for listing on the Nasdaq Stock Market's National Market; (vi) the independent
public accountants of PHFG shall have issued a letter dated as of the Effective
Time to the effect that the Merger shall be accounted for as a pooling of
interests under generally accepted accounting principles; and (vii) each of PHFG
and CFX shall have received an opinion of its respective counsel to the effect
that the Merger qualifies as a reorganization within the meaning of Section
368(a) of the Code and with respect to certain other related federal income tax
considerations (see "The Merger -- Certain Federal Income Tax Consequences").
In addition to the foregoing conditions, the obligations of PHFG 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 CFX 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 CFX; (iii) the receipt of a certificate from specified officers
of CFX with respect to compliance with the conditions relating to (i) and (ii)
immediately above as set forth in the Agreement; (iv) the receipt of certain
legal opinions from CFX's legal counsel; and (v) the receipt by PHFG of such
certificates of CFX's officers or others and such other documents to evidence
fulfillment of the conditions relating to CFX as PHFG may reasonably request.
Any of the foregoing conditions may be waived by PHFG.
In addition to the other conditions set forth above, CFX'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; (iii) the receipt of a certificate from specified
officers of PHFG with respect to compliance with the conditions relating to (i)
and (ii) immediately above as set forth in the Agreement; (iv) the receipt of
certain legal opinions from legal counsel to PHFG; and (v) the receipt by CFX of
such certificates of PHFG's officers or others and such other documents to
evidence fulfillment of the conditions relating to them as CFX may reasonably
request. Any of the foregoing conditions may be waived by CFX.
REGULATORY APPROVALS
Consummation of the Merger is subject to prior receipt of all required
approvals and consents of the Merger and the Bank Mergers or waivers thereof by
all applicable federal and state regulatory authorities. In order to consummate
the Merger and the Bank Mergers, PHFG or one of its banking subsidiaries, as
applicable, must obtain the prior approval, consent or waiver, as applicable, of
the FRB, the FDIC, the OTS, the Maine Superintendent, the New Hampshire Bank
Commissioner 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 the BHCA,
unless waived by the FRB in accordance with Regulation Y under the BHCA, and the
Bank Mergers are subject to the prior approval of
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the FDIC or the OTS, as applicable, under the Bank Merger Act ("BMA") provisions
of the Federal Deposit Insurance Act. Pursuant to the applicable provisions of
the BHCA and the BMA, the FRB may not approve the Merger and the FDIC or OTS may
not approve a Bank Merger if (i) such transaction would result in a monopoly or
would be in furtherance of any combination or conspiracy to monopolize or
attempt to monopolize the business of banking in any part of the United States;
or (ii) the effect of such transaction, in any section of the country, may be to
substantially lessen competition, or tend to create a monopoly, or in any other
manner to restrain trade, in each case unless the FRB, the FDIC or the OTS, as
applicable, finds that the anticompetitive effects of the proposed transaction
are clearly outweighed in the public interests by the probable effect of the
transaction in meeting the convenience and needs of the community to be served.
In conducting its review of any application for approval, each of the FRB, the
FDIC and the OTS is required to consider whether the financial and managerial
resources of the acquiring bank holding company and acquiring bank are adequate
(including consideration by a variety of means of the competence, experience and
integrity of the applicant's directors, officers and principal stockholders and
compliance with, among other things, fair lending laws). Each of the FRB, the
FDIC and the OTS has the authority to deny an application if it concludes that
the combined organization would have an inadequate capital position or if the
acquiring organization does not meet the requirements of the Community
Reinvestment Act of 1977, as amended.
Each of the BHCA and the BMA provides that a transaction approved by the
applicable federal banking agency generally may not be consummated until 30 days
after approval by such agency. If the U.S. Department of Justice and the
relevant agency otherwise agree, this 30-day period may be reduced to as few as
15 days. During such period, the U.S. Department of Justice may commence a legal
action challenging the transaction under the antitrust laws. The commencement of
an action would stay the effectiveness of the approval of the federal banking
agency unless a court specifically orders otherwise. If, however, the U.S.
Department of Justice does not commence a legal action during such waiting
period, it may not thereafter challenge the transaction except in an action
commenced under Section 2 of the Sherman Antitrust Act.
The approval of the Maine Superintendent is required for consummation of
the Merger under Part 10 of Title 9-B of the Maine Revised Statutes Annotated.
The Maine 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 Maine Superintendent in this regard are substantially similar
to those to be considered by federal banking agencies, as discussed above.
The New Hampshire Bank Commissioner must approve the merger of CFX Bank
with and into BNH under Section 388:9 of the New Hampshire Revised Statutes
Annotated ("NHRSA"). The New Hampshire Bank Commissioner may conduct such
investigation as he deems necessary to find whether such Bank Merger will
promote the public convenience and advantage and the interest of the merging
institutions and their shareholders and depositors, and whether such Bank Merger
can be effected without reducing the amount standing to the credit of any
depositor upon consummation thereof and without the imposition of restrictions
on the withdrawal of funds by depositors. In connection with such transaction,
the New Hampshire Bank Commissioner must approve BNH's operation of the offices
of CFX Bank after the merger of CFX Bank with and into BNH pursuant to NHRSA
Section 384-B:2,II, which generally cannot be granted if it would violate the
20% deposit limitation contained in this section and described below. In making
a determination under NHRSA Section 384-B:2,II, the New Hampshire Bank
Commissioner shall take into consideration (i) the convenience, needs and
welfare of the communities and area concerned, (ii) the financial history of the
banks concerned, including the adequacy of their capital funds, (iii) the
prospects of the resulting bank, (iv) the character of the management of the
resulting bank and (v) whether or not the effect of granting approval would be
to expand the size of the bank and the extent of its business beyond limits
consistent with adequate and sound banking, the public interest and the
preservation of competition in the field of banking.
NHRSA Section 384:58,II generally provides that an acquisition of a New
Hampshire bank by an out-of-state bank holding company such as PHFG shall not be
permitted if it would result in violation of the deposit limitation contained in
NHRSA Section 384-B:3(2), unless waived by the New Hampshire Board of Trust
Company Incorporation ("NHBTCI") because it determines that it is in the best
interests of the State of New Hampshire. NHRSA Section 384-B:3(2) provides that
no bank holding company which controls two or
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more New Hampshire-chartered banks or national banks authorized to conduct
business in New Hampshire shall directly or indirectly acquire ownership or
control of any voting stock of any other such bank or national bank if upon such
acquisition the dollar volume of the total deposits in New Hampshire of the bank
holding company and all its affiliates would exceed 20% of the dollar volume of
total deposits in New Hampshire of all banks, national banks and federal savings
and loan associations in New Hampshire, as determined by the NHBTCI on the basis
of the most recent reports made by such institutions to their supervisory
authorities and available at the time of acquisition. In addition, NHRSA Section
384-B:2,II provides that a bank resulting from the merger of two New Hampshire
banks, such as the proposed merger of CFX Bank with and into BNH, may operate as
a branch office or offices the business of the other bank acquired in the
merger, provided, however, that the dollar volume of the total deposits of the
remaining bank at the time of the filing of its application for such branch
office or offices does not exceed 20% of the dollar volume of the total deposits
of all banks, national banks and federal savings and loan associations in New
Hampshire, as determined by the NHBTCI in the same manner set forth above. PHFG
believes that the specific language of Section 384-B:3(2) is not applicable to
the Merger and that the requirements of Section 384-B:2,II will be met in
connection with the merger of CFX Bank with and into BNH. There can be no
assurance, however, that New Hampshire authorities will agree with PHFG's views
in this regard and not require PHFG to divest deposits in New Hampshire in
connection with such transactions.
The Merger is subject to approval of the Massachusetts Board under Sections
2 and 4 of Chapter 167A of the Massachusetts General Laws Annotated.
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
the statutorily delineated local community of PHFG in Massachusetts, 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 (the "Massachusetts
Commissioner"), which shall be based upon the cost (not to include lost
opportunity costs) incurred in making funds available to the MHPF.
Applications have been, or in the case of the FRB will be, filed with
applicable regulatory authorities for the required approval, consent or waiver
of approval of the Merger and the Bank Mergers. Although neither PHFG nor CFX is
aware of any basis for disapproving the Merger and the Bank Mergers, there can
be no assurance that all requisite approvals, consents or waivers will be
obtained, that such approvals, consents or waivers will be received on a timely
basis or that such approvals, consents or waivers 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 PHFG to terminate the
Agreement.
BUSINESS PENDING THE MERGER
The Agreement contains certain covenants of the parties regarding the
conduct of their respective businesses pending consummation of the Merger.
Pending consummation of the Merger, CFX and its subsidiaries generally are
required to conduct their respective businesses in the ordinary course
consistent with past practice and to use all reasonable efforts to preserve
their respective business organizations intact. In addition, CFX shall not, and
shall cause each CFX subsidiary not to, among other things, declare any dividend
on the CFX Common Stock, except for regular quarterly cash dividends which are
not in excess of $.22 per share of CFX Common Stock (which, if consistent with
pooling of interests accounting treatment for the
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Merger, generally shall have the same record and payment dates as the record and
payment dates for quarterly dividends on the PHFG Common Stock); issue any
shares of its capital stock, other than upon exercise of outstanding options to
purchase CFX Common Stock, pursuant to the CFX Employee Stock Purchase Plan for
any offering period pursuant thereto ended on or before December 31, 1997 and
pursuant to the CFX Option Agreement; effect any recapitalization,
reclassification, stock dividend, stock split or like change in capitalization;
take specified actions with respect to its business, including without
limitation increase the rate of compensation of its directors, officers or
employees, enter into or modify any employee benefit plan, change its methods of
accounting or tax reporting, purchase or sell assets, make capital expenditures,
enter into contracts with respect to branch offices, acquire any business or
entity, enter into any new line of business and enter into futures, options and
similar contracts, except in the case of each of the foregoing as permitted by
the Agreement; amend its articles and bylaws; take any action that would impede
the Agreement from qualifying for pooling of interests accounting or as a
reorganization under the Code; take any action that would result in any of the
representations and warranties of CFX not being true and correct in any material
respect at or prior to the Effective Time or in any of the conditions to the
Merger set forth in the Agreement not being satisfied; or agree to do any of the
foregoing.
The Agreement also provides that pending consummation of the Merger PHFG
and its subsidiaries shall conduct their respective businesses in substantially
the same manner as theretofore conducted, provided that nothing contained
therein shall be deemed to prevent PHFG from effecting other acquisitions or
entering into new lines of business. In addition, PHFG shall not, and shall
cause each subsidiary which is a Significant Subsidiary (as defined in the
Agreement) not to, declare any dividend on the PHFG Common Stock, except for
regular quarterly cash dividends which are not in excess of $.25 per share of
PHFG Common Stock; amend its articles and bylaws in a manner which would
adversely affect the PHFG Common Stock or its ability to consummate the
transactions contemplated by the Agreement; take any action that would impede
the Merger from qualifying for pooling of interests accounting or as a
reorganization under the Code; take any action that would result in any of the
representations and warranties of not being true and correct in any material
respect at or prior to the Effective Time or in any of the conditions to the
Merger set forth in the Agreement not being satisfied; or agree to do any of the
foregoing.
NO SOLICITATION
The Agreement provides that CFX shall not solicit or encourage any
inquiries relating to, or the making of any proposal which constitutes, an
Acquisition Transaction (as defined in the Agreement) or, except to the extent
legally required for the discharge of the fiduciary duties of the Board of
Directors of CFX, as advised by counsel, (i) recommend or endorse an Acquisition
Transaction, (ii) participate in any discussions or negotiations regarding an
Acquisition Transaction or (iii) provide any third party with any nonpublic
information in connection with any inquiry or proposal relating to an
Acquisition Transaction (other than in each case with or to PHFG or an affiliate
of PHFG). The term "Acquisition Transaction" generally is defined in the
Agreement to mean any merger or consolidation involving CFX or a subsidiary of
CFX, a purchase, lease or other acquisition of all or a substantial portion of
the assets and liabilities of CFX or a subsidiary of CFX (other than CFX Funding
L.L.C.) or a purchase or other acquisition of an interest in any class or series
of equity securities of CFX (except as otherwise expressly permitted by the
Agreement) or a subsidiary of CFX.
EFFECTIVE TIME OF THE MERGER
The Effective Time of the Merger shall be the date and time of the filing
of (i) articles of merger with the Secretary of State of the State of Maine
pursuant to the MBCA and (ii) articles of merger with the Secretary of State of
the State of New Hampshire pursuant to the NHBCA, unless a different date and
time is specified as the effective time in such Articles of Merger. Articles of
Merger will be filed only after the receipt of all requisite regulatory
approvals of the Merger and the Bank Mergers, approval of the Agreement by the
requisite votes of the shareholders of PHFG and CFX and the satisfaction or
waiver of all other conditions to the Merger and the Bank Mergers set forth in
the Agreement.
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A closing (the "Closing") shall take place immediately prior to the
Effective Time on the fifth business day following the satisfaction or waiver
(to the extent permitted) of all the conditions to consummation of the Merger
specified in the Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the Closing), or on such
other date as the parties may mutually agree upon.
TERMINATION AND AMENDMENT
The Agreement may be terminated (i) by mutual consent of the parties; (ii)
by a non-breaching party if the other party (a) breaches any material covenants
or undertakings contained in the Agreement or (b) materially breaches any
representations or warranties contained in the Agreement, in each case if such
breach has not been cured within thirty days after notice thereof from the
terminating party; (iii) by either party if certain required regulatory
approvals or consents are not obtained; (iv) by either party if either PHFG's or
CFX's shareholders do not approve the Agreement, unless such failure to approve
is caused by the failure of the party seeking such termination to materially
perform its obligations under the Agreement; (v) by either PHFG or CFX if the
Merger is not consummated by October 27, 1998, unless the failure to consummate
the Merger is due to a breach by the party seeking such termination of its
obligations under the Agreement; and (vi) by either party if the Board of
Directors of the other party has withdrawn, modified or changed in a manner
adverse to the terminating party its recommendation to its stockholders to
approve the Agreement.
CFX also may terminate the Agreement if during the three-day period
commencing on the date on which the last required governmental approval of the
Merger and the Bank Mergers is received (without regard to any waiting period in
respect thereof) (the "Determination Date") it so notifies PHFG and both of the
following conditions are applicable:
(i) the number (the "PHFG Ratio") obtained by dividing the average
daily per share closing prices of the PHFG Common Stock during the 20
trading days preceding the Determination Date (the "Average Closing Price")
by $43.13, the per share closing price of the PHFG Common Stock on October
24, 1997, the last trading day immediately preceding the date of the first
public announcement of the Agreement (the "Starting Price"), is less than
.80; and
(ii) the PHFG Ratio is less than (x) the number obtained by dividing
the weighted average daily per share closing prices of the common stocks of
22 publicly-traded bank holding companies (the "Index Group") during the 20
trading days preceding the Determination Date (the "Final Index Price") by
$43.23, the weighted average daily per share closing prices of the common
stocks of each company comprising the Index Group on October 24, 1997, the
last trading day immediately preceding the date of the first public
announcement of the Agreement (the "Initial Index Price"), less (y) 0.15
(the "Index Ratio").
If both of the foregoing conditions are applicable, CFX has the right to
terminate the Agreement. The CFX Board has made no decision as to whether it
would exercise its right to terminate the Agreement under such circumstances.
Any such decision will be made by the CFX Board in light of the circumstances
existing at the time that the CFX Board has the opportunity to make such an
election, if any. Prior to making any determination to terminate the Agreement,
the CFX Board would consult with its financial and other advisers and would
consider all financial and other information it deemed relevant to its decision.
The matter would not, however, be resubmitted to shareholders. If CFX elected
not to exercise its right to terminate the Agreement, the Exchange Ratio would
remain 0.667 and the dollar value of the consideration which the shareholders of
CFX would receive for each share of CFX Common Stock would be the value of 0.667
of a share of PHFG Common Stock at the Effective Time.
If CFX elects to exercise its right to terminate the Agreement, it must
give notice to PHFG during the three-day period commencing with the
Determination Date. During the three-day period after receipt of such notice,
PHFG has the option to increase the consideration payable to CFX shareholders by
adjusting the Exchange Ratio in the manner described below. PHFG is under no
obligation to adjust the Exchange Ratio and there can be no assurance that PHFG
would elect to adjust the Exchange Ratio if CFX were to exercise its option to
terminate the Agreement. Any such decision would be made by PHFG in light of the
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circumstances existing at the time PHFG has the opportunity to make such an
election. If PHFG elects to adjust the Exchange Ratio, it must give CFX prompt
notice of that election and the adjusted Exchange Ratio, in which case CFX will
not have any right to terminate the Agreement as a result of the above-described
circumstances.
The operation of the conditions permitting CFX to terminate the Agreement
based on a decrease in the market price of the PHFG Common Stock reflects the
parties' agreement that shareholders of CFX would assume the risk of a modest
decline in value of the PHFG Common Stock (equal to up to a 20% decline from the
PHFG Starting Price) under any circumstances and that such shareholders would
assume the risk of a more significant decline in value of the PHFG Common Stock
unless the percentage decline in the value of the PHFG Common Stock from the
Starting Date to the Determination Date represents a more than 15% decrease in
the weighted average price of the common stocks of the Index Group during such
period. The premise of this agreement is that declines in value of the PHFG
Common Stock which are in accordance with an index of comparable publicly-traded
stocks is indicative of a broad-based change in market and economic conditions
affecting PHFG (as well as CFX) rather than factors which are specifically
attributable to the value of the PHFG Common Stock.
The operation and effect of the provisions of the Agreement dealing with a
decline in the market price of the PHFG Common Stock may be illustrated by the
following three scenarios:
(1) One scenario is that the Average Closing Price is below the
Starting Price of $43.13 but is not less than $34.50. Under such
circumstances the decline in the Starting Price would be 20% or less and
the PHFG Ratio would not be less than .80. As a result, there would be no
adjustment to the 0.667 Exchange Ratio and CFX would be obligated to
consummate the Merger regardless of the change in the weighted average
price of the common stocks of the Index Group (assuming all other
conditions to CFX's obligations were satisfied or waived).
(2) A second scenario is that the Average Closing Price declines to
less than $34.50 but does not decline by more than 15% of the weighted
average price of the common stocks of the Index Group. Under such
circumstances there would be no adjustment to the 0.667 Exchange Ratio and
CFX would be obligated to consummate the Merger (assuming all other
conditions to CFX's obligations were satisfied or waived).
For example, if the Average Closing Price was $32.00 and the Final
Index Price was $37.00, the PHFG Ratio ($32.00 / $43.13, or .74) would be
less than .80 but would not be less than the Index Ratio ($37.00 / $43.23,
less .15, or .71). The Exchange Ratio would remain 0.667 and CFX would be
obligated to consummate the Merger (assuming all other conditions to CFX's
obligations were satisfied or waived).
(3) A third scenario is that the Average Closing Price declines to
less than $34.50 and by more than 15% of the weighted average price of the
common stocks of the Index Group. Under such circumstances, CFX would have
the right but not the obligation to terminate the Agreement unless PHFG
elected to increase the Exchange Ratio to the lesser of (x) a number
(rounded to the nearest thousandth) obtained by dividing (A) the product of
the Starting Price, .80 and the Exchange Ratio by (B) the Average Closing
Price and (y) a number (rounded to the nearest thousandth) obtained by
dividing (A) the product of the Index Ratio and the Exchange Ratio by (B)
the PHFG Ratio.
For example, if the Average Closing Price was $32.00 and the Final
Index Price was $39.00, the PHFG Ratio ($32.00 / $43.13, or .74) would be
less than .80 and would be less than the Index Ratio ($39.00 / $43.23, less
.15, or .75). If CFX exercised its right to terminate the Agreement under
such circumstances, PHFG would have the option to increase the Exchange
Ratio to the lesser of (x) .7192 (the number determined by dividing $23.01
(the product of the $43.13 Starting Price, .80 and the 0.667 Exchange
Ratio) by the $32.00 Average Closing Price) and (y) .6762 (the number
determined by dividing .50 (the product of the .75 Index Ratio and the
0.667 Exchange Ratio) by .74 (the PHFG Ratio)). If PHFG exercised such
option, the Exchange Ratio would be .6762 and CFX would be
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obligated to consummate the Merger (assuming all other conditions to CFX's
obligations were satisfied or waived).
The Index Group is comprised of 22 publicly-traded bank holding companies.
These companies were selected by PHFG and CFX, with the assistance of their
respective financial advisers, because they were deemed to comprise a peer group
of institutions, although none of such companies are identical to PHFG in size,
location, financial condition and operations. For information relating to the
composition and weighting of the Index Group and other information relating to
the operation of the foregoing provisions, see Section 7.1(h) of the Agreement,
which is attached as Annex I to this Prospectus/Joint Proxy Statement.
If, between the date of the Agreement and the Effective Time, the shares of
PHFG Common Stock are 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 is declared with
a record date within said period, the Exchange Ratio shall be adjusted
accordingly.
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 CFX, 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
CFX's shareholders or otherwise materially adversely affects CFX shareholders
without further approval by those shareholders who are so affected.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of CFX may be deemed to have
interests in the Merger in addition to their interests as shareholders
generally. The CFX Board was aware of these factors and considered them, among
other matters, in approving the Agreement and the transactions contemplated
thereby.
Directors and Officers. Pursuant to the Agreement, PHFG agreed that at the
Effective Time (i) the directors of PHFG shall include five persons serving as
directors of CFX immediately prior to the Effective Time (including Peter J.
Baxter, President and Chief Executive Officer of CFX) designated by CFX and who
both meet the director qualification requirements set forth in the Bylaws of
PHFG and are otherwise acceptable to PHFG and (ii) Mr. Baxter shall be Vice
Chairman of the PHFG Board and an Executive Vice President and Chief Operating
Officer of PHFG. See "Management and Operations of PHFG after the Merger --
Board of Directors and Management Following the Merger."
Employment and Change of Control Agreements. Pursuant to the Agreement,
PHFG agreed to honor, and to cause its appropriate subsidiaries to honor,
various employment agreements and change-in-control agreements which have been
entered into by CFX and its subsidiaries, including the three-year employment
agreements, dated as of August 29, 1997, between CFX and each of Peter J.
Baxter, President and Chief Executive Officer of CFX, Mark A. Gavin, Executive
Vice President and Chief Operating Officer of CFX, Douglas Crichfield, Executive
Vice President of CFX, and Christopher W. Bramley, Executive Vice President of
CFX (collectively, the "Employment Agreements"). Pursuant to an Employment
Agreement, an executive officer shall be employed in a specified capacity for a
three-year period commencing on the effective date of the Employment Agreement,
which shall be extended automatically for one additional year on each annual
anniversary of such effective date unless either CFX or the executive gives
contrary written notice to the other in the required manner. The Employment
Agreements provide for the payment of specified benefits to an executive if
during the term of the Employment Agreement the executive's employment by CFX is
terminated (whether by CFX or the executive) upon the occurrence of or within 12
months after a Triggering Event, which is defined in the Employment Agreements
generally to include (i) termination by CFX of the employment of the executive
for any reason other than "cause," as defined, (ii) the assignment to the
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executive without his consent of any duties which are inconsistent in any
material respect with the executive's position, authority, duties or
responsibilities, (iii) a requirement by CFX that the executive be based at a
location that is more than 75 miles from the main office of CFX in anticipation
of or following a Change in Control (which is defined in a manner which would
include the Merger), (iv) the failure of the Company without the executive's
consent to continue specified employee benefits, (v) an election by CFX not to
permit the automatic annual renewal of the employment term as discussed above,
(vi) a material breach by CFX of the Employment Agreement which is not cured
after CFX receives written notice thereof and (vii) a reduction by CFX in the
executive's base salary. In the event that the executive's employment is
terminated upon the occurrence of or within 12 months after a Triggering Event,
(i) CFX shall make a lump sum cash payment to the executive in an amount equal
to 299% of the executive's base annual salary at the time the Triggering Event
occurs plus the amount of any discretionary bonuses paid by CFX to the executive
within the 12 months immediately preceding the occurrence of the Triggering
Event, (ii) CFX shall continue to provide to the executive for a three-year
period the executive's then-existing coverage under CFX's health, dental and
life insurance plans or, if continued coverage under such plans cannot be
provided, substantially equivalent coverage under alternative arrangements, and
(iii) any stock options granted to the executive shall become immediately
exercisable, and the executive may exercise any such option until the later of
the expiration of its original term or one year after the effective date of the
termination of the executive's employment (except in each case in this clause
(iii) as may adversely affect the application of the pooling of interests method
to a business combination in which CFX intends to use such method). The
Employment Agreements also provide that in the event the foregoing benefits are
subject to the 20% excise tax under Section 4999 of the Code, the Company shall
pay to the executive an additional amount (the "Gross-Up Payment") such that the
net amount retained by the executive from the Gross-Up Payment, after deduction
of any federal, state and local income taxes, excise tax and FICA and Medicare
withholdings taxes on the Gross-Up Payment, shall be equal to the Excise Tax on
the total benefits to be provided to the executive under his Employment
Agreement. It is estimated by CFX that as of December 31, 1997 the payments
payable to Messrs. Baxter, Gavin, Crichfield and Bramley in the event of a
termination of employment upon or following the Merger (exclusive of the
Gross-Up Payments) would amount to $1.2 million, $633,880, $678,141 and
$913,041, respectively. Gross-Up Payments are not deductible by an employer
corporation such as CFX or PHFG, as its successor, for federal income tax
purposes. Pursuant to agreements among PHFG, CFX and each of Messrs. Gavin and
Crichfield, $600,000 and $500,000, respectively, of the lump sum payments to be
made to these persons pursuant to the Employment Agreements upon termination of
their employment with CFX and PHFG following consummation of the Merger, less
required withholdings, were paid in late December 1997 in order to ensure the
deductibility by PHFG of payments to be made to these persons pursuant to the
Employment Agreements for federal income tax purposes.
CFX also entered into three-year change of control agreements with Edwin L.
Herbert, General Counsel of CFX, David Rasmussen, Chief Information Officer of
CFX, and Gregg R. Tewksbury, Chief Financial Officer of CFX. Pursuant to these
agreements, each of which is extended automatically for one additional year on
the annual anniversary thereof, CFX is required to make a lump sum cash payment
to the named employee if, within 12 months of the occurrence of a change in
control of CFX (which is defined in a manner that would include the Merger), the
employee loses his position by reason of discharge or demotion, or the employee
resigns following a substantial withholding, adverse alteration or reduction of
responsibility or compensation as existed immediately prior to the change in
control of CFX, in either case for reasons other than good cause. The amount of
the cash payment is a percentage (150% in the case of Mr. Herbert, 100% in the
case of Mr. Rasmussen and 200% in the case of Mr. Tewksbury) of the employee's
annual base salary plus the gross amount of the incentive payment paid to the
executive under CFX's 1997 Incentive Compensation Plan. The amounts payable to
Messrs. Herbert, Rasmussen and Tewksbury under the change of control agreements
would amount to $165,000, $167,000 and $238,500, respectively.
CFX also assumed the obligations of Safety Fund under an employment and
change of control agreement with Stephen Shirley that requires CFX to continue
paying to Mr. Shirley his annual base salary, which currently amounts to
$152,000, for a period of one year (subject to a 50% reduction in the event Mr.
Shirley is re-employed during that period) following the occurrence of a change
in control of CFX (which is defined in a manner that would include the Merger)
and either CFX's termination of Mr. Shirley's employment for any
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reason other than death, disability or cause, or Mr. Shirley's resignation for
reasons other than disability following a significant reduction in the nature or
scope of his duties, responsibilities, authority or powers, or a reduction in
his annual base salary (other than a generally applicable salary reduction
similarly affecting all management personnel of CFX), as in effect on the date
of the change in control.
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, to the fullest extent permitted by
applicable law, each present and former director, officer and employee of CFX or
its subsidiaries 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, arising in whole or in part out of, or pertaining to
(i) the fact that he or she was a director, officer or employee of CFX or a
subsidiary of CFX or any of their respective predecessors or (ii) the Agreement,
the Stock Option Agreements or any of the transactions contemplated thereby,
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. Pursuant to the Agreement, PHFG also generally agreed to honor
all rights to indemnification and all limitations of liability existing in favor
of the Indemnified Parties as provided in the Articles of Incorporation, Bylaws
or similar governing instruments of CFX and its subsidiaries as in effect as of
the date of the Agreement with respect to matters occurring prior to the
Effective Time.
Pursuant to the Agreement, PHFG also agreed to maintain CFX'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 CFX for a period of three years following
the Effective Time. Because the cost of such insurance materially decreases for
periods which are farther away from the Effective Time, PHFG anticipates that it
will maintain such insurance for a six-year period following the Effective Time.
Other than as set forth above, no director or executive officer of CFX has
any direct or indirect material interest in the Merger, except insofar as
ownership of CFX Common Stock and CFX Options might be deemed such an interest.
CERTAIN EMPLOYEE MATTERS
As soon as administratively practicable after the Effective Time, PHFG
shall take all reasonable action so that employees of CFX and its subsidiaries
shall be entitled to participate in the PHFG employee benefit plans of general
applicability to the same extent as similarly situated employees of PHFG and its
subsidiaries (it being understood that inclusion of the employees of CFX and its
subsidiaries in the PHFG employee benefit plans may occur at different times
with respect to different plans). For purposes of determining eligibility to
participate in, the vesting of benefits and for all other purposes (but not for
accrual of pension benefits) under the PHFG employee benefit plans, PHFG and the
PHFG employee benefit plans shall recognize years of service with CFX, any CFX
subsidiary or any predecessor thereof or entity acquired by CFX or a CFX
subsidiary as such service is recognized by and reflected on the records of CFX
and the CFX employee benefit plans. PHFG and the PHFG employee benefit plans
shall provide employees of CFX and CFX subsidiaries with full credit for
copayment, deductible amounts and out-of-pocket maximums under any CFX employee
benefit plan paid by such employees prior to the Effective Time and shall not
apply any preexisting condition, waiting period or other similar limitations to
such employees, except to the extent that any of the same is applicable to
employees of PHFG and its subsidiaries.
All employees of CFX or a CFX 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 CFX or any CFX subsidiary a right to continuing employment with
PHFG or a PHFG subsidiary after the Effective Time. An employee of CFX or a CFX
subsidiary (other than an employee who is party to an employment agreement or a
change-in-control agreement or who is entitled to severance benefits
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in accordance with the terms, including without limitation, termination dates,
of a severance plan formerly maintained by Community or The Safety Fund
Corporation) who is involuntarily terminated other than for cause following the
Effective Time shall be entitled to receive severance payments in accordance
with, and to the extent provided in, the PHFG employee severance plan applicable
to the Merger, provided that no employee shall be entitled to such benefits
unless CFX terminates its existing severance plan effective immediately prior to
the Effective Time and provides evidence reasonably satisfactory to PHFG of such
termination.
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 CFX
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 CFX 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 CFX at the time of the CFX 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 year following the Effective Time,
those persons who are Affiliates of CFX at the time of the CFX 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
one-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. The Registration Statement and this
Prospectus/Joint Proxy Statement do not cover any resales of PHFG Common Stock
received by persons who may be deemed to be Affiliates of PHFG or CFX in the
Merger.
SEC guidelines regarding qualifying for the pooling of interests method of
accounting also limit sales of shares of the acquiring and acquired company by
affiliates of either company in a business combination. SEC guidelines indicate
further that the pooling of interests method of accounting generally will not be
challenged on the basis of sales by affiliates of the acquiring or acquired
company if they do not dispose of any of the shares of the corporation they own
or shares of a corporation they receive in connection with a merger during the
period beginning 30 days before the merger and ending when financial results
covering at least 30 days of post-merger operations of the combined entity have
been published.
Each of PHFG and CFX has agreed in the Agreement to use its reasonable best
efforts to cause each person who may be deemed to be an Affiliate (for purposes
of Rule 145 and for purposes of qualifying the Merger for pooling of interests
accounting treatment) of such party to deliver to PHFG a letter agreement
intended to preserve the ability to treat the Merger as a pooling of interests
and, in the case of Affiliates of CFX, to ensure compliance with the Securities
Act.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary description of certain federal income
tax consequences of the Merger to shareholders of CFX. The federal income tax
laws are complex and the tax consequences of the Merger may vary depending upon
each shareholder's individual circumstances or tax status. Accordingly, this
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summary is not a complete description of all of the consequences of the Merger
and, in particular, may not address federal income tax considerations that may
affect the treatment of a shareholder which, at the Effective Time, already owns
some PHFG Common Stock, is not a U.S. citizen, is a tax-exempt entity, is a
financial institution or an insurance company, is an individual who acquired CFX
Common Stock pursuant to an employee stock option or right or otherwise as
compensation, or who or which exercises some form of control over CFX. In
addition, no information is provided herein with respect to the tax consequences
of the Merger under applicable foreign, state or local laws. This summary is
based on laws, regulations, rulings and judicial decisions as in effect on the
date of this Prospectus/Joint Proxy Statement, without consideration of the
particular facts or circumstances of any holder of CFX Common Stock. These
authorities are all subject to change and any such change may be made with
retroactive effect. No assurance can be given that, after any such change, this
summary would not be different.
CONSEQUENTLY, EACH SHAREHOLDER OF CFX IS URGED TO CONSULT HIS OR HER OWN
TAX ADVISOR CONCERNING THE SPECIFIC FEDERAL AND ANY FOREIGN, STATE AND LOCAL
INCOME TAX AND OTHER TAX CONSEQUENCES OF THE MERGER APPLICABLE TO SUCH
SHAREHOLDER.
The Merger. CFX has received an opinion from Arnold & Porter, special tax
counsel to CFX, which is based on facts, representations and assumptions that
were provided by CFX and PHFG and that are consistent with the state of facts
that CFX and PHFG believe will be existing as of the Effective Time. On the
basis of such facts, representations and assumptions, Arnold & Porter has opined
that for federal income tax purposes: (i) the Merger, when consummated in
accordance with the terms of the Agreement and certain related documentation,
will constitute a reorganization within the meaning of Section 368(a) of the
Code; (ii) no gain or loss will be recognized by shareholders of CFX upon the
exchange of their CFX Common Stock solely for shares of PHFG Common Stock
pursuant to the Merger, except in respect of cash received in lieu of a
fractional share interest in PHFG Common Stock; (iii) the basis of the PHFG
Common Stock received by a CFX shareholder receiving solely PHFG Common Stock
will be the same as his or her basis in the CFX Common Stock surrendered in
exchange therefor, reduced by any amount allocable to a fractional share
interest for which cash is received (as described below); and (iv) the holding
period of the shares of PHFG Common Stock received by a CFX shareholder
receiving solely PHFG Common Stock will include the period during which such CFX
shareholder held the CFX Common Stock surrendered in exchange therefor, provided
the surrendered CFX Common Stock was held by such shareholder as a capital asset
at the Effective Time.
For federal income tax purposes, cash received by a holder of CFX Common
Stock in lieu of a fractional share interest in PHFG Common Stock will be
treated as received in exchange for such fractional share interest, and gain or
loss will be recognized for federal income tax purposes measured by the
difference between the amount of cash received and the portion of the basis of
the share of CFX Common Stock allocable to such fractional share interest. Such
gain or loss should be long-term capital gain or loss if such share of CFX
Common Stock is held as a capital asset and has been held for more than one year
at the Effective Time. Generally, any long-term capital gain resulting from the
receipt of cash by a holder of CFX Common Stock in lieu of a fractional share of
PHFG Common Stock will be taxed at a maximum rate of 28% if, at the Effective
Time, such share of CFX Common Stock had been held for one year and not more
than 18 months, and at a rate of 20% if, at the Effective Time, such share had
been held for more than 18 months.
A holder of CFX Common Stock who exercises dissenters' rights under
applicable New Hampshire law and who receives a cash payment of the fair value
of the holder's shares of CFX Common Stock will be treated as having received
such payment in redemption of such shares. Such redemption will be subject to
the conditions and limitations of Section 302 of the Code, including the
attribution rules of Section 318 of the Code. In general, if the shares of CFX
Common Stock are held by the holder as a capital asset at the Effective Time, a
dissenting holder will recognize capital gain or loss measured by the difference
between the amount of cash received by such holder and the basis for such
shares. If, however, such holder owns, either actually or constructively, any
other CFX Common Stock or PHFG Common Stock, the payment made to such holder
could be treated as dividend income. In general, under the constructive
ownership rules of the Code, a holder may be considered to own stock that is
owned, and in some cases constructively owned, by certain related individuals or
entities, as well as stock that such holder (or related individuals or entities)
has the right to
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acquire by exercising an option or converting a convertible security. Each
holder of CFX Common Stock who contemplates exercising dissenters' rights should
consult his or her own tax advisor as to the federal and other tax consequences
of such actions, including the possibility that the payment will be treated as
dividend income.
Closing Opinions. It is a condition precedent to the obligation of CFX to
effect the Merger that CFX receive an opinion from Arnold & Porter, dated as of
the Effective Time, with respect to certain federal income tax consequences of
the Merger, which opinion in general will address the consequences described in
this summary in the first paragraph under the sub-heading "-- The Merger." It is
also a condition precedent to the obligation of PHFG to effect the Merger that
PHFG receive an opinion from Elias, Matz, Tiernan & Herrick L.L.P., special
counsel to PHFG, dated as of the Effective Time, to the effect that the Merger
and each of the Bank Mergers will constitute a reorganization within the meaning
of Section 368 of the Code. Each of such opinions will be based upon facts
existing at the Effective Time, and in rendering such opinions counsel will
require and rely upon facts, representations and assumptions that will be
provided by PHFG, CFX and others.
ACCOUNTING TREATMENT OF THE MERGER
It is expected that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles, and it is a condition
to the parties' consummation of the Merger that PHFG and CFX receive a letter,
dated the Effective Time, from PHFG's independent public accountants to the
effect that the Merger qualifies for such accounting treatment. See "The
Merger -- Conditions to the Merger." As required by generally accepted
accounting principles, under pooling of interests accounting, as of the
Effective Time, the assets and liabilities of CFX would be added to those of
PHFG at their recorded book values and the shareholders' equity accounts of PHFG
and CFX would be combined on PHFG's consolidated balance sheet. On a pooling of
interests accounting basis, income and other financial statements of PHFG issued
after consummation of the Merger would be restated retroactively to reflect the
consolidated combined financial position and results of operations of PHFG and
CFX as if the Merger had taken place prior to the periods covered by such
financial statements. The unaudited pro forma financial information contained in
this Prospectus/Joint Proxy Statement has been prepared using the pooling of
interests accounting method to account for the Merger. See "Selected Pro Forma
Consolidated Financial Data" and "Pro Forma Combined Consolidated Financial
Data."
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 CFX.
AMENDMENT AND RESTATEMENT OF PHFG'S ARTICLES OF INCORPORATION
By virtue of adopting the Agreement, shareholders of PHFG will be adopting
the PHFG Restated Articles included as Exhibit A to the Agreement, which is
included as Annex I to this Prospectus/Joint Proxy Statement. The PHFG Restated
Articles reflect two amendments being adopted in connection with the Merger, as
well as an amendment to PHFG's Articles of Incorporation to increase the
authorized capitalization of PHFG which was previously adopted by PHFG and its
shareholders. Specifically, the PHFG Restated Articles reflect an amendment to
Article 7 of the PHFG Articles of Incorporation to increase the maximum number
of directors of PHFG from 15 to 25, which will enable PHFG to fulfill its
agreement to add five persons from the CFX Board to the PHFG Board upon
consummation of the Merger. In addition, the PHFG Restated Articles reflect an
amendment to Article 10 of the PHFG Articles of Incorporation to provide that
the supermajority (75%) voting requirement set forth therein for amendment to
certain provisions of the PHFG Articles, including Articles 7 and 10, shall not
be applicable if the amendment is approved by the affirmative vote of at least
two thirds of the Whole Board of Directors and a majority of the Continuing
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Directors (in each case as defined in Article 9 of the PHFG Articles of
Incorporation). PHFG believes that Article 10 of its Articles of Incorporation
does not restrict its ability to amend certain provisions of its Articles of
Incorporation by a plan of merger in accordance with the MBCA, and has obtained
an opinion of Maine counsel to the effect that the PHFG Restated Articles, which
are identical to the current Articles of Incorporation of PHFG except for the
two above-described amendments adopted in connection with the Agreement, will be
duly and validly adopted by the shareholders of PHFG in the event that they
approve the Agreement by the requisite majority vote. See "The Special
Meetings -- Votes Required."
STOCK OPTION AGREEMENTS
As an inducement and a condition to PHFG's entering into the Agreement,
PHFG and CFX also entered into the CFX Option Agreement, pursuant to which CFX,
as issuer, granted PHFG, as grantee, the CFX Option, upon the occurrence of
certain events (none of which has occurred as of the date hereof to the
knowledge of PHFG and CFX), to purchase up to 4,793,062 shares of CFX Common
Stock, representing 19.9% of the outstanding shares of CFX Common Stock, at a
price of $22.69 per share, subject to adjustment in certain circumstances and
termination within certain periods. As an inducement and a condition to CFX's
entering into the Agreement, PHFG and CFX also entered into the PHFG Option
Agreement, pursuant to which PHFG, as issuer, granted CFX, as grantee, the PHFG
Option, upon the occurrence of certain events (none of which has occurred as of
the date hereof to the knowledge of PHFG and CFX), to purchase up to 2,769,736
shares of PHFG Common Stock, representing 10% of the outstanding shares of PHFG
Common Stock at the date of execution of the PHFG Option Agreement, at a price
of $43.13 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 CFX Option Agreement and the PHFG
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 CFX with respect to the CFX
Option Agreement and PHFG with respect to the PHFG Option Agreement, (ii)
"Grantee" means PHFG with respect to the CFX Option Agreement and CFX with
respect to the PHFG Option Agreement and (iii) "Option" means the CFX Option or
the PHFG Option, as applicable.
Provided Grantee is not in willful breach of any of its covenants or
agreements contained in the Agreement under circumstances that would entitle
Issuer to terminate the Agreement, Grantee may exercise the Option, in whole or
in part, at any time and from time to time, if, but only if, both a Preliminary
Purchase Event and a Purchase Event occur prior to the occurrence of an Exercise
Termination Event (as defined in the Stock Option Agreements). The definitions
referred to in this paragraph are incorporated herein by reference to the copies
of the CFX Option Agreement and the PHFG Option Agreement included as Annexes II
and III to this Prospectus/Joint Proxy Statement, respectively.
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.
Under each Stock Option Agreement, at any time after the first occurrence
of a Repurchase Event (as defined in each Stock Option Agreement) and prior to
an Exercise Termination Event, Grantee may request Issuer to repurchase the
Option and any Option Shares purchased pursuant thereto at an aggregate price
specified in the Option Agreement, provided that the obligation of Issuer to
repurchase the Option and any Option Shares under the Stock Option Agreement
shall not terminate upon the occurrence of an Exercise Termination Event unless
no Purchase Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
Each Stock Option Agreement provides that in no event shall Grantee's Total
Profit (as defined in each Stock Option Agreement, which definitions are
incorporated herein by reference) exceed $35,000,000 and, if it otherwise would
exceed such amount, Grantee, at its sole election, shall either (i) reduce the
number of
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shares of Issuer Common Stock subject to the Option, (ii) deliver to Issuer for
cancellation Option Shares previously purchased by Grantee, (iii) pay cash to
Issuer or (iv) any combination thereof, so that Grantee's actually realized
Total Profit shall not exceed $35,000,000 after taking into account the
foregoing actions. Each Stock Option Agreement also provides that the Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined in each Stock Option Agreement,
which definitions are incorporated herein by reference) of more than
$35,000,000, provided that this provision shall not restrict any exercise of the
Option permitted on any subsequent date.
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 CFX Option Agreement and the PHFG Option Agreement are
included as Annexes II and III to this Prospectus/Joint Proxy Statement,
respectively, and reference is made thereto for the complete terms thereof.
LETTER AGREEMENTS
In connection with the execution of the Agreement, the directors of CFX
entered into a letter agreement with PHFG pursuant to which such persons agreed
to vote all shares of CFX Common Stock beneficially owned by them to approve the
Agreement at the CFX Special Meeting, and the directors of PHFG entered into a
letter agreement with CFX pursuant to which such persons agreed to do the same
with respect to the shares of PHFG Common Stock beneficially owned by them at
the PHFG Special Meeting. Pursuant to the foregoing letter agreements, directors
of CFX and PHFG also agreed to certain restrictions on the transfer of shares of
PHFG Common Stock and CFX Common Stock which are intended to ensure compliance
with applicable federal securities laws and that the Merger will be accounted
for as a pooling of interests under generally accepted accounting principles.
See "The Merger -- Resale of PHFG Common Stock."
DISSENTERS' RIGHTS
Pursuant to Sections 293-A:13.01 et seq. of the NHBCA, in the event that
the Merger is consummated, any holder of shares of CFX Common Stock who objects
to the Merger is entitled to dissent from the Merger and to have the fair value
of such shares ("Dissenting Stock") as determined by CFX (or PHFG, as its
successor upon consummation of the Merger), or if necessary, judicially
determined, paid to him or her, by complying with the provisions of Sections
293-A:13.01 et seq. of the NHBCA. Failure to take any steps set forth in
Sections 293-A:13.01 et seq. in connection with the exercise of such rights may
result in termination or waiver thereof.
The following is a summary of the statutory procedures required to be
followed by a holder of Dissenting Stock (a "dissenting shareholder") in order
to exercise his or her rights under the NHBCA. This summary is qualified in its
entirety by reference to Sections 293-A:13.01 et seq. of the NHBCA, the text of
which is attached as Annex VI to this Prospectus/Joint Proxy Statement.
If a shareholder elects to exercise dissenters' rights with respect to the
Merger, such shareholder must (i) deliver to CFX prior to the vote on the Merger
at the CFX Special Meeting a written notice of intention to demand payment for
his shares if the Merger is effected and (ii) not vote in favor of the Merger.
The written notice required to be delivered to CFX by a dissenting shareholder
is in addition to and separate from any proxy or vote against the Merger.
Neither voting against nor failure to vote for the Merger will constitute the
written notice required to be filed by a dissenting shareholder. Failure to vote
against the Merger, however, will not constitute a waiver of rights under
Sections 293-A:13.01 et seq. of the NHBCA provided that a written notice has
been properly filed. A signed proxy that is returned but which does not contain
any instructions as to how it should be voted will be voted in favor of approval
of the Merger and will be deemed a waiver of dissenters' rights. See "The
Special Meetings -- Voting and Revocation of Proxies."
Subject to the foregoing, a beneficial shareholder may assert dissenters'
rights as to shares held on his or her behalf only if (i) he or she submits to
CFX the record shareholder's written consent to the dissent not later
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than the time the beneficial shareholder asserts dissenters' rights and (ii) he
or she does so with respect to all shares of CFX Common Stock of which he or she
is the beneficial owner or over which he or she has the power to direct the
vote. A record holder of shares of CFX Common Stock may dissent on behalf of any
beneficial owner with respect to all but not less than all the shares of such
beneficial owner if the record holder notifies CFX in writing of the name and
address of each such person on whose behalf he asserts dissenters' rights. All
notices of intention to demand payment should be addressed to Edwin L. Herbert,
General Counsel, CFX Corporation, 102 Main Street, Keene, New Hampshire 03431.
If the Merger is approved, CFX is obligated to give written notice to each
dissenting shareholder who timely filed a notice of intention to demand payment
and who did not vote in favor of approval of the Merger no later than 10 days
after the approval of the Merger by the shareholders of CFX. The notice must be
accompanied by a copy of Sections 293-A:13.01 et seq. and must (i) state where a
demand for payment must be sent and where and when certificates for Dissenting
Stock must be deposited in order to obtain payment, (ii) inform holders of
uncertificated shares to what extent transfer of the shares will be restricted
after the payment demand is received, (iii) be accompanied by a form for
demanding payment that includes the date of the first announcement to news media
or to shareholders of the terms of the proposed Merger (October 27, 1997) and
requires that the person asserting dissenters' rights certify whether or not he
or she acquired beneficial ownership of the shares before that date and (iv) set
a date by which CFX or PHFG, as its successor, shall receive the payment demand,
which date shall not be less than 30 days nor more than 60 days after the date
the notice is delivered. The dissenting shareholder must demand payment, certify
whether he or she acquired ownership of such shares prior to October 27, 1997
and deposit the certificates in accordance with the terms of the notice. A
dissenting shareholder who fails to demand payment or deposit certificates for
Dissenting Stock, as required, shall have no right under Sections 293-A:13.01
et. seq. to receive payment for the Dissenting Stock.
Unless the Merger has been effected and CFX has made the payment required
below within 60 days after the date for demanding payment and depositing
certificates for Dissenting Stock, CFX shall return any certificates for
Dissenting Stock so deposited. If the Merger is consummated after such
Dissenting Stock has been returned by CFX, PHFG shall send a new notice
conforming to the requirements herein described.
Upon consummation of the Merger, the obligations of CFX under the NHBCA
described below shall be assumed by PHFG, as successor to CFX upon consummation
of the Merger. After the Effective Time, all notices or other communications
relating to the exercise of dissenters' rights should be addressed to Carol L.
Mitchell, Esq., Executive Vice President and General Counsel, Peoples Heritage
Financial Group, Inc., P.O. Box 9540, Portland, Maine 04112-9540.
As soon as the Merger has been consummated, or upon receipt of demand for
payment, if the Merger has already been consummated, CFX shall pay to each
dissenting shareholder who has made proper demand and deposited his or her
certificates the amount which CFX estimates to be the fair value of his or her
Dissenting Stock, with accrued interest, if any, accompanied by (i) CFX's
balance sheet as of the end of a fiscal year ending not more than 16 months
before the date of payment, (ii) an income statement and a statement of changes
in shareholders' equity of CFX for such fiscal year, (iii) CFX's latest
available interim financial statements, if any, (iv) a statement of CFX's
estimate of the fair value of the shares, (v) an explanation of how the interest
was calculated and (vi) a statement of the dissenting shareholder's right to
demand supplemental payment pursuant to Section 293-A:13.28 if the shareholder
is dissatisfied with CFX's offer, as well as a copy of Sections 293-A:13.01 et
seq. CFX may withhold payment from any dissenting shareholder acquiring
beneficial ownership of the CFX Common Stock subsequent to October 27, 1997, the
date on which announcement of the Merger was first made. For such shares of CFX
Common Stock acquired after October 27, 1997, CFX, upon consummation of the
Merger, shall estimate the fair value of such shares, plus accrued interest, if
any, and pay such estimated amount to each holder of such shares who agrees to
accept such payment in full satisfaction of his or her demand. With each such
offer of payment, CFX shall send its estimate of the fair value of such shares
of CFX Common Stock, an explanation of how the interest was calculated, and a
statement of such dissenting shareholder's right to demand payment if such
dissenting shareholder is dissatisfied with such offer.
57
<PAGE> 63
Fair value of Dissenting Stock means the value immediately before the
Effective Time, excluding any change in value in anticipation of the Merger if
such exclusion is not inequitable (which amount may be more, less or the same as
the consideration to be received by shareholders of CFX in connection with the
Merger).
If CFX fails to remit such fair value to the dissenting shareholder within
60 days from the date set for demanding payment, or if CFX fails to return any
deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days of the date set for demanding payment, or
if such dissenting shareholder believes the amount paid or offered to be paid,
as the case may be, to be less than fair value (or that the interest, if any, is
not correct), such dissenting shareholder may send CFX his or her own estimate
of fair value (and interest, if any) and demand payment of the deficiency, or
reject CFX's offer and demand payment of the fair value (and interest, if any).
If the dissenting shareholder does not notify CFX of his or her payment demand
within 30 days after CFX has made payment or offered payment, as the case may
be, such shareholder shall be entitled to no more than the amount remitted.
Within 60 days after a demand for payment of the deficiency, if it remains
unsettled, CFX shall file a petition with the Superior Court of Cheshire County,
New Hampshire (the "Court") requesting determination of the fair value of the
Dissenting Stock and accrued interest. All dissenting shareholders whose demands
have not been settled shall be parties to such action and shall be served a copy
of the petition. The Court shall determine the fair value of the Dissenting
Stock and each dissenting shareholder shall be entitled to judgment for the
amount by which the amount previously remitted by CFX is exceeded by the Court's
determination of fair value, if any. If CFX does not file a petition, each
dissenting shareholder who has made a demand and who has not settled his or her
claim shall be entitled to receive the amount demanded with interest and may sue
to enforce his or her claim in an appropriate court.
Costs of an appraisal proceeding, including costs and expenses of
appraisers appointed by the Court, shall be determined by the Court and assessed
against CFX, except that the Court may assess any part of such costs and
expenses to all or some of the dissenting shareholders who are parties and whose
action the court finds to be arbitrary, vexatious or not in good faith in
demanding payment under Sections 293-A:13.01 et seq. Fees and expenses of
counsel and experts for the respective parties may be assessed against (i) CFX
if the Court finds it failed to comply substantially with the requirements of
Sections 293-A:13.01 et seq. or (ii) either CFX or a dissenting shareholder if
the court finds that the party acted arbitrarily, vexatiously or not in good
faith with respect to its dissenters' rights. The court may award reasonable
attorney fees to be paid out of the amounts awarded to the dissenting
shareholders if the court finds that the services of counsel for any dissenting
shareholder have been of substantial benefit to other dissenting shareholders
similarly situated and that such attorney fees should not be assessed against
CFX.
CFX shareholders who exercise their rights to dissent under the NHBCA, and
thereby receive a cash payment for their CFX Common Stock, will have a taxable
disposition of stock, the treatment of which will be dependent on the particular
circumstances of the shareholder. See "-- Certain Federal Income Tax
Consequences." Such shareholders are advised to consult a tax advisor as to the
specific tax consequences of exercising dissenters' rights.
Depending on the number of shares of PHFG Common Stock held in PHFG's
treasury and the amount of cash paid by PHFG in lieu of fractional share
interests in the PHFG Common Stock upon consummation of the Merger, holders of
CFX Common Stock who exercise their dissenters' rights could prevent the Merger
from being accounted for as a pooling of interests. See "-- Accounting Treatment
of the Merger."
58
<PAGE> 64
MANAGEMENT AND OPERATIONS OF PHFG AFTER THE MERGER
BOARD OF DIRECTORS AND MANAGEMENT FOLLOWING THE MERGER
Pursuant to the Agreement, at the Effective Time the directors of PHFG
shall include five persons serving as directors of CFX immediately prior to the
Effective Time (including Peter J. Baxter, President and Chief Executive Officer
of CFX) designated by CFX and who both meet the director qualification
requirements set forth in the Bylaws of PHFG and are otherwise acceptable to
PHFG. The CFX directors will be allocated as equally as possible among the three
classes of PHFG's directors. The Agreement also provides that, at the Effective
Time, Mr. Baxter shall be Vice Chairman of the PHFG Board and an Executive Vice
President and Chief Operating Officer of PHFG.
The following table sets forth certain information about each director of
CFX who will become a director of PHFG upon consummation of the Merger.
<TABLE>
<CAPTION>
POSITION WITH CFX AND DIRECTOR OF
PRINCIPAL OCCUPATION CFX
NAME AGE DURING THE PAST FIVE YEARS SINCE
- --------------------------- --- ---------------------------------------------- -----------
<S> <C> <C> <C>
Peter J. Baxter............ 45 President and Chief Executive Officer of CFX 1988
and CFX Bank
P. Kevin Condron........... 52 President, Central Supply Company, Inc. 1996
(wholesale plumbing and heating)
Douglas S. Hatfield, Jr.... 62 President and Treasurer, Hatfield, Moran & 1990
Barry, P.A. (attorneys)
Philip A. Mason............ 54 Partner, Mason & Martin, LLP (attorneys) 1988
Seth A. Resnicoff, M.D..... 55 Engaged in the private practice of surgery in 1997
Concord, New Hampshire since 1975; Chairman of
Strategic Healthcare (which provides
management and marketing services to
independent physicians and surgeons)
</TABLE>
Additional information about the foregoing persons is contained in CFX's
Annual Report on Form 10-K for the year ended December 31, 1996, as amended,
which is incorporated by reference in this Prospectus/Joint Proxy Statement. See
"Incorporation of Certain Documents by Reference" and "Available Information."
CONSOLIDATION OF OPERATIONS; PROJECTED COST SAVINGS, REVENUE ENHANCEMENTS AND
EARNINGS
PHFG expects to achieve significant cost savings and operating synergies
subsequent to the Merger and the Bank Mergers. The cost savings and operating
synergies are expected to be derived from reductions in personnel, the
consolidation of certain branch locations in overlapping markets in New
Hampshire and the integration of other facilities and back office operations. In
addition, because CFX will be merged with and into PHFG, the costs associated
with CFX operating as a publicly-held entity also will be eliminated. The
aggregate after-tax cost savings for 1998 and 1999 are estimated to amount to
approximately $20.5 million, and it is anticipated that approximately $8.0
million and $12.6 million of such cost savings will be realized in 1998 and
1999, respectively. Because of the uncertainties inherent in merging two
financial institutions, changes in the regulatory environment and changes in
economic conditions, no assurances can be given that any particular level of
cost savings will be realized, that any such cost savings will be realized over
the time period currently anticipated or that such cost savings will not be
offset to some degree by increases in other expenses, including expenses related
to integrating the two companies.
In addition to expected cost savings and operating synergies, PHFG
believes, based on its previous experience in acquiring financial institutions,
that revenue enhancement opportunities exist with the offering of more
commercial and retail bank products to CFX's customers and the communities
served by CFX. In particular, PHFG believes that it can increase the amount of
commercial business and consumer loans to be originated by the acquired
operations, with a resulting improvement to interest rate spread and net
interest margin. In addition, PHFG believes that other revenue enhancements can
be obtained by the offering of
59
<PAGE> 65
additional fee-based products through the acquired operations, including cash
management services, discount brokerage, insurance brokerage, investment
management and trust services and annuity and mutual fund products, as well as
from increases in earning assets as a result of leveraging opportunities
provided by the strong capital position of CFX. Management of PHFG estimates
that revenue enhancements resulting from the Merger could approximate $5.1
million on an after-tax basis and that such revenue enhancements will be
realized primarily in 1999. The amounts and realization of these and any
additional revenues will depend upon a number of factors, including, but not
limited to, competition, the economic environment, customer acceptance of PHFG
and its products and services and regulatory requirements, which are all beyond
the control of PHFG.
Based upon the cost savings, operating synergies and revenue enhancements
expected to be realized subsequent to consummation of the Merger and the Bank
Mergers, PHFG believes that the Merger will be accretive to earnings per share
in 1999 by approximately $.13 per share, which is based on the average consensus
Wall Street estimates (made prior to announcement of the proposed Merger, as
computed by Zacks Investment Research and Nelson Information, Inc., public
suppliers of such information) for 1998 and the application of an 11% growth
factor used in one such estimate to produce an average consensus Wall Street
estimate for 1999 of $3.30 per share. In addition, although the Merger is
expected to be dilutive to earnings per share in 1998 because it will not be
consummated at the beginning of the period, PHFG believes that if estimated cost
savings and operating synergies in 1998 are annualized, the Merger would be
accretive to earnings per share in 1998 by approximately $.03 per share relative
to the average consensus Wall Street estimates of $2.97 per share, exclusive of
the one-time reorganization and restructuring charge to be incurred in
connection with the Merger, as discussed below.
The following table sets forth the estimated effects of the Merger on the
operations of PHFG during the periods indicated.
<TABLE>
<CAPTION>
ESTIMATED
PRO FORMA 1998 1999
SHARES EARNINGS(1) EARNINGS
--------- ----------- --------
(DOLLARS IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
PHFG earnings per share................................... $ 2.97 $ 3.30
PHFG base net income...................................... 27,500 $ 81,675 $ 90,750
CFX base net income....................................... 24,673(2) $ 38,083 $ 42,844
Cost savings after tax(3)................................. $ 7,972 $ 12,555
Revenue enhancements after tax:
CFX margin improvement.................................. $ 3,500
Leveraging of excess capital............................ $ 1,600
--------
Pro forma revenue growth................................ $ 5,100
Total..................................................... 43,957 $ 127,730 $151,249
Pro forma earnings per share.............................. $ 2.91 $ 3.43
Accretion (dilution).................................... $ (.06) $ .13
Accretion (dilution).................................... (2%) 4%
Net earnings based on annualized cost savings............. $ 131,716
Pro forma earnings per share based on annualized cost
savings................................................. $ 3.00
Accretion -- $.......................................... $ .03
Accretion -- %.......................................... 1%
</TABLE>
- ---------------
(1) Excludes the effect of a one-time merger and restructuring charge
anticipated in the first quarter of 1998, which is estimated at $12.8
million on an after-tax basis.
(2) Includes the effects of assumed exercises of CFX Options, using the treasury
stock method.
(3) Assumes cost savings are phased in 67% and 100% in 1998 and 1999,
respectively.
The cost savings, operating synergies and revenue enhancements which are
expected to be realized subsequent to consummation of the Merger and the Bank
Mergers do not reflect a one-time, after-tax charge
60
<PAGE> 66
of approximately $12.8 million relating to Merger reorganization and
restructuring costs, which will be incurred upon consummation of the Merger. The
one-time charge relates primarily to terminations of employment contracts,
change-in-control contracts and severance obligations ($5.0 million),
professional fees ($5.6 million) and other operating expenses required to be
accrued in accordance with generally accepted accounting principles ($5.0
million), less estimated tax benefits of $2.8 million.
61
<PAGE> 67
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed consolidated balance
sheet combines the consolidated historical balance sheets of PHFG and CFX,
assuming the Merger was consummated as of September 30, 1997 on a pooling of
interests accounting basis, and the following unaudited pro forma combined
condensed consolidated statements of operations present the combined
consolidated statements of operations of PHFG and CFX assuming the Merger was
consummated as of the beginning of the indicated periods. 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 an expected reorganization and restructuring charge in
connection with the Merger and the Bank Mergers has been reflected in the pro
forma combined condensed consolidated balance sheet; however, because the
reorganization and restructuring charge is nonrecurring, it has not been
reflected in the pro forma combined condensed consolidated statements of
operations. The pro forma financial data does not reflect information relating
to the PHFG Acquisitions or cost savings, operating synergies and revenue
enhancements which are expected to be realized subsequent to consummation of the
Merger and the Bank Mergers. See "Management and Operations of PHFG after the
Merger."
The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the Merger been consummated at September 30, 1997 or at the
beginning of the periods indicated, nor is it necessarily indicative of the
results of operations in future periods or the future financial position of the
combined entities.
The pro forma information should be read in conjunction with the historical
consolidated financial statements of PHFG and CFX, including the related notes,
incorporated by reference herein, the supplemental consolidated financial
statements of CFX, 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" and "Selected
Pro Forma Consolidated Financial Data."
62
<PAGE> 68
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
PHFG AND CFX
SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PHFG CFX ADJUSTMENTS COMBINED
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks....................... $ 421,489 $ 71,647 $ -- $ 493,136
Federal funds sold............................ 137,000 47,190 -- 184,190
Securities available for sale at market
value....................................... 1,174,210 585,452 -- 1,759,662
Securities held to maturity................... -- 37,396 -- 37,396
Loans held for sale........................... 154,352 28,909 -- 183,261
Loans and leases.............................. 3,918,449 1,913,377 -- 5,831,826
---------- ---------- -------- ----------
Less: Allowance for loan and lease losses..... 62,961 21,408 -- 84,369
---------- ---------- -------- ----------
Net loans and leases................ 3,855,488 1,891,969 -- 5,747,457
---------- ---------- -------- ----------
Premises and equipment........................ 70,324 39,306 -- 109,630
Goodwill and other intangibles................ 66,052 8,856 -- 74,908
Mortgage servicing rights..................... 36,976 8,152 -- 45,128
Other assets.................................. 140,192 102,305 -- 242,497
---------- ---------- -------- ----------
Total assets........................ $6,056,083 $2,821,182 $ -- $8,877,265
========== ========== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest-bearing............................ $3,600,532 $1,714,412 $ -- $5,314,944
Non-interest bearing........................ 668,023 221,202 -- 889,225
---------- ---------- -------- ----------
4,268,555 1,935,614 -- 6,204,169
---------- ---------- -------- ----------
Borrowings from the Federal Home Loan Bank of
Boston...................................... 802,279 415,455 -- 1,217,734
Other borrowings.............................. 369,562 197,791 -- 567,353
Other liabilities............................. 64,616 26,631 12,770 (1) 104,017
---------- ---------- -------- ----------
Total liabilities................... 5,505,012 2,575,491 12,770 (1) 8,093,273
---------- ---------- -------- ----------
Corporation-obligated, mandatorily redeemable
securities of subsidiary trust.............. 100,000 -- -- 100,000
---------- ---------- -------- ----------
Shareholders' equity:
Preferred Stock............................. -- -- -- --
Common Stock:
PHFG..................................... 286 160 (2) 446
CFX...................................... 16,010 (16,010)(2) --
Paid in capital............................... 271,790 147,756 15,259 (2) 434,805
Retained earnings............................. 208,260 80,494 (12,770)(1) 275,984
Net unrealized gain on securities available
for sale.................................... 4,030 2,022 -- 6,052
Treasury stock at cost........................ (33,295) (591) 591 (33,295)
---------- ---------- -------- ----------
Total shareholders' equity.......... 451,071 245,691 (12,770)(1) 683,992
---------- ---------- -------- ----------
Total liabilities and shareholders'
equity............................ $6,056,083 $2,821,182 $ -- $8,877,265
========== ========== ======== ==========
</TABLE>
- ---------------
(1) Reflects an estimated $12.8 million, net of taxes, of one-time
reorganization and restructuring costs related to the Merger and the Bank
Mergers. See "Management and Operations of PHFG after the Merger."
(2) Reflects the par value of the PHFG Common Stock to be issued in exchange for
CFX Common Stock in connection with the Merger, with related adjustment to
paid-in capital. The PHFG Common Stock to be issued in connection with the
Merger was calculated by multiplying the number of outstanding shares of CFX
Common Stock by the Exchange Ratio.
63
<PAGE> 69
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND CFX
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PHFG CFX COMBINED(1)
-------- -------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest on loans and leases........................... $261,571 $113,138 $ 374,709
Interest on securities................................. 33,947 30,105 64,052
Interest on other investments.......................... 20,371 2,126 22,497
Dividends on equity securities......................... 1,862 1,127 2,989
-------- -------- --------
Total interest and dividend income.................. 317,751 146,496 464,247
-------- -------- --------
Interest expense:
Interest on deposits................................... 107,409 52,306 159,715
Interest on borrowed funds............................. 30,741 20,926 51,667
-------- -------- --------
Total interest expense.............................. 138,150 73,232 211,382
-------- -------- --------
Net interest income................................. 179,601 73,264 252,865
Provision for loan losses................................ -- 3,385 3,385
-------- -------- --------
Net interest income after provision for loan
losses............................................ 179,601 69,879 249,480
-------- -------- --------
Noninterest income:
Customer services...................................... 16,941 3,807 20,748
Mortgage banking services.............................. 12,761 4,660 17,421
Trust and investment advisory services................. 6,517 1,898 8,415
Net securities gains (losses).......................... 51 1,421 1,472
Other noninterest income............................... 2,676 5,757 8,433
-------- -------- --------
38,946 17,543 56,489
-------- -------- --------
Noninterest expenses:
Salaries and employee benefits......................... 66,605 28,878 95,483
Occupancy and equipment................................ 18,897 8,913 27,810
Distributions on securities of subsidiary trust........ 6,072 -- 6,072
Amortization of goodwill and deposit premiums.......... 5,661 465 6,126
Advertising and marketing.............................. 5,378 1,768 7,146
Deposit and other assessments.......................... 1,148 212 1,360
Merger expenses........................................ -- 11,031 11,031
Other noninterest expenses............................. 31,290 14,152 45,442
-------- -------- --------
135,051 65,419 200,470
-------- -------- --------
Income before income tax expense......................... 83,496 22,003 105,499
Income tax expense....................................... 30,092 7,013 37,105
-------- -------- --------
Net income............................................. $ 53,404 $ 14,990 $ 68,394
======== ======== ========
Earnings per share....................................... $ 1.92 $ 0.63 $ 1.56
Average shares outstanding............................... 27,859 23,813 43,743
</TABLE>
64
<PAGE> 70
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND CFX
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PHFG CFX COMBINED(1)
-------- -------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest on loans and leases........................... $211,937 $ 94,330 $ 306,267
Interest on securities................................. 12,213 25,528 37,741
Interest on other investments.......................... 24,804 3,194 27,998
Dividends on equity securities......................... 1,391 1,070 2,461
-------- -------- -----------
Total interest and dividend income.................. 250,345 124,122 374,467
-------- -------- -----------
Interest expense:
Interest on deposits................................... 88,833 47,277 136,110
Interest on borrowed funds............................. 21,598 11,117 32,715
-------- -------- -----------
Total interest expense.............................. 110,431 58,394 168,825
-------- -------- -----------
Net interest income................................. 139,914 65,728 205,642
Provision for loan losses................................ 900 3,210 4,110
-------- -------- -----------
Net interest income after provision for loan
losses............................................ 139,014 62,518 201,532
-------- -------- -----------
Noninterest income:
Customer services...................................... 10,902 3,797 14,699
Mortgage banking services.............................. 9,850 3,326 13,176
Trust and investment advisory services................. 5,454 1,717 7,171
Net securities gains (losses).......................... 503 1,823 2,326
Other noninterest income............................... 1,760 5,440 7,200
-------- -------- -----------
28,469 16,103 44,572
-------- -------- -----------
Noninterest expenses:
Salaries and employee benefits......................... 54,019 25,304 79,323
Occupancy and equipment................................ 15,517 7,285 22,802
Distributions on securities of subsidiary trust........ -- -- --
Amortization of goodwill and deposit premiums.......... 3,224 502 3,726
Advertising and marketing.............................. 2,900 1,792 4,692
Deposit and other assessments.......................... 2,939 205 3,144
Merger expenses........................................ 5,105 4,522 9,627
Other noninterest expenses............................. 26,720 14,402 41,122
-------- -------- -----------
110,424 54,012 164,436
-------- -------- -----------
Income before income tax expense......................... 57,059 24,609 81,668
Income tax expense....................................... 20,118 8,575 28,693
-------- -------- -----------
Net income............................................. $ 36,941 $ 16,034 $ 52,975
======== ======== ==========
Earnings per share....................................... $ 1.47 $ 0.68 $ 1.30
Average shares outstanding............................... 25,163 23,519 40,850
</TABLE>
65
<PAGE> 71
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND CFX
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PHFG CFX COMBINED(1)
-------- -------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest on loans and leases........................... $288,999 $128,533 $ 417,532
Interest on securities................................. 18,629 34,393 53,022
Interest on other investments.......................... 31,620 3,930 35,550
Dividends on equity securities......................... 1,924 1,449 3,373
-------- -------- --------
Total interest and dividend income.................. 341,172 168,305 509,477
-------- -------- --------
Interest expense:
Interest on deposits................................... 120,443 63,634 184,077
Interest on borrowed funds............................. 30,156 15,949 46,105
-------- -------- --------
Total interest expense.............................. 150,599 79,583 230,182
-------- -------- --------
Net interest income................................. 190,573 88,722 279,295
Provision for loan losses................................ 900 4,285 5,185
-------- -------- --------
Net interest income after provision for loan
losses............................................ 189,673 84,437 274,110
-------- -------- --------
Noninterest income:
Customer services...................................... 15,353 4,952 20,305
Mortgage banking services.............................. 12,940 4,716 17,656
Trust and investment advisory services................. 7,233 2,351 9,584
Net securities gains (losses).......................... 507 2,780 3,287
Other noninterest income............................... 2,415 7,463 9,878
-------- -------- --------
38,448 22,262 60,710
-------- -------- --------
Noninterest expenses:
Salaries and employee benefits......................... 73,303 34,076 107,379
Occupancy and equipment................................ 20,799 10,306 31,105
Amortization of goodwill and deposit premiums.......... 4,874 653 5,527
Advertising and marketing.............................. 4,327 2,343 6,670
Deposit and other assessments.......................... 3,050 1,074 4,124
Merger expenses........................................ 5,105 4,522 9,627
Other noninterest expenses............................. 36,615 18,296 54,911
-------- -------- --------
148,073 71,270 219,343
-------- -------- --------
Income before income tax expense......................... 80,048 35,429 115,477
Income tax expense....................................... 27,568 11,876 39,444
-------- -------- --------
Net income............................................. $ 52,480 $ 23,553 $ 76,033
======== ======== ========
Earnings per share....................................... $ 2.10 $ 1.01 $ 1.87
Average shares outstanding............................... 25,035 23,383 40,632
</TABLE>
66
<PAGE> 72
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND CFX
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PHFG CFX COMBINED(1)
-------- -------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest on loans and leases........................... $253,787 $109,601 $ 363,388
Interest on securities................................. 12,627 34,424 47,051
Interest on other investments.......................... 37,521 3,213 40,734
Dividends on equity securities......................... 1,914 1,570 3,484
-------- ------- -------
Total interest and dividend income.................. 305,849 148,808 454,657
-------- ------- -------
Interest expense:
Interest on deposits................................... 108,209 57,674 165,883
Interest on borrowed funds............................. 26,686 10,191 36,877
-------- ------- -------
Total interest expense.............................. 134,895 67,865 202,760
-------- ------- -------
Net interest income................................. 170,954 80,943 251,897
Provision for loan losses................................ 4,230 3,814 8,044
-------- ------- -------
Net interest income after provision for loan
losses............................................ 166,724 77,129 243,853
-------- ------- -------
Noninterest income:
Customer services...................................... 11,908 4,474 16,382
Mortgage banking services.............................. 10,849 3,397 14,246
Trust and investment advisory services................. 5,850 2,246 8,096
Net securities gains (losses).......................... 116 2,383 2,499
Other noninterest income............................... 2,694 5,238 7,932
-------- ------- -------
31,417 17,738 49,155
-------- ------- -------
Noninterest expenses:
Salaries and employee benefits......................... 67,472 31,941 99,413
Occupancy and equipment................................ 17,418 9,118 26,536
Amortization of goodwill and deposit premiums.......... 2,211 714 2,925
Advertising and marketing.............................. 4,642 1,972 6,614
Deposit and other assessments.......................... 4,497 2,443 6,940
Merger expenses........................................ 4,958 -- 4,958
Other noninterest expenses............................. 29,082 17,063 46,145
-------- ------- -------
130,280 63,251 193,531
-------- ------- -------
Income before income tax expense......................... 67,861 31,616 99,477
Income tax expense....................................... 23,375 10,062 33,437
-------- ------- -------
Net income.......................................... 44,486 21,554 66,040
Preferred stock dividends................................ -- 89 89
-------- ------- -------
Net income available to common stock..................... $ 44,486 $ 21,465 $ 65,951
======== ======= =======
Earnings per share....................................... $ 1.80 $ 0.93 $ 1.64
Average shares outstanding............................... 24,696 23,180 40,157
</TABLE>
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PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND CFX
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PHFG CFX COMBINED(1)
-------- -------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest on loans and leases........................... $215,177 $ 90,751 $ 305,928
Interest on securities................................. 12,409 32,344 44,753
Interest on other investments.......................... 27,241 2,266 29,507
Dividends on equity securities......................... 1,770 1,435 3,205
-------- ------- -------
Total interest and dividend income.................. 256,597 126,796 383,393
-------- ------- -------
Interest expense:
Interest on deposits................................... 87,920 45,435 133,355
Interest on borrowed funds............................. 20,082 6,219 26,301
-------- ------- -------
Total interest expense.............................. 108,002 51,654 159,656
-------- ------- -------
Net interest income................................. 148,595 75,142 223,737
Provision for loan losses................................ 3,374 3,622 6,996
-------- ------- -------
Net interest income after provision for loan
losses............................................ 145,221 71,520 216,741
-------- ------- -------
Noninterest income:
Customer services...................................... 10,481 3,619 14,100
Mortgage banking services.............................. 8,446 4,296 12,742
Trust and investment advisory services................. 5,471 2,169 7,640
Net securities gains (losses).......................... (254) 655 401
Other noninterest income............................... 3,482 3,661 7,143
-------- ------- -------
27,626 14,400 42,026
-------- ------- -------
Noninterest expenses:
Salaries and employee benefits......................... 61,799 30,592 92,391
Occupancy and equipment................................ 16,687 8,478 25,165
Amortization of goodwill and deposit premiums.......... 2,045 757 2,802
Advertising and marketing.............................. 4,642 1,572 6,214
Deposit and other assessments.......................... 7,899 3,558 11,457
Merger expenses........................................ 559 -- 559
Other noninterest expenses............................. 31,506 16,752 48,258
-------- ------- -------
125,137 61,709 186,846
-------- ------- -------
Income before income tax expense......................... 47,710 24,211 71,921
Income tax expense....................................... 13,662 7,474 21,136
-------- ------- -------
Net income.......................................... 34,048 16,737 50,785
Preferred stock dividends................................ -- 287 287
-------- ------- -------
Net income available to common stock..................... $ 34,048 $ 16,450 $ 50,498
======== ======= =======
Earnings per share....................................... $ 1.37 $ 0.73 $ 1.27
Average shares outstanding............................... 24,850 22,528 39,876
</TABLE>
- ---------------
(1) PHFG expects to achieve cost savings, operating synergies and revenue
enhancements following consummation of the Merger and the Bank Mergers. The
cost savings, operating synergies and revenue enhancements are expected to
be achieved in various amounts at various times during the periods
subsequent to the consummation of such transactions, and not ratably over or
at the beginning or end of such periods. See "Management and Operations of
PHFG after the Merger." No adjustment has been reflected in the pro forma
combined statements of operations for the anticipated cost savings,
operating synergies and revenue enhancements.
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For the reasons noted above, it should not be assumed that the dilution in
PHFG's earnings per share reflected in the pro forma combined condensed
consolidated statements of operations will represent actual dilution with
respect to the Merger.
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 PHFG Restated
Articles and the 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 CFX 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 PHFG Board 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 PHFG Board 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 PHFG Board is authorized to issue PHFG Preferred Stock and to fix and
state voting powers, designations, preferences or other special rights of such
shares and the qualifications, limitations and restrictions thereof. The PHFG
Preferred Stock may be issued in distinctly designated series, may be
convertible into PHFG Common Stock and may rank prior to the PHFG Common Stock
as to dividend rights, liquidation preferences, or both.
The authorized but unissued shares of PHFG Preferred Stock (as well as the
authorized but unissued and unreserved shares of PHFG Common Stock) are
available for issuance in future mergers or acquisitions, in a future public
offering or private placement or for other general corporate purposes. Except as
otherwise required to approve the transaction in which the additional authorized
shares of PHFG Preferred Stock (as well as PHFG Common Stock) would be issued,
shareholder approval generally would not be required for the issuance of these
shares. Depending on the circumstances, however, shareholder approval may be
required pursuant to the requirements for continued listing of the PHFG Common
Stock on the Nasdaq Stock
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<PAGE> 75
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 American Stock Transfer
& 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 PHFG Board prior to such time as any
person becomes an Acquiring Person) following the commencement of a tender offer
or exchange offer that would result in a person or group beneficially owning 25%
or more of such outstanding shares of PHFG Common Stock. Until the Distribution
Date, the PHFG Rights will be evidenced by the PHFG Common Stock certificates
and will be transferred with and only with such PHFG Common Stock certificates,
and the surrender for transfer of any certificates for PHFG Common Stock
outstanding also will constitute the transfer of the PHFG Rights associated with
the PHFG Common Stock represented by such certificate. The PHFG Rights are not
exercisable until the Distribution Date and will expire at the close of business
on September 25, 1999, unless earlier redeemed by PHFG, as described below.
Unless the PHFG Rights are earlier redeemed, in the event that at any time
following the Stock Acquisition Date (i) PHFG were to be the surviving
corporation in a merger or other business combination with an Acquiring Person
and the PHFG Common Stock remained outstanding and was not changed into or
exchanged for other securities or assets, (ii) an Acquiring Person engages in a
number of other self-dealing transactions specified in the PHFG Rights
Agreement, or (iii) any person, other than employee benefit plans of PHFG,
becomes the beneficial owner of 25% or more of the then-outstanding shares of
PHFG Common Stock, the PHFG Rights Agreement provides that proper provision
shall be made so that each holder of record of a PHFG Right, other than the
Acquiring Person, whose PHFG Rights will thereupon become null and void, and
certain of its transferees, will thereafter have the right to receive, upon
exercise and payment of the Purchase Price, PHFG Common Stock (or, in certain
circumstances, cash, property or other securities of PHFG) having a value equal
to two times the exercise price of the PHFG Right. In addition, unless the PHFG
Rights are earlier redeemed, in the event that at any time following the Stock
Acquisition Date, (i) PHFG is involved in a merger or other business combination
in which PHFG is not the surviving corporation or in which the PHFG Common Stock
is changed into or exchanged for other securities of any other person or cash or
any other property, or (ii) 50% or more of PHFG's assets or earning power of
PHFG and its subsidiaries taken as a whole is sold or transferred, the PHFG
Rights Agreement provides that proper provision shall be made so that each
holder of record of a PHFG Right (other than PHFG Rights which previously have
been voided as set forth above) will from and after such date have the right to
receive, upon exercise and payment of the Purchase Price, common stock of the
acquiring company having a value equal to two times the exercise price of the
PHFG Right. The events set forth in this paragraph are referred to in the PHFG
Rights Agreement as the "Triggering Events."
At any time after a person becomes an Acquiring Person, PHFG may exchange
all or part of the PHFG Rights (other than PHFG Rights which previously have
been voided as set forth above) for shares of PHFG Common Stock at an exchange
ratio of one share per PHFG Right, as such may be appropriately adjusted to
reflect any stock split or similar transaction.
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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 PHFG's Annual
Report on Form 10-K for 1996. See "Available Information."
OTHER PROVISIONS
The PHFG Restated Articles and the 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 PHFG Restated
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 25 directors (see "The
Merger -- Amendment and Restatement of PHFG's Articles of Incorporation"); (iii)
authorizing directors to fill vacancies in the PHFG Board; (iv) increasing the
vote for removal of directors by shareholders; (v) increasing the amount of
stock required to be held by shareholders seeking to call a special meeting of
shareholders; and (vi) requiring an increased vote of shareholders to approve
certain business combinations unless certain price and procedural requirements
are met or the PHFG Board approves the business combination in the manner
provided therein. The provisions in the Bylaws of PHFG include specific
conditions under which (i) persons may be nominated for election as directors of
PHFG at an annual meeting of shareholders; and (ii) business may be transacted
at an annual meeting of shareholders.
In addition to the foregoing, in certain instances the issuance of
authorized but unissued shares of PHFG Common Stock or PHFG Preferred Stock may
have an anti-takeover effect by making it more difficult and/or expensive to
acquire PHFG. Sections 611-A and 910 of the MBCA also may have the same
anti-takeover effects. See "Comparison of the Rights of Shareholders -- State
Anti-takeover Statutes."
TRANSFER AGENT
The transfer agent and registrar for the PHFG Common Stock is American
Stock Transfer & Trust Company.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
PHFG is a Maine corporation subject to the provisions of the MBCA and CFX
is a New Hampshire corporation subject to the provisions of the NHBCA. Upon
consummation of the Merger, shareholders of CFX will become shareholders of PHFG
and their rights as shareholders of PHFG will be governed by the PHFG Restated
Articles, the Bylaws of PHFG and the MBCA.
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE
DIFFERENCES AFFECTING THE RIGHTS OF CFX'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 INCORPORATION AND BYLAWS OF CFX, THE PHFG RESTATED
ARTICLES, THE BYLAWS OF PHFG AND APPLICABLE LAWS AND REGULATIONS.
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<PAGE> 77
AUTHORIZED CAPITAL STOCK
CFX. CFX's Articles of Incorporation authorize the issuance of up to
50,000,000 shares of CFX Common Stock, of which 24,058,307 shares were
outstanding as of the Record Date, and up to 3,000,000 shares of preferred
stock, $1.00 par value per share ("CFX Preferred Stock"), of which no shares are
issued and outstanding.
PHFG. PHFG's Restated Articles authorize the issuance of up to 100,000,000
shares of PHFG Common Stock, of which 27,739,090 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.
ISSUANCE OF CAPITAL STOCK
CFX. Under the NHBCA, CFX may issue shares of CFX capital stock and rights
or options for the purchase of shares of capital stock of CFX on such terms and
for such consideration as may be determined by the CFX Board. Neither the NHBCA
nor CFX's Articles of Incorporation and Bylaws require shareholder approval of
any such actions. However, the listing agreement between the AMEX and
corporations, such as CFX, with securities which are listed on the AMEX require
such corporations 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 and securities law treatment under current laws and
regulations.
PHFG. Under the MBCA, PHFG may issue shares of PHFG capital stock and
rights or options for the purchase of shares of capital stock of PHFG on such
terms and for such consideration as may be determined by the PHFG Board. None of
the MBCA, the PHFG Restated Articles and PHFG's 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. PHFG also is subject to the requirements of the
Bylaws of the National Association of Securities Dealers, Inc., which generally
require corporations, such as PHFG, with securities which are listed 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. PHFG also may elect to seek shareholder approval of
stock-related compensation plans in certain instances in order to qualify such
plans for favorable federal income tax and securities laws treatment under
current laws and regulations.
VOTING RIGHTS
CFX. Each share of CFX Common Stock is entitled to one vote per share on
all matters properly presented at meetings of shareholders of CFX, and
shareholders of CFX do not have the right to cumulate votes in an election 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, and
shareholders of PHFG do not have the right to cumulate their votes in an
election of directors.
CLASSIFICATION AND SIZE OF BOARD OF DIRECTORS
CFX. The Articles of Incorporation of CFX provide that the number of
directors of CFX shall be no less than nine and no more than 21 and shall be
fixed from time to time within the foregoing limitations by resolution of the
CFX Board, provided that no decrease in the number of directors shall shorten
the term of any incumbent director. Currently the number of directors of CFX is
21.
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<PAGE> 78
Pursuant to the CFX Articles of Incorporation and Bylaws, the CFX 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 PHFG Restated Articles 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
25, and further provided that no decrease in the number of directors shall have
the effect of shortening the term of any incumbent director. See "The Merger --
Amendment and Restatement of PHFG's Articles of Incorporation." Currently the
number of directors of PHFG is 13, which will be increased to 18 upon
consummation of the Merger (17 if the Effective Time is after the 1998 annual
meeting of shareholders of PHFG, as of which one current director of PHFG will
retire). See "The Merger -- Interests of Certain Persons in the Merger."
Pursuant to the PHFG Restated Articles and PHFG's 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
CFX. Vacancies occurring in the CFX Board by reason of an increase in the
number of directors may be filled by the CFX Board for a term of office
continuing only until the next election of directors by shareholders. Vacancies
occurring in the CFX Board by reason of death, resignation, retirement,
disqualification, removal or other cause may be filled by a majority vote of the
remaining directors, and any director so chosen shall hold office for the
unexpired term of their predecessors in office.
Pursuant to the CFX Articles of Incorporation, directors of CFX may be
removed at any meeting of shareholders called expressly for the purpose by the
affirmative vote of the holders of 75% of the shares entitled to vote or, if
removal is for cause, as defined, by a majority of the shares then entitled to
vote.
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 PHFG Restated Articles, 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
CFX. The Articles of Incorporation of CFX provide that in connection with
the exercise of its judgment in determining what is in the best interests of CFX
and its shareholders, when evaluating a Business Combination (as defined) or a
proposal by another person or persons to make a Business Combination or a tender
or exchange offer, the CFX Board may, in addition to considering the adequacy of
the amount to be paid in connection with any such transaction, consider all of
the following factors and any other factors which it deems relevant: (i) the
social and economic effects of the transaction on CFX and its subsidiaries,
employees, depositors, loan and other customers, creditors and other elements of
the communities in which CFX and its subsidiaries operate or are located; (ii)
the business and financial condition and earnings prospects of the acquiring
person or persons, including, but not limited to, debt obligations to be
incurred in connection with the acquisition, and other likely financial
obligations of the acquiring person or persons, and the possible effect of such
conditions upon CFX and its subsidiaries and the other elements of the
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<PAGE> 79
communities in which CFX and its subsidiaries operate or are located; and (iii)
the competence, experience and integrity of the acquiring person or persons and
its or their management.
PHFG. Under the MBCA, directors and officers may, in considering the best
interests of the corporation and 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
CFX. The NHBCA generally provides that transactions involving a New
Hampshire corporation and an interested director of that corporation are not
voidable by the corporation solely because of such director's interest if: (i)
the material facts are disclosed and a majority of disinterested directors on
the board of directors or a committee thereof authorize, approve or ratify the
transaction, (ii) the material facts are disclosed and a majority of shares
entitled to vote thereon authorize, approve or ratify the transaction, exclusive
of any shares owned by or voted under the control of the benefited director, or
(iii) the transaction was fair to the corporation. The NHBCA provides that a New
Hampshire corporation may not lend money to or guarantee the obligation of a
director of the corporation unless (i) the loan or guarantee is approved by a
majority of the shares entitled to vote thereon, exclusive of the shares owned
by or voted under the control of the benefited director, or (ii) the board of
directors of the corporation determines that the loan or guarantee benefits the
corporation and either approves the specific loan or guarantee or a general plan
authorizing loans and guarantees.
PHFG. The MBCA generally provides that transactions involving a Maine
corporation and an interested director (or officer) of that corporation are not
void or voidable solely because of such director's (or officer's) interest if:
(i) the material facts are disclosed and noted in the minutes and a majority of
disinterested directors on the board of directors or a committee thereof
authorize, approve or ratify the transaction, (ii) the material facts are
disclosed and a majority of shares entitled to vote thereon authorize, approve
or ratify the transaction, inclusive of any shares owned by or voted under the
control of the benefited director, or (iii) the transaction was fair and
equitable to the corporation at the time it is authorized or approved and the
party asserting the fairness of the transaction establishes fairness.
EXCULPATION OF DIRECTORS AND OFFICERS
CFX. CFX's Articles of Incorporation provide that no director and/or
officer of CFX shall be personally liable to CFX or its shareholders for
monetary damages for breach of fiduciary duty as a director or officer, except
with respect to (i) any breach of the director's and/or officer's duty of
loyalty to CFX or its shareholders, (ii) acts or omissions which are not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) actions for which a director may be liable under specified provisions of
the NHBCA or (iv) any transaction from which the director or officer 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. None of
the MBCA, the PHFG Restated Articles and the Bylaws of PHFG contain provisions
which limit or eliminate the personal liability of officers in certain
circumstances.
SPECIAL MEETINGS OF SHAREHOLDERS
CFX. CFX's Bylaws provide that special meetings of shareholders of CFX may
be called by the Chairman of the Board, the President, a Vice President or by a
majority of the CFX Board, and shall be called by the CFX Board upon the written
request to the Secretary of CFX of the holders of not less than 10% of the
outstanding shares of CFX entitled to vote at the meeting.
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<PAGE> 80
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
CFX. The Articles of Incorporation of CFX provide that nominations by
shareholders for election as a director must be made in writing and received by
the Secretary of CFX not less than 30 days nor more than 60 days prior to any
meeting of shareholders called for the election of directors, provided that if
fewer than 14 days' notice of the meeting is given to shareholders, such
proposed nominations shall be received by the close of the tenth day following
the day on which the notice of the meeting was mailed to shareholders. Each such
notice shall set forth (i) the name, age, business address and, if known,
residence address of each proposed nominee in such notice; (ii) the principal
occupation or employment of each such nominee; and (iii) the number of shares of
CFX stock which are beneficially owned by each nominee. In addition, the
shareholder making such nomination shall promptly provide any other information
reasonably requested by CFX. A nomination for director of CFX may only be made
at a shareholders meeting called for the purpose of electing directors at which
the nominating shareholder is present in person or by proxy.
PHFG. PHFG's Bylaws provide that nominations by shareholders for election
as a director must be made in writing and delivered or mailed to the Clerk of
PHFG not later than (i) 90 days prior to the anniversary date of the immediately
preceding annual meeting, and (ii) with respect to an election to be held at a
special meeting of shareholders for the election of directors, the close of
business on the tenth day following the date on which notice of such meeting is
first given to shareholders. Each such notice shall set forth (i) the name and
address of the shareholder who intends to make the nomination and of the person
or persons to be nominated; (ii) a representation that the shareholder is a
holder of record of stock of PHFG entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) a description of all arrangements or
understandings between the shareholder and each nominee and any other person or
person (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (iv) such other information
regarding each nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC; and
(v) the consent of each nominee to serve as a director of PHFG if so elected.
SHAREHOLDER PROPOSALS
CFX. CFX does not have a provision in its Articles of Incorporation or
Bylaws relating to shareholder proposals at annual meetings of shareholders.
Shareholder proposals which are proposed to be included in the proxy statement
and form of proxy of CFX relating to an annual meeting must be submitted in
accordance with the notice and other requirements of Rule 14a-8 under the
Exchange Act.
PHFG. PHFG's Bylaws provide that a proposal by shareholders for submission
to a vote of shareholders at an annual meeting must be made in writing and
delivered or mailed to the Clerk of PHFG not less than 90 days prior to the
anniversary date of the immediately preceding annual meeting. A shareholder's
notice to the Clerk shall set forth as to each matter the shareholder proposes
to bring before the annual meeting (a) a brief description of the business
desired to be brought before the annual meeting; (b) the name and address, as
they appear on PHFG's books, of the shareholder proposing such business; (c) the
class and number of shares of PHFG which are beneficially owned by the
shareholder; and (d) any material interest of the shareholder in such business.
Shareholder proposals which are proposed to be included in the proxy statement
and form of proxy of PHFG relating to an annual meeting must be submitted in
accordance with the notice and other requirements of Rule 14a-8 under the
Exchange Act.
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<PAGE> 81
SHAREHOLDER ACTION WITHOUT A MEETING
CFX. The Bylaws of CFX provide that any action required or permitted to be
taken at an annual or special meeting of shareholders may be taken without a
meeting if the action is taken by all the shareholders entitled to vote on the
action by one or more written consents. Unanimous written consent is obtainable,
as a practical matter, only on matters on which there are only a relatively few
shareholders entitled to vote.
PHFG. The Bylaws of PHFG provide that any action to be taken or which may
be taken at any annual or special meeting of shareholders may be taken if a
consent in writing, setting forth the actions so taken, is given by the holders
of all outstanding shares entitled to vote. Unanimous written consent is
obtainable, as a practical matter, only on matters on which there are only a
relatively few shareholders entitled to vote.
SHAREHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS
CFX. The NHBCA provides that a list of shareholders of a New Hampshire
corporation such as CFX must be available for inspection by any shareholder,
beginning two business days after notice of the meeting of shareholders is given
for which the list was prepared and continuing through the meeting. The NHBCA
also provides that a shareholder of a New Hampshire corporation may inspect and
copy certain specified records of the corporation during regular business hours
if the shareholder (i) has made a demand in writing at least five business days
in advance of the date on which he or she desires to inspect and copy records,
and such demand is made in good faith and states a proper purpose, (ii)
described with reasonable particularity his purpose and the records to be
inspected and (iii) the records are directly connected with the purpose. The
NHBCA authorizes a shareholder of a New Hampshire corporation which refuses to
permit an authorized inspection to bring a legal action for an order directing
the corporation to permit such inspection and, if successful, to be awarded
costs incurred to obtain the order unless the corporation proves that it refused
inspection in good faith because it had a reasonable basis for doubt about the
right of the shareholder to inspect the records demanded.
PHFG. The Bylaws of PHFG provide that a list of shareholders shall be
available for inspection by any shareholder entitled to vote for a period of not
less than 10 days before and during each meeting of shareholders. The MBCA
provides that a shareholder of a Maine corporation such as PHFG who has been
such for at least six months or owns 10% or more of the corporation's
outstanding shares may, for any proper purpose, and subject to the provision, if
requested, of specified affidavits, inspect the corporation's books and records
of account, minutes of meetings and list or record of shareholders. The MBCA
authorizes a shareholder of a Maine corporation which refuses to permit an
authorized inspection to bring a legal action for an order directing the
corporation to permit such inspection and, if successful, to be awarded costs
and in certain circumstances specified punitive damages.
AMENDMENT OF GOVERNING INSTRUMENTS
CFX. The holders of at least two thirds of all shares of CFX entitled to
vote for the election of directors is required to amend or repeal, or to adopt
any provision in contravention of or inconsistent with, the Articles of
Incorporation of CFX, provided that any such action with respect to the
provision of the CFX Articles of Incorporation which deals with voting for
Business Combinations, as described under "Mergers, Consolidations and Sales of
Assets" below, requires the affirmative vote of the holders of at least 80% of
all shares of CFX entitled to vote for the election of directors.
The Bylaws of CFX may be amended by the affirmative vote of a majority of
the entire CFX Board, subject to repeal, change or adoption of any contravening
or inconsistent provision by the vote of the holders of at least two thirds of
all shares entitled to vote on the matter at a meeting expressly called for that
purpose.
PHFG. No amendment to the PHFG Restated Articles generally may be made
unless it is first proposed by the PHFG Board and thereafter approved by the
holders of at least a majority of all outstanding shares entitled to vote
thereon, with the exception of certain sections thereof which generally require
approval by the holders of at least 75% of the shares of PHFG entitled to vote
generally in an election of directors. See "The Merger Amendment and Restatement
of PHFG's Articles of Incorporation." In addition, the "fair
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<PAGE> 82
price" provision in the PHFG Restated Articles may not be amended except in the
manner set forth therein. See "Business Combinations with Certain Persons and
Acquisitions of Shares" below.
The PHFG Restated Articles provide that the PHFG Board shall have the
exclusive power to adopt, amend or repeal the Bylaws of PHFG.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
CFX. The NHBCA requires the approval of the Board of Directors of CFX,
which shall recommend adoption by shareholders unless there is a conflict of
interest or other special circumstances, and the holders of at least a majority
of the outstanding CFX Common Stock for mergers, consolidations and share
exchanges in which CFX is a participating corporation and for sales of all or
substantially all of its property and assets.
The Articles of Incorporation of CFX provide that the vote of the holders
of at least 80% of the outstanding shares entitled to vote for the election of
directors shall be required to approve or authorize any Business Combination to
which CFX or any subsidiary of CFX is a party unless the aggregate of the cash
and fair market value of the consideration to be paid to all holders of the CFX
Common Stock in connection with the Business Combination shall be equal to the
highest price per share paid by the other party or parties to the Business
Combination (the "Acquiring Party") in acquiring any CFX Common Stock, provided,
however, that the consideration to be paid to the holders of the CFX Common
Stock shall be in the same form as that paid by the Acquiring Party in acquiring
the shares of CFX Common Stock held by it except to the extent that any
shareholder of CFX shall otherwise agree. The Articles of Incorporation of CFX
also provide that, subject to the immediately preceding sentence, the vote of
the holders of at least 75% of the outstanding shares entitled to vote for the
election of directors shall be required to approve or authorize any Business
Combination to which CFX or any subsidiary of CFX is a party unless the Business
Combination shall have been approved by at least two thirds of the directors of
CFX who are not affiliated with, or shareholders of, the Acquiring Party. The
term Business Combination is broadly defined in the Articles of Incorporation of
CFX to include mergers, consolidations, sales of all or a substantial portion of
assets, dissolutions and certain issuances of securities and reclassifications
of stock by or involving CFX or any of its subsidiaries. Pursuant to their
terms, the supermajority voting requirements for Business Combinations contained
in the CFX Articles of Incorporation are inapplicable to the Merger.
PHFG. The MBCA requires the approval of the PHFG Board 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.
The PHFG Restated Articles 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 PHFG Board, including a
majority of the Continuing Directors, as defined, approves the merger or other
business combination in the manner provided therein. A Related Person generally
is defined to include any person, firm or entity which is the beneficial owner
of 10% or more of the voting shares of PHFG, and a Continuing Director generally
is defined as any director who was a director of PHFG 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
CFX. The NHBCA does not contain provisions which are comparable to the
MBCA discussed below dealing with business combinations between a Maine
corporation and certain persons and acquisitions of shares of voting stock of a
Maine corporation.
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
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<PAGE> 83
Controlling Person, which generally is defined to mean an individual, firm or
entity (or group thereof) which has voting power over at least 25% of the
outstanding voting shares of the corporation. Such a demand must be submitted to
the Controlling Person within 30 days after the Controlling Person provides
required notice to the shareholders of the acquisition or transactions which
resulted in such person or group becoming a Controlling Person. Section 910
could be interpreted to provide that a person or group of persons could become a
Controlling Person for purposes of such section by soliciting and acquiring
revocable proxies to vote at least 25% of the voting shares of a corporation.
Section 611-A of the MBCA generally provides that a Maine corporation which
has a class of voting stock registered or traded on a national securities
exchange or under the Exchange Act may not engage in any business combination
for five years following an Interested Stockholder's Stock Acquisition Date
unless the business combination is (i) approved by the corporation's board of
directors prior to that Interested Stockholder's Stock Acquisition Date or (ii)
approved, subsequent to that Interested Stockholder's Stock Acquisition Date, by
the board of directors of the Maine corporation and authorized by the holders of
a majority of the outstanding voting stock of the corporation not beneficially
owned by that Interested Stockholder or any affiliate or associate thereof or by
persons who are either directors or officers and also employees of the
corporation. An Interested Stockholder is defined to include any person, firm or
entity that is directly or indirectly the beneficial owner of 25% or more of the
outstanding voting stock of the corporation, other than by reason of a revocable
proxy given in response to a proxy solicitation conducted in accordance with the
Exchange Act which is not then reportable on a Schedule 13D under the Exchange
Act, and Stock Acquisition Date is defined to mean the date that any person,
firm or entity first becomes an Interested Stockholder of that corporation.
DISSENTERS' RIGHTS OF APPRAISAL
CFX. Under the NHBCA, a shareholder of a New Hampshire corporation such as
CFX generally has the right to dissent from, and obtain payment of the fair
value of his shares in the event of, a merger or share exchange in which the
corporation is participating, a sale of all or substantially all of the property
and assets of the corporation and certain amendments to the corporation's
articles of incorporation which materially and adversely affect rights in
respect of the shareholder's shares in certain specified respects, subject to
specified procedural requirements. For a detailed description of the dissenters'
rights of shareholders of CFX in connection with the Merger, see "The
Merger -- Dissenters' Rights."
PHFG. Under the MBCA, a shareholder of a Maine corporation such as PHFG
generally has the right to dissent from a merger or consolidation in which the
corporation is participating or sale of all or substantially all of the assets
of the corporation, subject to specified procedural requirements. The MBCA
generally does not confer appraisal rights, however, if the corporation's stock
is either (i) registered or traded on a national securities exchange or (ii)
registered with the SEC pursuant to Section 12(g) of the Exchange Act, as is the
PHFG Common Stock. See "Available Information." Even if a corporation's stock
meets the foregoing requirements, however, the MBCA provides that appraisal
rights generally will be permitted if shareholders of the corporation are
required to accept for their stock in any merger, consolidation or similar
transaction anything other than (i) shares of the surviving or new corporation
resulting from the transaction, or such shares plus cash in lieu of fractional
shares, or (ii) shares, or shares plus cash in lieu of fractional shares, of any
other corporation unless such shares are registered or traded on a national
securities exchange or held of record by not less than 2,000 shareholders, or
any combination of the foregoing.
SHAREHOLDER RIGHTS PLANS
CFX. CFX has not adopted a shareholder rights plan.
PHFG. PHFG has adopted a shareholder rights plan, as described under
"Description of PHFG Capital Stock -- PHFG Rights."
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<PAGE> 84
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 October 31, 1997 by (i) each director of PHFG and (ii)
all directors and executive officers of PHFG as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF OCTOBER 31, 1997(1)
-------------------------
NAME OF BENEFICIAL OWNER AMOUNT PERCENT
------------------------------------------------------------- --------- -------
<S> <C> <C>
Directors:
Robert P. Bahre............................................ 40,961(2) -- %
Everett W. Gray............................................ 7,032(2) --
Andrew W. Greene........................................... 5,550(2) --
Katherine M. Greenleaf..................................... 9,424(2) --
Dana S. Levenson........................................... 7,574(2) --
Robert A. Marden........................................... 10,165(2)(3) --
Malcolm W. Philbrook, Jr. ................................. 43,153(2)(4) --
Pamela P. Plumb............................................ 11,582(2) --
William J. Ryan............................................ 205,620(5) --
Curtis M. Scribner......................................... 10,604(2) --
Paul R. Shea............................................... 8,372(2) --
Davis P. Thurber........................................... 288,844(2) 1.0
John E. Veasey............................................. 159,187(2) --
All directors and executive officers of PHFG as a group (20
persons)................................................... 1,107,781(6) 3.9 %(6)
</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 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 non-employee directors other than Messrs. Gray, Marden,
Thurber and Veasey, includes outstanding options to purchase 3,000 shares of
PHFG Common Stock pursuant to PHFG's 1995 Stock Option Plan for Non-Employee
Directors, and in the case of Messrs. Gray, Marden, Thurber and Veasey
includes outstanding options to purchase 2,000 shares, 2,373 shares, 200
shares and 1,000 shares of PHFG Common Stock granted pursuant to such plan,
respectively.
(3) Includes 1,714 shares held by Mr. Marden's spouse, with whom beneficial
ownership of such shares is shared.
(4) Includes 1,670 shares held by one entity for which Mr. Philbrook serves as
director; beneficial ownership of such shares is shared with the other
members of the investment committee. Also includes 14,416 Mr. Philbrook
serves as sole trustee or in one case as co-trustee; beneficial ownership of
2,505 of such shares is shared with a co-trustee.
(5) Includes shares over which the indicated officer has voting power pursuant
to PHFG's Thrift Incentive Plan and Profit Sharing Employee Stock Ownership
Plan, and options to purchase shares of PHFG
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<PAGE> 85
Common Stock pursuant to PHFG's stock option plans (collectively, the "Option
Plans") which are exercisable within 60 days of October 31, 1997, as follows:
<TABLE>
<CAPTION>
THRIFT PROFIT SHARING CURRENTLY
INCENTIVE EMPLOYEE STOCK EXERCISABLE
PLAN OWNERSHIP PLAN OPTIONS
--------- -------------- -----------
<S> <C> <C> <C>
William J. Ryan.......................... 24,074 2,949 164,418
</TABLE>
(6) Includes an aggregate of 64,926 shares of PHFG Common Stock which are held
by the trusts established pursuant to the Thrift Incentive Plan (48,592
shares) and the Profit Sharing Employee Stock Ownership Plan (16,334 shares)
and which have been allocated to the accounts of executive officers of PHFG
as a group. Also includes 358,202 shares which may be acquired upon the
exercise of outstanding stock options pursuant to the Option Plans which are
exercisable within 60 days of October 31, 1997. Shares subject to such stock
options are deemed to be outstanding for the purpose of computing the
percentage of PHFG Common Stock beneficially owned by directors and
executive officers of PHFG as a group.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
PHFG is not aware of any person or entity, including any "group" as that
term is used in Section 13(d)(3) of the Exchange Act, who or which was the
beneficial owner of 5% or more of the outstanding PHFG Common Stock as of
October 31, 1997.
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<PAGE> 86
CERTAIN BENEFICIAL OWNERS OF CFX COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the CFX Common Stock
beneficially owned as of October 31, 1997 by (i) each director of CFX and (ii)
all directors and executive officers of CFX as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AS OF
OCTOBER 31, 1997(1)(2)
-----------------------
NAME OF BENEFICIAL OWNER AMOUNT PERCENT
--------------------------------------------------------------- --------- -------
<S> <C> <C>
Directors:
Richard F. Astrella.......................................... 69,107 -- %
William E. Aubuchon, III..................................... 28,523 --
Peter J. Baxter.............................................. 154,468 --
Richard B. Baybutt........................................... 94,982 --
Christopher V. Bean.......................................... 40,101 --
Christopher W. Bramley....................................... 80,380 --
John N. Buxton............................................... 7,427 --
P. Kevin Condron............................................. 37,577 --
Timothy J. Connors........................................... 10,191 --
Douglas Crichfield........................................... 163,841 --
Calvin L. Frink.............................................. 28,815 --
Eugene E. Gaffey............................................. 44,501 --
David R. Grenon.............................................. 66,589 --
Elizabeth Sears Hager........................................ 20,082 --
Douglas S. Hatfield.......................................... 52,984 --
Philip A. Mason.............................................. 20,337 --
Walter R. Peterson........................................... 88,426 --
Seth A. Resnicoff............................................ 30,476 --
Mark E. Simpson.............................................. 54,467 --
Robert W. Simpson............................................ 354,977 1.5
L. William Slanetz........................................... 37,246 --
All directors and executive officers of CFX as a group (26
persons)..................................................... 1,679,778(3) 6.9 %
</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 CFX Common Stock if he or she directly or indirectly has
or shares: (i) voting power, which includes the power to vote or to direct
the voting of the shares, or (ii) investment power, which includes the power
to dispose or direct the disposition of the shares. Unless otherwise
indicated, an individual has sole voting power and sole investment power
with respect to the indicated shares and all individual holdings amount to
less than 1% of the outstanding CFX Common Stock.
(2) The number of shares shown includes, but is not limited to, shares of CFX
Common Stock that could be acquired within 60 days of October 31, 1997
pursuant to the exercise of stock options, the power to revoke a trust or
similar arrangement: for Mr. Baybutt, 29,172 shares held by Baybutt
Construction Corp. and 16,408 shares owned by the Baybutt Construction Corp.
Profit Sharing Trust; for Mr. Hatfield, 14,429 shares held by the Douglas S.
Hatfield Trust, 1,000 shares held by the Douglas and Judith Hatfield
Charitable Unitrust and shares held by an IRA; for Messrs. Aubuchon,
Condron, Peterson and Slanetz, 4,282 shares, 1,456 shares 1,100 shares and
7,656 shares, respectively, held by close relatives, that such individuals
have neither investment power nor voting power and with respect to which
they disclaim beneficial ownership; for Messrs. Astrella, Aubuchon, Baxter,
Baybutt, Bean, Bramley, Condron, Frink, Gaffey, Grenon and Ms. Hager and
Messrs. Hatfield, Mason, Peterson and Slanetz, 29,268 shares, 8,150
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<PAGE> 87
shares, 135,058 shares, 19,884 shares, 19,884 shares, 49,362 shares, 8,150
shares, 17,384 shares, 19,884 shares, 8,150 shares, 19,884 shares, 19,884
shares, 19,884 shares, 17,884 shares and 19,884 shares, respectively, subject to
CFX Options granted under CFX stock option plans and to which such
individuals disclaim beneficial ownership. Includes shares as to which
voting or investment power is shared with the individual's spouse.
(3) Includes an aggregate of 412,594 shares which may be acquired upon the
exercise of outstanding CFX Options. Shares subject to such CFX Options are
deemed to be outstanding for the purpose of computing the percentage of CFX
Common Stock beneficially owned by directors and executive officers as a
group.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
CFX is not aware of any person or entity, including any "group" as that
term is used in Section 13(d)(3) of the Exchange Act, who or which was the
beneficial owner of 5% or more of the outstanding CFX Common Stock as of October
31, 1997.
LEGAL OPINION
The validity of the PHFG Common Stock offered hereby will be passed upon
for PHFG by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements of PHFG as of December 31, 1996 and
1995, and for each of the years in the three-year period ended December 31, 1996
incorporated by reference herein, have been incorporated by reference herein 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 audited consolidated financial statements of CFX and subsidiaries as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, included in CFX's Annual Report on Form 10-K for the
year ended December 31, 1996, incorporated by reference herein, have been
incorporated by reference herein in reliance on the report of Wolf & Company,
P.C., independent certified public accountants, incorporated by reference
herein, and upon the authority of such firm as experts in accounting and
auditing.
The supplemental consolidated financial statements of CFX as of December
31, 1996 and 1995, and for each of the years in the three-year period ended
December 31, 1996, included in the Current Report on Form 8-K filed by CFX on
December 12, 1997 (the "December 12, 1997 CFX Form 8-K"), incorporated by
reference herein, have been incorporated by reference herein in reliance upon
the report of Wolf & Company, P.C., independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
In rendering its report included in the December 12, 1997 CFX Form 8-K,
Wolf & Company, P.C. relied upon (i) the report of Shatswell, MacLeod & Company,
P.C. relating to the consolidated balance sheets of Portsmouth as of December
31, 1996 and 1995 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996, included in the December 12, 1997 CFX Form 8-K,
(ii) the report of KPMG Peat Marwick LLP relating to the consolidated balance
sheets of Community as of December 31, 1996 and 1995 and June 30, 1995, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the year ended December 31, 1996, the six months ended December
31, 1995, and for each of the years in the two-year period ended June 30, 1995,
included in the December 12, 1997 CFX Form 8-K, (iii) the report of KPMG Peat
Marwick LLP relating to the consolidated balance sheet of The Safety Fund
Corporation as of December 31, 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the
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<PAGE> 88
years in the two-year period ended December 31, 1995, included in the December
12, 1997 CFX Form 8-K, (iv) the report of Deloitte & Touche LLP relating to the
consolidated statements of operations, stockholders' equity and cash flows of
Orange Savings Bank and subsidiary for the year ended December 31, 1994,
included in the December 12, 1997 CFX Form 8-K, and (v) the authority of such
firms as experts in accounting and auditing.
The audited consolidated balance sheets of Portsmouth as of December 31,
1996 and 1995 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996, included in Portsmouth's Annual Report on Form
10-K for the year ended December 31, 1996, incorporated herein by reference to
the Current Report on Form 8-K filed by CFX on September 15, 1997 (the
"September 15, 1997 CFX Form 8-K"), have been audited by Shatswell, MacLeod &
Company, P.C., independent certified public accountants, as set forth in their
report thereon included therein and incorporated by reference herein to the
September 15, 1997 CFX Form 8-K. Such financial statements are incorporated
herein in reliance upon the report of Shatswell, MacLeod & Company, P.C.
pertaining to such financial statements given upon the authority of such firm as
experts in accounting and auditing.
The audited consolidated balance sheets of Community as of December 31,
1996 and 1995 and June 30, 1995, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the year ended
December 31, 1996, the six months ended December 31, 1995 and for each of the
years in the two-year period ended June 30, 1995, incorporated herein by
reference to the September 15, 1997 CFX Form 8-K, have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, as set forth in their
report thereon included therein and incorporated herein by reference to the
September 15, 1997 CFX Form 8-K. Such financial statements are incorporated
herein in reliance upon the report of KPMG Peat Marwick LLP pertaining to such
financial statements given upon the authority of such firm as experts in
accounting and auditing.
PROPOSALS FOR THE 1998 ANNUAL MEETINGS
In the case of each of PHFG and CFX, the deadline set forth in Rule 14a-8
under the Exchange Act for the submission of proposals by shareholders for
inclusion in the proxy statement and form of proxy to be used by PHFG and CFX in
connection with its annual meeting of shareholders to be held in April 1998 has
passed.
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ANNEX I
AGREEMENT AND PLAN OF MERGER
BETWEEN
PEOPLES HERITAGE FINANCIAL GROUP, INC.,
AND
CFX CORPORATION
DATED AS OF OCTOBER 27, 1997
<PAGE> 90
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS................................................................... 1
ARTICLE II THE MERGER................................................................... 5
2.1 The Merger................................................................... 5
2.2 Effective Time; Closing...................................................... 5
2.3 Treatment of Capital Stock................................................... 6
2.4 Shareholder Rights; Stock Transfers.......................................... 6
2.5 Fractional Shares............................................................ 6
2.6 Dissenting Shares............................................................ 7
2.7 Exchange Procedures.......................................................... 7
2.8 Anti-Dilution Provisions..................................................... 8
2.9 Options...................................................................... 8
2.10 Additional Actions........................................................... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 9
3.1 Capital Structure............................................................ 9
3.2 Organization, Standing and Authority of the Company.......................... 9
3.3 Ownership of the Company Subsidiaries........................................ 9
3.4 Organization, Standing and Authority of the Company Subsidiaries............. 9
3.5 Authorized and Effective Agreement........................................... 10
3.6 Securities Documents and Regulatory Reports.................................. 11
3.7 Financial Statements......................................................... 11
3.8 Material Adverse Change...................................................... 12
3.9 Environmental Matters........................................................ 12
3.10 Tax Matters.................................................................. 12
3.11 Legal Proceedings............................................................ 13
3.12 Compliance with Laws......................................................... 13
3.13 Certain Information.......................................................... 14
3.14 Employee Benefit Plans....................................................... 14
3.15 Certain Contracts............................................................ 15
3.16 Brokers and Finders.......................................................... 15
3.17 Insurance.................................................................... 16
3.18 Properties................................................................... 16
3.19 Labor........................................................................ 16
3.20 Loans; Nonperforming and Classified Assets................................... 16
3.21 Administration of Fiduciary Accounts......................................... 17
3.22 Derivative Transactions...................................................... 17
3.23 Required Vote; Antitakeover Provisions....................................... 17
3.24 Fairness Opinion............................................................. 17
3.25 Accounting for the Merger; Reorganization.................................... 17
3.26 Disclosures.................................................................. 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PHFG....................................... 18
4.1 Capital Structure............................................................ 18
4.2 Organization, Standing and Authority of PHFG................................. 18
</TABLE>
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<TABLE>
<S> <C> <C>
4.3 Ownership of the PHFG Subsidiaries........................................... 18
4.4 Organization, Standing and Authority of the PHFG Subsidiaries................ 19
4.5 Authorized and Effective Agreement........................................... 19
4.6 Securities Documents and Regulatory Reports.................................. 20
4.7 Financial Statements......................................................... 20
4.8 Material Adverse Change...................................................... 21
4.9 Environmental Matters........................................................ 21
4.10 Tax Matters.................................................................. 21
4.11 Legal Proceedings............................................................ 22
4.12 Compliance with Laws......................................................... 22
4.13 Certain Information.......................................................... 22
4.14 Employee Benefit Plans....................................................... 23
4.15 Certain Contracts............................................................ 24
4.16 Brokers and Finders.......................................................... 24
4.17 Insurance.................................................................... 24
4.18 Properties................................................................... 24
4.19 Labor........................................................................ 24
4.20 Loans........................................................................ 24
4.21 Administration of Fiduciary Accounts......................................... 25
4.22 Required Vote; Ownership of Company Common Stock............................. 25
4.23 Fairness Opinion............................................................. 25
4.24 Accounting for the Merger; Reorganization.................................... 25
4.25 Disclosures.................................................................. 25
ARTICLE V COVENANTS..................................................................... 26
5.1 Reasonable Best Efforts...................................................... 26
5.2 Shareholder Meetings......................................................... 26
5.3 Regulatory Matters........................................................... 26
5.4 Investigation and Confidentiality............................................ 27
5.5 Press Releases............................................................... 27
5.6 Business of the Parties...................................................... 27
5.7 Current Information.......................................................... 30
5.8 Indemnification; Insurance................................................... 31
5.9 Employee Benefit Plans and Arrangements...................................... 32
5.10 Stock Exchange Listing....................................................... 33
5.11 The Bank Mergers............................................................. 33
5.12 Affiliates; Restrictions on Resale........................................... 33
5.13 Disclosure Supplements....................................................... 33
5.14 Failure to Fulfill Conditions................................................ 33
ARTICLE VI CONDITIONS PRECEDENT......................................................... 33
6.1 Conditions Precedent -- PHFG and the Company................................. 33
6.2 Conditions Precedent -- The Company.......................................... 34
6.3 Conditions Precedent -- PHFG................................................. 35
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT........................................... 36
7.1 Termination.................................................................. 36
7.2 Effect of Termination........................................................ 37
7.3 Survival of Representations, Warranties and Covenants........................ 37
7.4 Waiver....................................................................... 37
7.5 Amendment or Supplement...................................................... 37
ARTICLE VIII MISCELLANEOUS.............................................................. 37
8.1 Expenses..................................................................... 37
8.2 Entire Agreement............................................................. 38
8.3 Assignment; Successors....................................................... 38
8.4 Notices...................................................................... 38
8.5 Alternative Structure........................................................ 38
8.6 Interpretation............................................................... 39
8.7 Counterparts................................................................. 39
8.8 Governing Law................................................................ 39
Exhibit A Form of Amended and Restated Articles of Incorporation of the Surviving
Corporation
Exhibit B Matters to be covered by Opinion(s) of Counsel to PHFG
Exhibit C Matters to be covered by Opinion(s) of Counsel to the Company
</TABLE>
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of October 27,
1997, between Peoples Heritage Financial Group, Inc. ("PHFG"), a Maine
corporation, and CFX Corporation (the "Company"), a New Hampshire corporation.
WITNESSETH:
WHEREAS, the Boards of Directors of PHFG 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; 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 PHFG's willingness to enter into
this Agreement, the Company is concurrently entering into a Stock Option
Agreement with PHFG (the "Company Stock Option Agreement"), pursuant to which
the Company is granting to PHFG the option to purchase shares of Company Common
Stock (as defined herein) under certain circumstances; and
WHEREAS, as a condition and inducement to the Company's willingness to
enter into this Agreement PHFG is concurrently entering into a Stock Option
Agreement with the Company (the "PHFG Stock Option Agreement"), pursuant to
which PHFG is granting to the Company the option to purchase shares of PHFG
Common Stock (as defined herein) under certain circumstances;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquired Companies" shall mean Orange Savings Bank, The Safety Fund
Corporation, Community Bankshares, Inc. and Portsmouth Bank Shares, Inc.
"Affiliate" shall have the meaning specified in Section 5.12(a) hereof.
"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Bank Mergers" shall have the meaning set forth in Section 5.11 hereof.
"Bank Merger Agreements" shall have the meaning set forth in Section 5.11
hereof.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC.
"Central Fund" shall mean the Mutual Savings Central Fund, Inc. of the
Commonwealth of Massachusetts.
"Certificates" shall have the meaning set forth in Section 2.4 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Banks" shall mean the Company Massachusetts Banks and the Company
New Hampshire Bank.
"Company Common Stock" shall mean the common stock, par value $.66 2/3 per
share, of the Company.
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"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, 1996, 1995 and 1994 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,
1996, 1995 and 1994 as filed by the Company in its Securities Documents, and
(ii) the consolidated statements of financial condition of the Company
(including related notes and schedules, if any) and the consolidated statements
of operations, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Company included in the Securities Documents filed by
the Company with respect to the quarterly and annual periods ended subsequent to
December 31, 1996.
"Company Massachusetts Banks" shall mean Orange Savings Bank, a
Massachusetts-chartered savings bank and a wholly-owned subsidiary of the
Company, and Safety Fund National Bank, a national bank and a wholly-owned
subsidiary of the Company.
"Company New Hampshire Bank" shall mean CFX Bank, a New Hampshire-chartered
savings bank and a wholly-owned subsidiary of the Company.
"Company Options" shall mean options to purchase shares of Company Common
Stock granted pursuant to the Company Stock Option Plans.
"Company Preferred Stock" shall mean the Preferred Stock, $1.00 par value
per share, of the Company.
"Company Stock Option Plans" shall mean (i) the Company's 1986 Stock Option
Plan, 1995 Stock Option Plan and 1997 Long-Term Incentive Plan, in each case as
amended as of the date hereof, and (ii) stock option plans of the Acquired
Companies under which the Company has assumed options that now represent the
right to purchase shares of Company Common Stock in connection with the
acquisition of such companies, in each case as amended as of the date hereof.
"Company Stock Purchase Plan" shall mean the Company's Amended and Restated
1992 Employee Stock Purchase Plan, as amended as of the date hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental Entity
or third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
sec.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. sec.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. sec.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. sec.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. sec.9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. sec.1101, et
seq; the Safe Drinking Water Act, 42 U.S.C. sec.300f, et seq; and all comparable
state and local laws, and (2) any common law (including without limitation
common
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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(b) 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 PHFG in connection with the
issuance of shares of PHFG 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.
"Loan" shall have the meaning set forth in Section 3.20(a) hereof.
"Massachusetts Bank Commissioner" shall mean the Bank Commissioner of the
Commonwealth of Massachusetts.
"Massachusetts Board" shall mean the Massachusetts Board of Bank
Incorporation.
"Material Adverse Effect" shall mean, with respect to PHFG or the Company,
respectively, any effect that (i) is material and adverse to the financial
condition, results of operations or business of PHFG and its Subsidiaries taken
as whole and the Company and its Subsidiaries taken as a whole, respectively, or
(ii) materially impairs the ability of the Company, PHFG or any of their
respective banking subsidiaries to consummate the transactions contemplated by
this Agreement and the Bank Merger Agreements, provided, however, that Material
Adverse Effect shall not be deemed to include (a) the impact of changes in laws
and regulations or interpretations thereof that are generally applicable to the
banking industry or generally accepted accounting principles that are generally
applicable to the banking industry, (b) reasonable expenses incurred in
connection with the transactions contemplated hereby and (c) actions or
omissions of a party (or any of its Subsidiaries) taken with the prior informed
written consent of the other party in contemplation of the transactions
contemplated hereby.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"MBCA" shall mean the Maine Business Corporation Act, as amended.
"Merger" shall mean the merger of the Company with and into PHFG pursuant
to the terms hereof.
"MHPF" shall mean the Massachusetts Housing Partnership Fund.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"New Hampshire Bank Commissioner" shall mean the Bank Commissioner of the
State of New Hampshire.
"NHBCA" shall mean the New Hampshire Business Corporation Act, as amended.
"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.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PHFG Banks" shall mean the PHFG Maine Bank, the PHFG New Hampshire Bank
and the PHFG Massachusetts Bank.
"PHFG Capital Securities" shall mean the 9.06% Capital Securities issued by
Peoples Heritage Capital Trust I and any similar capital securities which may be
issued by a trust subsidiary of PHFG in the future.
"PHFG Common Stock" shall mean the common stock, par value $.01 per share,
of PHFG and, unless the context otherwise requires, related PHFG Rights.
"PHFG Employee Plans" shall have the meaning set forth in Section 4.14(a)
hereof.
"PHFG Employee Stock Benefit Plans" shall mean the following employee
benefit plans of PHFG: 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,
Amended and Restated 1995 Stock Option Plan for Non-Employee Directors, 1996
Equity Incentive Plan and Dividend Reinvestment Plan.
"PHFG Financial Statements" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of PHFG as of December 31, 1996,
1995 and 1994 and the consolidated statements of income, shareholders' equity
and cash flows (including related notes and schedules, if any) of PHFG for each
of the three years ended December 31, 1996, 1995 and 1994 as filed by PHFG in
its Securities Documents, and (ii) the consolidated balance sheets of PHFG
(including related notes and schedules, if any) and the consolidated statements
of income, shareholders' equity and cash flows (including related notes and
schedules, if any) of PHFG included in the Securities Documents filed by PHFG
with respect to the quarterly and annual periods ended subsequent to December
31, 1996.
"PHFG Maine Bank" shall mean Peoples Heritage Savings Bank, a
Maine-chartered universal bank and a wholly-owned subsidiary of PHFG.
"PHFG Massachusetts Bank" shall mean Family Bank, F.S.B., a
federally-chartered savings bank and a wholly-owned subsidiary of PHFG.
"PHFG New Hampshire Bank" shall mean Bank of New Hampshire, a New
Hampshire-chartered commercial bank and a wholly-owned subsidiary of PHFG.
"PHFG Preferred Stock" shall mean the shares of preferred stock, par value
$.01 per share, of PHFG.
"PHFG Rights" shall mean the rights attached to shares of PHFG Common Stock
pursuant to PHFG Rights Agreement.
"PHFG Rights Agreement" shall mean the Stockholder Rights Agreement, dated
as of September 12, 1989, between PHFG and American Stock Transfer & Trust
Company, in its capacity as Rights Agent.
"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 5.13 hereof.
"Proxy Statement" shall mean the joint prospectus/proxy statement contained
in the Form S-4, as amended or supplemented, and to be delivered to shareholders
of PHFG 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.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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"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 respective
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.
"Surviving Corporation" shall have the meaning specified in Section 2.1
hereof.
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 PHFG (the "Merger") in accordance with the applicable provisions of the
MBCA and the NHBCA. PHFG shall be the surviving corporation of the Merger
(hereinafter sometimes called the Surviving Corporation) and shall continue its
corporate existence under the laws of the State of Maine. The name of the
Surviving Corporation shall be "Peoples Heritage Financial Group, Inc." Upon
consummation of the Merger, the separate corporate existence of the Company
shall terminate.
(b) From and after the Effective Time, the Merger shall have the effects
set forth in Section 905 of the MBCA and Section 293-A:11.06 of the NHBCA.
(c) Upon consummation of the Merger, (i) the Articles of Incorporation of
PHFG shall be substantially in the form of the Amended and Restated Articles of
Incorporation attached hereto as Exhibit A, until altered, amended or repealed
in accordance with their terms and applicable law, and (ii) the Bylaws of PHFG
shall be the same as the Bylaws of PHFG immediately prior to the Effective Time,
with the exception of such changes thereto as may be adopted by PHFG to reflect
the Merger, which Bylaws shall remain in effect until altered, amended or
repealed in accordance with their terms and applicable law.
(d) Upon consummation of the Merger, (i) the directors of PHFG shall be (x)
up to 13 of the persons serving as director of PHFG immediately prior to the
Effective Time if the Effective Time is prior to the annual meeting of
stockholders of PHFG in 1998 and up to 12 of the persons serving as director of
PHFG immediately prior to the Effective Time if the Effective Time is after such
annual meeting of stockholders and (y) five persons serving as director of the
Company immediately prior to the Effective Time (including Peter J. Baxter)
designated by the Company and who both meet the director qualification
requirements set forth in the Bylaws of PHFG and are otherwise acceptable to
PHFG and (ii) the executive officers of PHFG shall be the persons serving as
executive officers of PHFG immediately prior to the Effective Time, except that
Peter J. Baxter shall be Vice Chairman of the Board of Directors and an
Executive Vice President and Chief Operating Officer of PHFG. The directors and
executive officers of PHFG at the Effective Time shall serve for such terms as
are specified in or determined pursuant to the Articles of Incorporation and
Bylaws of PHFG.
2.2 EFFECTIVE TIME; CLOSING
The Merger shall become effective upon the occurrence of the filing of (i)
articles of merger with the Secretary of State of the State of Maine pursuant to
the MBCA and (ii) articles of merger with the Secretary of State of the State of
New Hampshire pursuant to the NHBCA, unless a later date and time is specified
as
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the effective time (the "Effective Time") in such articles of merger
(collectively, the "Articles of Merger"). 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 PHFG in Portland, Maine, or
at such other place, at such other time, or on such other date as the parties
may mutually agree upon. At the Closing, there shall be delivered to PHFG and
the Company the opinions, certificates and other documents required to be
delivered under Article VI hereof.
2.3 TREATMENT OF CAPITAL STOCK
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
(a) each share of PHFG Common Stock issued and outstanding immediately
prior to the Effective Time shall be unchanged and shall remain issued and
outstanding; and
(b) 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 PHFG, the Company or any of their respective
wholly-owned 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 without consideration)
shall become and be converted into the right to receive .667 shares of PHFG
Common Stock (subject to possible adjustment as set forth in Sections 2.8
and 7.1(h) hereof, the "Exchange Ratio").
2.4 SHAREHOLDER RIGHTS; STOCK TRANSFERS
At the Effective Time, each holder of a certificate or certificates
representing outstanding shares of Company Common Stock (the "Certificates")
shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender of any such Certificates in accordance with Section
2.7 hereof, certificates representing the number of whole shares of PHFG Common
Stock, and any cash in lieu of a fractional share interest, into which such
shares of Company Common Stock shall have been converted pursuant to Section 2.3
hereof, without interest. After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Company of shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to PHFG
or the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in Sections 2.6 and 2.7 hereof, as applicable, except as otherwise
provided by law.
2.5 FRACTIONAL SHARES
(a) No certificates or scrip representing fractional shares of PHFG Common
Stock shall be issued upon the surrender for exchange of a Certificate or
Certificates, and such fractional share interests shall not entitle the owner
thereof to vote or to any other rights as a shareholder of PHFG.
(b) Notwithstanding any other provision of this Agreement, each holder of
shares of Company Common Stock converted into shares of PHFG Common Stock
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of PHFG Common Stock (after taking into account all
Certificates delivered by such holder) shall, at the time of surrender of the
Certificate or Certificates representing such holder's shares of Company Common
Stock receive an amount of cash (without interest) equal to the product arrived
at by multiplying such fraction of a share of PHFG Common Stock by the closing
price of a share of PHFG 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.
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2.6 DISSENTING SHARES
Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the NHBCA and has not effectively withdrawn
or lost such right as of the Effective Time (the "Dissenting Shares") shall not
be converted into or represent a right to receive shares of PHFG Common Stock
hereunder, and the holder thereof shall be entitled only to such rights as are
granted by the NHBCA. The Company shall give PHFG prompt notice upon receipt by
the Company of any such written demands for payment of the fair value of such
shares of Company Common Stock and of withdrawals of such demands and any other
instruments provided pursuant to the NHBCA (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 shares of PHFG
Common Stock in accordance with the applicable provisions of this Agreement. Any
payments made in respect of Dissenting Shares shall be made by the Surviving
Corporation.
2.7 EXCHANGE PROCEDURES
(a) At or after the Effective Time, each holder of a Certificate or
Certificates, upon surrender of the same to an agent, duly appointed by PHFG
(the "Exchange Agent"), shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of whole shares of PHFG
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(b) hereof. As promptly as practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of an
outstanding Certificate which is to be exchanged for PHFG 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 PHFG Common Stock or cash
in lieu of any fractional share interest. Notwithstanding anything in this
Agreement to the contrary, Certificates surrendered for exchange by any
Affiliate of the Company (as defined in Section 5.12(a) hereof) shall not be
exchanged for certificates representing shares of PHFG Common Stock in
accordance with the terms of this Agreement until PHFG has received a written
agreement from such person as specified in Section 5.12(b).
(b) No holder of a Certificate shall be entitled to receive any dividends
in respect of the PHFG 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 PHFG Common Stock. In the event that dividends are declared and paid by PHFG
in respect of PHFG Common Stock after the Effective Time but prior to any
holder's surrender of Certificates, dividends payable to such holder in respect
of shares of PHFG Common Stock not then issued shall accrue (without interest).
Any such dividends shall be paid (without interest) upon surrender of the
Certificates. PHFG shall be entitled, after the Effective Time, to treat
Certificates as evidencing ownership of the number of whole shares of PHFG
Common Stock into which the shares of Company Common Stock represented by such
Certificates shall have been converted pursuant to this Agreement,
notwithstanding the failure on the part of the holder thereof to surrender such
Certificates.
(c) PHFG shall not be obligated to deliver a certificate or certificates
representing shares of PHFG Common Stock to which a holder of Company Common
Stock would otherwise be entitled as a result of the Merger until such holder
surrenders a Certificate or Certificates 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 PHFG. If any certificate evidencing shares of PHFG Common Stock is
to be issued in a name other than that in which the Certificate 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
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PHFG 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 PHFG
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 PHFG Common Stock, and PHFG shall assume each Company Option,
in accordance with the terms of the applicable Company Stock Option Plan and
stock option agreement by which it is evidenced, except that from and after the
Effective Time, (i) PHFG and the Human Resources Committee of its Board of
Directors shall be substituted for 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 PHFG may be exercised solely for shares of PHFG
Common Stock, (iii) the number of shares of PHFG 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 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 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. PHFG and the Company agree to take all necessary steps to effect the
foregoing provisions of this Section 2.9(a).
(b) 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
the options referred to in paragraph (a) of this Section 2.9 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 in
the case of a Form S-8 or, in the case of a Form S-3, until the shares subject
to such options may be sold without a further holding period under Rule 144
under the Securities Act.
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 Surviving
Corporation 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 PHFG that, except as Previously
Disclosed:
3.1 CAPITAL STRUCTURE
The authorized capital stock of the Company consists of 50,000,000 shares
of Company Common Stock and 3,000,000 shares of Company Preferred Stock. As of
the date hereof, there are 24,002,744 shares of Company Common Stock issued and
outstanding, 37,877 shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock and there are no shares of Company
Preferred Stock outstanding. All outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Company Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. Except by
virtue of (i) the Company Stock Option Agreement, (ii) outstanding Rights as of
the date hereof to purchase an aggregate of 1,178,453 shares of Company Common
Stock pursuant to the Company Stock Option Plans, as Previously Disclosed, and
(iii) Rights granted in the ordinary course of business pursuant to the Company
Stock Purchase Plan for any offering period pursuant thereto ended on or before
December 31, 1997, there are no Rights authorized, issued or outstanding with
respect to the capital stock of the Company.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Hampshire with full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The Company is
duly registered as a bank holding company under the BHCA and the regulations of
the FRB thereunder. The Company has heretofore delivered to PHFG true and
complete copies of the Certificate of Incorporation 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 its Significant Subsidiaries. Except for (i) capital
stock or other ownership interests in the Company Subsidiaries, (ii) stock in
the FHLB of Boston and the Federal Reserve Bank of Boston, (iii) securities and
other interests held in a fiduciary capacity and beneficially owned by third
parties or taken in consideration of debts previously contracted and (iv) the
PHFG Stock Option Agreement, the Company does not own or have the right to
acquire, directly or indirectly, any outstanding capital stock or other voting
securities or ownership interests of any corporation, bank, savings association,
partnership, joint venture or other organization. The outstanding shares of
capital stock or other ownership interests of each Company Subsidiary have been
duly authorized and validly issued, are fully paid and (except as provided by
applicable law) nonassessable, and are directly or indirectly 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
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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 each Company
Bank are insured by the BIF, or in the case of certain deposits of each such
institution, the SAIF, to the maximum extent permitted by the FDIA, and each
Company Bank has paid all deposit insurance premiums and assessments required by
the FDIA and the regulations thereunder. The deposit accounts of the
Massachusetts-chartered Company Massachusetts Bank are insured by the Depositors
Insurance Fund for amounts in excess of FDIC limits pursuant to Massachusetts
law, and the Company Massachusetts Bank has paid all deposit insurance premiums
and assessments required under applicable Massachusetts laws and regulations.
The Company has heretofore delivered or made available to PHFG true and complete
copies of the Charter or equivalent documents and Bylaws of each Company
Subsidiary 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 PHFG, constitutes a legal, valid and binding
obligation of the Company which is enforceable against the Company in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Mergers), 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
Certificate of Incorporation 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 or notices with, and the
consents, approvals or waivers of, as applicable, the FRB, the DOJ, the
Superintendent, the New Hampshire Bank Commissioner, the Massachusetts Board and
the MHPF in connection with the Merger, (ii) the filing and effectiveness of the
Form S-4 with the Commission, (iii) the approval of this Agreement by the
requisite vote of the shareholders of the Company, (iv) the filing of Articles
of Merger with the Secretary of State of the State of Maine pursuant to the MBCA
and the Secretary of State of the State of New Hampshire pursuant to the NHBCA,
in each case in connection with the Merger, and (v) such corporate approvals and
such applications or notices with, and consents, approvals or waivers of, the
OCC, the OTS, the FDIC, the New Hampshire Bank Commissioner, the Massachusetts
Bank Commissioner and the Central Fund as may be applicable in connection with a
Bank Merger, and except as Previously Disclosed, no consents, approvals or
waivers of or filings or registrations with any Governmental Entity or with any
third party are necessary on the part of the Company or a Company 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
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by a Company Bank of a Bank Merger Agreement and the consummation by a Company
Bank of the transactions contemplated thereby.
(d) As of the date hereof, the Company is not aware of any reason relating
to the Company or a Company Subsidiary (including without limitation Community
Reinvestment Act compliance) why all consents and approvals shall not be
procured from all Governmental Entities having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreements and (ii) the continuation by PHFG after the Effective Time of
the business of each of PHFG, the Company and the Company Subsidiaries 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 reasonably be expected to have a Material Adverse Effect on PHFG or the
Company or materially impair the value of the Company and the Company
Subsidiaries to PHFG.
3.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1994, the Company has timely filed with the Commission
all Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respects with the Securities Laws and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Since January 1, 1994, the Company and each Company Bank have duly
filed with the FRB, the OCC, the FDIC, the New Hampshire Bank Commissioner, the
Massachusetts Bank Commissioner and any other applicable Governmental Entity, 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
or a Company Subsidiary by the FRB, the OCC, the FDIC, the New Hampshire Bank
Commissioner, the Massachusetts Bank Commissioner or any other applicable
Governmental Entity, neither the Company nor any Company Subsidiary was required
to correct or change any action, procedure or proceeding which the Company
believes has not been corrected or changed as required in all material respects.
3.7 FINANCIAL STATEMENTS
(a) The Company has previously delivered or made available to PHFG accurate
and complete copies of the Company Financial Statements for all periods prior to
the date hereof, which, in the case of the consolidated statements of financial
condition of the Company as of December 31, 1996, 1995 and 1994 and the
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years ended December 31, 1996, 1995 and 1994, 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 5.7 hereof, fairly present or will fairly present, as the case may be,
the consolidated financial condition of the Company as of the respective dates
set forth therein, and the consolidated results of operations, shareholders'
equity and cash flows of the Company for the respective periods or as of the
respective dates set forth therein.
(b) Each of the Company Financial Statements 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 books and records of the Company and the Company Subsidiaries are
being maintained in material compliance with applicable legal and accounting
requirements, and such books and records accurately reflect in all material
respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of the Company and the Company Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the Securities Documents filed by the Company prior to the date hereof and (ii)
of liabilities incurred since June 30, 1997 in the ordinary course of business,
neither the Company nor any Company Subsidiary has any liabilities, whether
absolute, accrued,
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contingent or otherwise, material to the financial condition, results of
operations or business of the Company on a consolidated basis.
3.8 MATERIAL ADVERSE CHANGE
Since June 30, 1997, (i) the Company and the Company Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen that, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect on the Company.
3.9 ENVIRONMENTAL MATTERS
(a) To the best of the Company's knowledge, the Company and the Company
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.
(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 or which secure loans
of a Company Subsidiary as of the date hereof.
3.10 TAX MATTERS
(a) The Company and the Company 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 taxes required to
be paid in respect of the periods covered by such returns and, as of the
Effective Time, will have paid, or where payment is not required to have been
made, will have set up an adequate reserve or accrual for the payment of, all
taxes for any subsequent periods ending on or prior to the Effective Time.
Neither the Company nor any 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 the Company Subsidiaries are complete and accurate in
all material respects. Neither the Company nor any Company Subsidiary is
delinquent in the payment of any tax, assessment or governmental charge, and
none of them 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. The federal, state and local income tax returns of the Company and
the Company
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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
any Company Subsidiary as a result of such examinations or otherwise which have
not been settled and paid. There are currently no agreements in effect with
respect to the Company or a Company Subsidiary to extend the period of
limitations for the assessment or collection of any tax. As of the date hereof,
no audit, examination or deficiency or refund litigation with respect to such
return is pending or, to the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or a Company Subsidiary (nor does the Company
have any knowledge that the Internal Revenue Service has proposed any such
adjustment or change of accounting method) or (iii) has filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply.
3.11 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the Company or any Company Subsidiary or against any asset,
interest or right of the Company or any Company Subsidiary, or against any
officer, director or employee of any of them that in any such case, if decided
adversely, would, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any 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) The Company and each Company Subsidiary 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 any Company Subsidiary is in violation of its
respective Certificate of Incorporation or equivalent document 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 any 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 any 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 banks or bank holding
companies issued by governmental authorities), and none 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 the Company
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 PHFG and up to and
including the date(s) of the meetings of shareholders to which such Proxy
Statement relates, will contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date. The Proxy Statement mailed by the Company to its shareholders in
connection with the meeting of shareholders at which this Agreement will be
considered by such shareholders will comply as to form in all material respects
with the Exchange Act and the rules and regulations promulgated thereunder.
3.14 EMPLOYEE BENEFIT PLANS
(a) The Company has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, welfare or employee benefit plan or agreement maintained or
contributed to by the Company or any Company Subsidiary for the benefit of
employees or former employees of the Company or any Company Subsidiary (the
"Company Employee Plans"), and the Company has previously furnished or made
available to PHFG 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 with respect to each Company Employee Plan, 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 any 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 any 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, other than any reportable event
for which notice to the PBGC is not required.
(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), and neither the Company nor any Company Subsidiary
(or their respective successors) will incur any liability in the event of a
complete withdrawal from the multi-employer plan of which the Company and
certain of its Subsidiaries is a participant as of the date hereof in connection
with the transactions contemplated hereby.
(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 June 30,
1997 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
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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 relating to a Company Employee Plan.
3.15 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the Company or a Company Subsidiary (other than deposits,
federal funds purchased, FHLB advances and securities sold under agreements to
repurchase) or the guarantee by the Company or a Company Subsidiary of any
obligation, (ii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election or retention in office of
any present or former director, officer or employee of the Company or 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 existing or former 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 or (vi) 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 noncompliance 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 for an agreement with Keefe, Bruyette & Woods, Inc., 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.
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3.17 INSURANCE
The Company believes that it and each Company Subsidiary is insured, and
during each of the past three calendar years has been insured, for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured and has maintained all insurance
required by applicable laws and regulations. The Company has Previously
Disclosed to PHFG a list identifying all insurance policies maintained by it or
a Company Subsidiary as of the date hereof. All of the policies and bonds
maintained by the Company and its Subsidiaries are in full force and effect and
all claims thereunder have been filed in a due and timely manner and, to the
Company's knowledge, no such claim has been denied.
3.18 PROPERTIES
All real and personal property owned by the Company or a Company 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 its past practices.
The Company has good and marketable title free and clear of all liens,
encumbrances, charges, defaults or equities (other than equities of redemption
under applicable foreclosure laws) to all of the material properties and assets,
real and personal, reflected on the consolidated statement of financial
condition of the Company as of June 30, 1997 included in the Company Financial
Statements or acquired after such date, other than properties sold by the
Company in the ordinary course of business, except (i) liens for current taxes
not yet due or payable, (ii) pledges to secure deposits and other liens incurred
in the ordinary course of its banking business, (iii) such imperfections of
title, easements and encumbrances, if any, as are not material in character,
amount or extent and (iv) as reflected on the consolidated statement of
financial condition of the Company as of June 30, 1997 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
any 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 reasonably could be
expected to have a Material Adverse Effect on the Company. Employees of the
Company and any Company 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 Company's knowledge, there have been no
efforts to unionize or organize any employees of the Company or a Company
Subsidiary during the past five years.
3.20 LOANS; NONPERFORMING AND CLASSIFIED ASSETS
(a) Each loan agreement, note or borrowing arrangement, including without
limitation portions of outstanding lines of credit and loan commitments
(collectively, "Loans"), on the books and records of the Company and its
Subsidiaries, was made and has been serviced in all material respects in
accordance with customary lending standards in the ordinary course of business,
is evidenced in all material respects by appropriate and sufficient
documentation and, to the best knowledge of the Company, constitutes the legal,
valid and binding obligation of the obligor named therein, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditor's rights and to general equity
principles.
(b) The Company has Previously Disclosed as to the Company and each Company
Subsidiary as of September 30, 1997: (i) any written or, to the Company's
knowledge, oral Loan under the terms of which the obligor is 60 or more days
delinquent in payment of principal or interest, or to the best of the Company's
knowledge, in default of any other provision thereof; (ii) each Loan which has
been classified as "substan-
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dard," "doubtful," "loss" or "special mention" (or words of similar import) by
the Company, a Company Subsidiary or an applicable regulatory authority; (iii) a
listing of the real estate owned acquired by foreclosure or by deed-in-lieu
thereof, including the book value thereof; and (iv) each Loan with any director,
executive officer or five percent or greater stockholder of the Company or a
Company Bank, or to the best knowledge of the Company, any person, corporation
or enterprise controlling, controlled by or under common control with any of the
foregoing.
3.21 ADMINISTRATION OF FIDUCIARY ACCOUNTS
The Company and each of its Subsidiaries has properly administered all
accounts for which it acts as a fiduciary, including but not limited to accounts
for which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of the
governing documents and applicable laws and regulations, except for failures to
so administer which would not have a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries, nor any of their respective
directors, officers or employees, has committed any breach of trust with respect
to any such fiduciary account and the records for each such fiduciary account
are true and correct and accurately reflect the assets of such fiduciary
account, except for breaches of trust and failures to maintain records which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
3.22 DERIVATIVE TRANSACTIONS
Except as Previously Disclosed, as of the date hereof neither the Company
nor any of its Subsidiaries has engaged in transactions in or involving
forwards, futures, options on futures, swaps or other derivative instruments
since December 31, 1996.
3.23 REQUIRED VOTE; ANTITAKEOVER PROVISIONS
(a) The affirmative vote of the holders of a majority of the issued and
outstanding shares of Company Common Stock is the requisite vote to approve this
Agreement and the transactions contemplated hereby on behalf of the Company.
(b) No "control share acquisition," "business combination moratorium,"
"fair price" or other form of antitakeover statute or regulation is applicable
to this Agreement and the transactions contemplated hereby. The Board of
Directors of the Company has taken all necessary action so that the provisions
of Article Seven, Section 2(c) of the Company's Articles of Incorporation do not
and will not apply to this Agreement and the transactions contemplated hereby
and, assuming the accuracy of the representation and warranty of PHFG contained
in Section 4.22(b) hereof, the provisions of Article Seven, Section 2(b) of the
Company's Articles of Incorporation do not and will not apply to this Agreement
and the transactions contemplated hereby.
3.24 FAIRNESS OPINION
The Company has received a written opinion of Keefe, Bruyette & Woods, Inc.
to the effect that, as of the date hereof, the consideration to be received by
the stockholders of the Company pursuant to this Agreement is fair from a
financial point of view to the holders of the Company Common Stock.
3.25 ACCOUNTING FOR THE MERGER; REORGANIZATION
As of the date hereof, the Company does not have any reason to believe that
the Merger will fail to qualify (i) for pooling-of-interests accounting
treatment under generally accepted accounting principles or (ii) as a
reorganization under Section 368(a) of the Code.
3.26 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
PHFG in connection with or pursuant to this Agreement or the consummation of the
transactions contemplated hereby, when considered as a whole,
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contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact required to be stated or necessary to make
any such information or document, in light of the circumstances, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PHFG
PHFG represents and warrants to the Company that, except as Previously
Disclosed:
4.1 CAPITAL STRUCTURE
The authorized capital stock of PHFG consists of 100,000,000 shares of PHFG
Common Stock and 5,000,000 shares of PHFG Preferred Stock. As of September 30,
1997, there were 27,474,529 shares of PHFG Common Stock issued and outstanding,
1,102,356 shares of PHFG Common Stock were held as treasury stock and not
outstanding and there were no shares of PHFG Preferred Stock issued and
outstanding. All outstanding shares of PHFG Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, and none of
the outstanding shares of PHFG 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 PHFG, except for (i) shares of PHFG Common Stock issuable pursuant to
PHFG Employee Stock Benefit Plans, now or hereafter, (ii) shares of PHFG Common
Stock issuable pursuant to the PHFG Rights Agreement and (iii) by virtue of this
Agreement and the PHFG Stock Option Agreement.
4.2 ORGANIZATION, STANDING AND AUTHORITY OF PHFG
PHFG 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 PHFG. PHFG is duly registered as a bank
holding company under the BHCA and the regulations of the FRB thereunder. PHFG
has heretofore delivered to the Company true and complete copies of the Articles
of Incorporation and Bylaws of PHFG as in effect as of the date hereof.
4.3 OWNERSHIP OF THE PHFG SUBSIDIARIES
PHFG has Previously Disclosed the name, jurisdiction of incorporation and
percentage ownership of each direct or indirect PHFG Subsidiary and identified
its Significant Subsidiaries as of the date hereof. Except for (i) capital stock
or other ownership interests in the PHFG Subsidiaries, (ii) stock in the FHLB of
Boston, (iii) securities and other interests held in a fiduciary capacity and
beneficially owned by third parties or taken in consideration of debts
previously contracted, (iv) rights to acquire PHFG Capital Securities pursuant
to agreements entered into in connection with their issuance and (v) this
Agreement and the Company Stock Option Agreement, as of the date hereof PHFG
does not own or have the right to acquire, directly or indirectly, any
outstanding capital stock or other voting securities or ownership interests of
any corporation, bank, savings association, partnership, joint venture or other
organization. The outstanding shares of capital stock of each PHFG Subsidiary
which is a Significant Subsidiary have been duly authorized and validly issued,
are fully paid and nonassessable and, except in the case of the PHFG Capital
Securities, are directly or indirectly owned by PHFG free and clear of all
liens, claims, encumbrances, charges, pledges, restrictions or rights of third
parties of any kind whatsoever. No Rights are authorized, issued or outstanding
with respect to the capital stock or other ownership interests of any PHFG
Subsidiary which is a Significant Subsidiary and, except for agreements entered
into in connection with the issuance of the PHFG Capital Securities, there are
no agreements, understandings or commitments relating to the right of PHFG to
vote or to dispose of such capital stock or other ownership interests.
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4.4 ORGANIZATION, STANDING AND AUTHORITY OF THE PHFG SUBSIDIARIES
Each PHFG 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 PHFG 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 PHFG. The deposit accounts of
each PHFG Bank are insured by either the BIF or, in the case of certain deposits
of each such institution, the SAIF to the maximum extent permitted by the FDIA,
and each PHFG Bank has paid all premiums and assessments required by the FDIA
and the regulations thereunder.
4.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) PHFG 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 PHFG'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 PHFG, except for the approval of this Agreement by PHFG's shareholders.
This Agreement has been duly and validly executed and delivered by PHFG and,
assuming due authorization, execution and delivery by the Company, constitutes a
legal, valid and binding obligation of PHFG which is enforceable against PHFG in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Mergers), nor compliance by PHFG 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 PHFG or any PHFG 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 PHFG or a PHFG
Subsidiary pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which PHFG
or a PHFG 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 PHFG or a PHFG Subsidiary.
(c) Except for (i) the filing of applications or notices with, and the
consents, approvals or waivers of, as applicable, the FRB, the DOJ, the
Superintendent, the New Hampshire Bank Commissioner, the Massachusetts Board and
the MHPF in connection with the Merger, (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 PHFG
Common Stock pursuant to this Agreement, (iv) the approval of this Agreement by
the requisite vote of the shareholders of PHFG, (v) the filing of Articles of
Merger with the Secretary of State of the State of Maine pursuant to the MBCA
and with the Secretary of State of the State of New Hampshire pursuant to the
NHBCA, in each case in connection with the Merger, and (vi) such corporate
approvals and such applications or notices with, and consents, approvals or
waivers of, the OCC, the OTS, the FDIC, the New Hampshire Bank Commissioner, the
Massachusetts Bank Commissioner and the Central Fund as may be applicable in
connection with a Bank Merger, and except as Previously Disclosed, no consents,
approvals or waivers of or filings or registrations with any Governmental Entity
or with any third party are necessary on the part of PHFG or a PHFG Bank in
connection with (i) the execution and delivery by PHFG of this Agreement and the
consummation by PHFG of the transactions contemplated hereby and (ii) the
execution and delivery by a PHFG Bank of a Bank Merger Agreement and the
consummation by a PHFG Bank of the transactions contemplated thereby.
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(d) As of the date hereof, PHFG is not aware of any reason relating to PHFG
or a PHFG Subsidiary (including without limitation Community Reinvestment Act
compliance) why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement as shall be necessary for (i) consummation of the transactions
contemplated by this Agreement and the Bank Merger Agreements and (ii) the
continuation by PHFG after the Effective Time of the business of each of PHFG,
the Company and the Company Subsidiaries as such business is carried on
immediately prior to the Effective Time, free of any conditions or requirements
which, in the reasonable opinion of PHFG, could reasonably be expected to have a
Material Adverse Effect on PHFG or the Company or materially impair the value of
the Company and the Company Subsidiaries to PHFG.
4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1994, PHFG has timely filed with the Commission all
Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respect with the Securities Laws and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Since January 1, 1994, PHFG and each PHFG Bank have duly filed with the
FRB, the FDIC, the OTS, the Superintendent, the New Hampshire Bank Commissioner
and any other applicable Governmental Entity, 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 PHFG or a PHFG Subsidiary by the
FRB, the FDIC, the OTS, the Superintendent, the New Hampshire Bank Commissioner
or any other applicable Governmental Entity, neither PHFG nor any PHFG
Subsidiary was required to correct or change any action, procedure or proceeding
which PHFG believes has not been corrected or changed as required in all
material respects.
4.7 FINANCIAL STATEMENTS
(a) PHFG has previously delivered or made available to the Company accurate
and complete copies of the PHFG Financial Statements for all periods prior to
the date hereof, which, in the case of the consolidated statements of financial
condition of PHFG as of December 31, 1996, 1995 and 1994 and the consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years ended December 31, 1996, 1995 and 1994, are accompanied by the audit
reports of KPMG Peat Marwick LLP, independent public accountants with respect to
PHFG. The PHFG Financial Statements referred to herein, as well as PHFG
Financial Statements to be delivered pursuant to Section 5.7 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of PHFG as of the respective dates set forth therein, and the
consolidated results of operations, shareholders' equity and cash flows of PHFG
for the respective periods or as of the respective dates set forth therein.
(b) Each of the PHFG Financial Statements 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
books and records of PHFG and the PHFG Subsidiaries are being maintained in
material compliance with applicable legal and accounting requirements, and all
such books and records accurately reflect in all material respects all dealings
and transactions in respect of the business, assets, liabilities and affairs of
PHFG and the PHFG Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the Securities Documents filed by PHFG prior to the date hereof and (ii) of
liabilities incurred since June 30, 1997 in the ordinary course of business,
neither PHFG nor any PHFG Subsidiary has any liabilities, whether absolute,
accrued, contingent or otherwise, material to the financial condition, results
of operations or business of PHFG on a consolidated basis.
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4.8 MATERIAL ADVERSE CHANGE
Since June 30, 1997, no event has occurred or circumstance arisen that,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect on PHFG.
4.9 ENVIRONMENTAL MATTERS
(a) To the best of PHFG's knowledge, PHFG and the PHFG 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 PHFG. Neither PHFG nor a PHFG Subsidiary has received any
communication alleging that PHFG or a PHFG Subsidiary is not in such compliance
and, to the best knowledge of PHFG, there are no present circumstances that
would prevent or interfere with the continuation of such compliance.
(b) To the best of PHFG's knowledge, none of the properties owned, leased
or operated by PHFG or a PHFG 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
PHFG.
(c) To the best of PHFG'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 PHFG or a PHFG Subsidiary or against
any person or entity whose liability for any Environmental Claim PHFG or a PHFG
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
PHFG.
4.10 TAX MATTERS
(a) PHFG and the PHFG 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 taxes required to be paid in
respect of the periods covered by such returns and, as of the Effective Time,
will have paid, or where payment is not required to have been made, will have
set up an adequate reserve or accrual for the payment of, all taxes for any
subsequent periods ending on or prior to the Effective Time. Neither PHFG nor
any PHFG 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 PHFG and the PHFG Subsidiaries are complete and accurate in all
material respects. Neither PHFG nor any PHFG Subsidiary is delinquent in the
payment of any tax, assessment or governmental charge, and none of them 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. The
federal, state and local income tax returns of PHFG and the PHFG 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 PHFG or any
PHFG 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 PHFG or a PHFG 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 PHFG's knowledge, threatened.
(c) Except as Previously Disclosed, neither PHFG nor any PHFG 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 PHFG or a PHFG Subsidiary (nor does PHFG have any knowledge that
the Internal Revenue Service has
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proposed any such adjustment or change of accounting method) or (iii) has filed
a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
4.11 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of PHFG threatened
against PHFG or any PHFG Subsidiary or against any asset, interest or right of
PHFG or any PHFG 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 PHFG. Neither PHFG nor any PHFG Subsidiary is a party to any
order, judgment or decree which has or could reasonably be expected to have a
Material Adverse Effect on PHFG.
4.12 COMPLIANCE WITH LAWS
(a) PHFG and each PHFG Subsidiary 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 PHFG; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect; and to the best knowledge of PHFG, no suspension or
cancellation of any of the same is threatened.
(b) Neither PHFG nor any PHFG Subsidiary is in violation of its respective
Articles of Incorporation or equivalent document 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 PHFG;
and neither PHFG nor any PHFG Subsidiary has received any notice or
communication from any federal, state or local governmental authority asserting
that PHFG or a PHFG Subsidiary is in violation of any of the foregoing which
could reasonably be expected to have a Material Adverse Effect on PHFG. Neither
PHFG nor any PHFG 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 PHFG and the PHFG 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 PHFG 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 PHFG to
shareholders of the Company and PHFG 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.
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4.14 EMPLOYEE BENEFIT PLANS
(a) PHFG has Previously Disclosed all stock option, employee stock purchase
and stock bonus plans, qualified pension or profit-sharing plans, any deferred
compensation, consultant, bonus or group insurance contract or any other
incentive, welfare or employee benefit plan or agreement maintained or
contributed to by PHFG or any PHFG Subsidiary for the benefit of employees or
former employees of PHFG or any PHFG Subsidiary (the "PHFG Employee Plans"), and
PHFG has previously furnished or made available to the Company 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 with respect to each
PHFG Employee Plan and (iii) all rulings and determination letters and any open
requests for rulings or letters that pertain to any qualified plan.
(b) None of PHFG, any PHFG Subsidiary, any pension plan maintained by any
of them and qualified under Section 401 of the Code or, to the best of PHFG'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 PHFG or
any PHFG Subsidiary. To the best of PHFG's knowledge, no reportable event under
Section 4043(b) of ERISA has occurred with respect to any such pension plan,
other than any reportable event for which notice to the PBGC is not required.
(c) Neither PHFG nor any PHFG 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 PHFG Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "PHFG 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 PHFG's knowledge,
is threatened to be revoked and PHFG does not know of any ground on which such
revocation may be based. Neither PHFG nor any PHFG Subsidiary has any liability
under any such plan that is not reflected on the consolidated statement of
financial condition of PHFG at June 30, 1997 included in the PHFG 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 PHFG'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 PHFG 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 PHFG.
(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 PHFG 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 PHFG Pension
Plan, and there is no "unfunded current liability" (as defined in Section 412 of
the Code) with respect to any PHFG Pension Plan.
(g) To the best of PHFG's knowledge, the PHFG 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 PHFG, threatened
claims (other than routine claims for benefits) by, on behalf of or against any
of the PHFG Employee Plans or any trust related thereto or any fiduciary thereof
relating to a PHFG Employee Plan.
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4.15 CERTAIN CONTRACTS
Neither PHFG nor any PHFG Subsidiary is in default or in non-compliance,
which default or non-compliance could reasonably be expected to have a Material
Adverse Effect on PHFG, 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 for an agreement with McConnell, Budd & Downes, Inc., as Previously
Disclosed, neither PHFG nor any PHFG 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
PHFG believes that it and each PHFG Subsidiary is insured, and during each
of the past three calendar years has been 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 PHFG or a PHFG 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 its past practices. PHFG 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 PHFG as of June 30, 1997 included in the
PHFG Financial Statements or acquired after such date, other than properties
sold by PHFG in the ordinary course of business, 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 PHFG as of June 30, 1997 included in the
PHFG Financial Statements. All real and personal property which is material to
PHFG's business on a consolidated basis and leased or licensed by PHFG or a PHFG
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 PHFG or a PHFG Subsidiary which is a Significant
Subsidiary is pending or, to the best knowledge of PHFG, threatened. Neither
PHFG nor any PHFG Subsidiary is involved in, or threatened with or affected by,
any labor dispute, arbitration, lawsuit or administrative proceeding involving
its employees which reasonably could be expected to have a Material Adverse
Effect on PHFG. Employees of PHFG and any PHFG 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 PHFG's knowledge, there have
been no efforts to unionize or organize any employees of PHFG or a PHFG
Subsidiary during the past five years.
4.20 LOANS
Each Loan on the books and records of PHFG and its Subsidiaries was made
and has been serviced in all material respects in accordance with customary
lending standards in the ordinary course of business, is
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evidenced in all material respects by appropriate and sufficient documentation
and, to the best knowledge of PHFG, constitutes the legal, valid and binding
obligation of the obligor named therein, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditor's rights and to general equity principles.
4.21 ADMINISTRATION OF FIDUCIARY ACCOUNTS
PHFG and each of its Subsidiaries has properly administered all accounts
for which it acts as a fiduciary, including but not limited to accounts for
which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of the
governing documents and applicable laws and regulations, except for failures to
so administer which would not have a Material Adverse Effect on PHFG. Neither
PHFG nor any of its Subsidiaries, nor any of their respective directors,
officers or employees, has committed any breach of trust with respect to any
such fiduciary account and the records for each such fiduciary account are true
and correct and accurately reflect the assets of such fiduciary account, except
for breaches of trust and failure to maintain records which would not have a
Material Adverse Effect on PHFG.
4.22 REQUIRED VOTE; OWNERSHIP OF COMPANY COMMON STOCK
(a) The affirmative vote of the holders of a majority of the issued and
outstanding shares of PHFG Common Stock is the requisite vote to approve this
Agreement and the transactions contemplated hereby on behalf of PHFG.
(b) Except for the Company Option Agreement, none of PHFG or any of its
Subsidiaries, or to PHFG's knowledge, any of its other affiliates or associates
(as such terms are defined under the Exchange Act), owns beneficially or of
record, directly or indirectly, or is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, any
shares of Company Common Stock (other than shares held in a fiduciary capacity
that are beneficially owned by third parties or as a result of debts previously
contracted).
4.23 FAIRNESS OPINION
PHFG has received a written opinion of McConnell, Budd & Downes, Inc. to
the effect that, as of the date hereof, the Exchange Ratio is fair from a
financial point of view to the holders of the PHFG Common Stock.
4.24 ACCOUNTING FOR THE MERGER; REORGANIZATION
As of the date hereof, PHFG does not have any reason to believe that the
Merger will fail to qualify (i) for pooling-of-interests treatment under
generally accepted accounting principles or (ii) as a reorganization under
Section 368(a) of the Code.
4.25 DISCLOSURES
None of the representations and warranties of PHFG or any of the written
information or documents furnished or to be furnished by PHFG to the Company in
connection with or pursuant to this Agreement or the consummation of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
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ARTICLE V
COVENANTS
5.1 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement, each of the Company
and PHFG shall use its reasonable best efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary
or advisable under applicable laws and regulations so as to permit consummation
of the Merger and the Bank Mergers as promptly as reasonably practicable and to
otherwise enable consummation of the transactions contemplated hereby, and shall
cooperate fully with the other party hereto to that end.
5.2 SHAREHOLDER MEETINGS
Each of PHFG 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 PHFG and the Board of Directors
of the Company will recommend that the shareholders of PHFG and the Company,
respectively, approve this Agreement and the transactions contemplated hereby,
provided that the Board of Directors of PHFG or 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 parties hereto 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 PHFG and the Company each shall thereafter promptly mail the
Proxy Statement to its respective shareholders. PHFG 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 PHFG Common Stock pursuant
to the Merger and all other transactions contemplated by this Agreement, and the
Company shall furnish all information concerning the Company and the holders of
the Company Common Stock as may be reasonably requested in connection with any
such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the Bank Mergers). PHFG
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) PHFG 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 PHFG, the
Company or any of their respective
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Subsidiaries to any Governmental Entity in connection with the transactions
contemplated by this Agreement and the Bank Merger Agreements.
(d) PHFG and the Company shall promptly furnish each other with copies of
written communications received by PHFG 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 by this
Agreement and the Bank Merger Agreements.
5.4 INVESTIGATION AND CONFIDENTIALITY
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other party all books, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities of
it and its Subsidiaries, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of meetings of boards
of directors (and any committees thereof) and shareholders, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, loan files,
plans affecting employees, and any other business activities or prospects in
which the other party may have a reasonable interest, provided that such access
shall be reasonably related to the transactions contemplated hereby and, in the
reasonable opinion of the respective parties providing such access, not unduly
interfere with normal operations. Each party and its Subsidiaries shall make
their respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with the other party and its representatives, provided that such
access shall be reasonably related to the transactions contemplated hereby and
shall not unduly interfere with normal operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall 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.
(c) No investigation by either of the parties hereto or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other party set forth herein.
5.5 PRESS RELEASES
PHFG 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 in the reasonable judgment of the disclosing party is required
by law or the rules of a national stock exchange or the NASD, as applicable.
5.6 BUSINESS OF THE PARTIES
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of PHFG, the
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Company and the Company Subsidiaries shall carry on their respective businesses
in the ordinary course consistent with past practice. The Company will use all
reasonable efforts to (x) preserve its business organization and that of the
Company Subsidiaries intact, (y) keep available to itself and PHFG the present
services of the employees of the Company and the Company Subsidiaries and (z)
preserve for itself and PHFG the goodwill of the customers of the Company and
the Company Subsidiaries and others with whom business relationships exist,
provided, however, that the covenants contained in the foregoing clauses (y) and
(z) shall not be deemed to restrict the consolidation by the Company and the
Company New Hampshire Bank of the operations of Community Bankshares, Inc. and
Portsmouth Bank Shares, Inc. and their respective former subsidiaries. Without
limiting the generality of the foregoing, except with the prior written consent
of PHFG, as expressly contemplated hereby or as Previously Disclosed as of the
date hereof, between the date hereof and the Effective Time, the Company shall
not, and shall cause 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 $.22 per share,
which, if consistent with pooling of interest accounting treatment for the
Merger, shall have the same record and payment dates as the record and
payment dates relating to dividends on the PHFG Common Stock (as Previously
Disclosed by PHFG), it being the intention of the parties that the
shareholders of the Company receive dividends for any particular quarter on
either the Company Common Stock or the PHFG Common Stock but not both,
provided, however, 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 pursuant to (x)
Company Options outstanding as of the date hereof pursuant to the Company
Stock Option Plans, as Previously Disclosed pursuant to Section 3.1 hereof,
(y) the Company Stock Purchase Plan for any offering period pursuant
thereto ended on or before December 31, 1997 and (z) the Company Stock
Option Agreement; issue, grant, modify or authorize any Rights, other than
pursuant to the Company Stock Option Agreement (except shares acquired in a
fiduciary capacity that are beneficially owned by third parties or as a
result of debts previously contracted); 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 Incorporation or Bylaws or equivalent
documents; impose, or suffer the imposition, on any share of stock held by
the Company in a Company Subsidiary of any material lien, charge or
encumbrance or permit any such lien, charge or encumbrance to exist; or
waive or release any material right or cancel or compromise any material
debt or claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance to, or
provide any other new employee benefit or incentive to, any of its
directors, officers or employees, except (i) as may be required pursuant to
binding commitments existing on the date hereof and (ii) in the case of
employees who are not officers above the level of Vice President, such as
may be granted in the ordinary course of business consistent with past
practice;
(v) enter into or, except as may be required by law, modify any
pension, retirement, stock option, stock purchase, stock appreciation
right, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or employees;
or make any contributions to or on behalf of any Company Employee Plan not
in the ordinary course of business consistent with past practice;
(vi) enter into (w) any agreement, arrangement or commitment not made
in the ordinary course of business, (x) any agreement, indenture or other
instrument relating to the borrowing of money by the Company or a Company
Subsidiary or guarantee by the Company or a Company Subsidiary of any such
obligation, except in the case of a Company Subsidiary for deposits,
federal funds purchased, FHLB advances 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
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Company or a Company Subsidiary may employ an employee if necessary to
operate the business of the Company or a Company Subsidiary in the ordinary
course of business consistent with past practice and if the employment of
such employee is terminable by the Company or the Company Subsidiary 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, 1996, except as required by changes in laws or regulations or
generally accepted accounting principles, or change any of its methods of
reporting income and deductions for federal income tax purposes from those
employed in the preparation of its federal income tax return for the year
ended December 31, 1996, except as required by changes in laws or
regulations;
(viii) purchase or otherwise acquire, or sell or otherwise dispose of,
any assets or incur any liabilities other than in the ordinary course of
business consistent with past practices and policies;
(ix) make any capital expenditures in excess of $100,000 individually
or $1.0 million 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;
(x) file any applications or make any contract with respect to
branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity or enter into any
new line of business;
(xii) enter into any futures contract, option contract, interest rate
caps, interest rate floors, interest rate exchange agreement or other
similar agreement, other than in the ordinary course of business consistent
with past practice;
(xiii) 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;
(xiv) take any action that would prevent or impede the Merger from
qualifying (A) for pooling-of-interests accounting treatment under
generally accepted accounting principles or (B) as a reorganization within
the meaning of Section 368(a) of the Code, provided, however, that nothing
contained herein shall limit the ability of the Company to exercise its
rights under the PHFG Stock Option Agreement;
(xv) take any action that would or could reasonably be expected to
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 or prior to the Effective Time, or in any of the conditions to
the Merger set forth in Article VI hereof not being satisfied or in
violation of any provision of this Agreement, except in each case as may be
required by applicable law; or
(xvi) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Company, PHFG and the PHFG
Subsidiaries shall conduct their business in substantially the same manner as
heretofore conducted, it being understood and agreed that nothing contained
herein shall prevent PHFG from acquiring another financial institution or
company engaged in businesses in which it is engaged or from entering into new
lines of business, whether through acquisition or otherwise. Except with the
prior written consent of the Company or as expressly contemplated hereby,
between the date hereof and the Effective Time, PHFG shall not, and shall cause
each PHFG Subsidiary which is a Significant Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of the PHFG Common Stock, except for regular quarterly cash dividends which
are not in excess of $.25 per share of PHFG Common Stock, provided,
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however, that nothing contained herein shall be deemed to affect the
ability of a PHFG Subsidiary to pay dividends on its capital stock to PHFG;
(ii) amend its Articles of Incorporation or equivalent document or
Bylaws in a manner which would adversely affect in any manner the terms of
the PHFG Common Stock or the ability of PHFG or a PHFG Bank to consummate
the transactions contemplated hereby;
(iii) take any action that would prevent or impede the Merger from
qualifying (A) for pooling-of-interests accounting treatment under
generally accepted accounting principles or (B) as a reorganization within
the meaning of Section 368 of the Code; provided, however, that nothing
contained herein shall limit the ability of PHFG to exercise its rights
under the Company Stock Option Agreement;
(iv) take any action that would or could reasonably be expected to
result in any of the representations and warranties of PHFG contained in
this Agreement not to be true and correct in any material respect at or
prior to the Effective Time, or in any of the conditions to the Merger set
forth in Article VI hereof not being satisfied or in violation of this
Agreement, except in each case as may be required by applicable law; or
(v) agree to do any of the foregoing.
(c) The Company shall not authorize or permit any of its directors,
officers, employees or agents to directly or indirectly solicit, initiate or
encourage any inquiries relating to, or the making of any proposal which
constitutes, an Acquisition Transaction (as defined below), or, except to the
extent legally required for the discharge of the fiduciary duties of the Board
of Directors of the Company, as advised by counsel, (i) recommend or endorse an
Acquisition Transaction, (ii) participate in any discussions or negotiations
regarding an Acquisition Transaction or (iii) provide any third party with any
nonpublic information in connection with any inquiry or proposal relating to an
Acquisition Transaction (other than in each case with or to PHFG or an affiliate
of PHFG). The Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations previously conducted with any
parties other than PHFG with respect to any of the foregoing, and will take all
actions necessary or advisable to inform the appropriate individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 5.6(c). The Company will notify PHFG immediately if any inquiries or
proposals relating to an Acquisition Transaction are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, the Company, and the Company will
promptly inform PHFG in writing of all of the relevant details with respect to
the foregoing. As used in this Agreement, "Acquisition Transaction" shall mean
(i) a merger or consolidation, or any similar transaction, involving the Company
or a Company Subsidiary, (ii) a purchase, lease or other acquisition of all or a
substantial portion of the assets or liabilities of the Company or a Company
Subsidiary (other than CFX Funding L.L.C.) or (iii) a purchase or other
acquisition (including by way of share exchange, tender offer, exchange offer or
otherwise) of an interest in any class or series of equity securities of the
Company (other than as permitted by Section 5.6(a)(ii) hereof) or a Company
Subsidiary.
5.7 CURRENT INFORMATION
During the period from the date of this Agreement to the Effective Time,
each party shall, upon the request of the other party, cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of the other party regarding its financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more than
45 days after the end of each calendar quarter ending after the date of this
Agreement (other than the last quarter of each fiscal year ending December 31),
the Company and PHFG 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
PHFG 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 PHFG will deliver to the other
party a consolidated balance sheet and a consolidated statement of operations,
without related notes, for such month prepared in accordance with generally
accepted accounting principles.
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5.8 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time through the sixth anniversary of the
Effective Time, PHFG (the "Indemnifying Party") shall indemnify and hold
harmless, to the fullest extent permitted by applicable law, each present and
former director, officer and employee of the Company or a Company Subsidiary, as
applicable, 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 (a "Claim"), 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, arising in whole or in part out of, or
pertaining to (i) the fact that he or she was a director, officer or employee of
the Company or any Company Subsidiary or any of their respective predecessors or
(ii) this Agreement, the Company Stock Option Agreement, the PHFG Stock Option
Agreement or any of the agreements or transactions contemplated hereby or
thereby, 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.
(b) PHFG agrees that all rights to indemnification and all limitations on
liability existing in favor of the Indemnified Parties as provided in their
respective Articles or Certificates of Incorporation, Bylaws or similar
governing documents as in effect as of the date hereof with respect to matters
occurring prior to the Effective Time shall survive the Merger and the Bank
Mergers and shall continue in full force and effect, and shall be honored by
PHFG, its Subsidiaries or their respective successors as if they were the
indemnifying party thereunder, without any amendment thereto, for a period of
six years from the Effective Time; 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.
(c) Any Indemnified Party wishing to claim indemnification under Section
5.8(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
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), (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 that a federal or state banking agency or a
court of competent jurisdiction shall determine that indemnification of an
Indemnified Party in the manner contemplated hereby is prohibited by applicable
laws and regulations.
(d) PHFG shall use its reasonable best efforts to maintain the Company's
existing directors' and officers' liability insurance policy (or a policy
providing coverage on substantially the same terms and conditions) for acts or
omissions occurring prior to the Effective Time by persons who are currently
covered by such insurance policy maintained by the Company for a period of three
years following the Effective Time, provided, however, that in no event shall
PHFG expend, in order to obtain such insurance, any amount per annum in excess
of 150% of the amount of the actual annual premium paid as of the date hereof by
the Company for such insurance (the "Maximum Amount"), and provided further that
if the amount of the annual premium necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, PHFG shall use its reasonable
best efforts to maintain the most advantageous policy of directors' and
officers' insurance obtainable for an annual premium equal to the Maximum
Amount. The Company represents to PHFG that the Maximum Amount is $107,775.
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(e) In the event that PHFG or any of its respective successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case the successors and assigns of such entity
shall assume the obligations set forth in this Section 5.8.
(f) From and after the Effective Time, PHFG shall assume all
indemnification and insurance obligations of the Company under acquisition
agreements entered into by the Company prior to the date hereof, as Previously
Disclosed by the Company to PHFG.
(g) The provisions of this Section 5.8 are expressly intended to be for the
irrevocable benefit of, and shall be enforceable by, each Indemnified Party and
his or her heirs and representatives.
5.9 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS
(a) As soon as administratively practicable after the Effective Time, PHFG
shall take all reasonable action so that employees of the Company and the
Company Subsidiaries shall be entitled to participate in the PHFG Employee Plans
of general applicability to the same extent as similarly situated employees of
PHFG and its Subsidiaries (it being understood that inclusion of the employees
of the Company and its Subsidiaries in the PHFG Employee Benefit Plans may occur
at different times with respect to different plans). For purposes of determining
eligibility to participate in, the vesting of benefits and for all other
purposes (but not for accrual of pension benefits) under the PHFG Employee
Plans, PHFG and the PHFG Employee Plans shall recognize years of service with
the Company, any Company Subsidiary or any predecessor thereof or entity
acquired by the Company or a Company Subsidiary as such service is recognized by
and reflected on the records of the Company and the Company Employee Plans. PHFG
and the PHFG Employee Plans shall provide employees of the Company and the
Company Subsidiaries with full credit for copayment, deductible amounts and
out-of-pocket maximums under any Company Employee Plans paid by such employees
prior to the Effective Time and shall not apply any preexisting condition,
waiting period or other similar limitations to such employees, except to the
extent that any of the same is applicable to employees of PHFG and its
Subsidiaries.
(b) All employees of the Company or a Company 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 this
Agreement shall give any employee of the Company or any Company Subsidiary a
right to continuing employment with PHFG or a PHFG Subsidiary after the
Effective Time. An employee of the Company or a Company Subsidiary (other than
an employee who is party to an employment agreement or a change-in-control
agreement or who is entitled to severance benefits in accordance with the terms,
including without limitation, termination dates, of a severance plan formerly
maintained by Community Bankshares, Inc. or The Safety Fund Corporation) who is
involuntarily terminated other than for cause following the Effective Time shall
be entitled to receive severance payments in accordance with, and to the extent
provided in, the PHFG employee severance plan applicable to the Merger, a copy
of which the Company acknowledges has been provided to it by PHFG, provided
that, notwithstanding anything to the contrary contained herein, no employee
shall be entitled to such benefits unless the Company terminates its existing
severance plan effective immediately prior to the Effective Time and provides
evidence reasonably satisfactory to PHFG of such termination.
(c) Following the Effective Time, PHFG shall, and shall cause its
appropriate Subsidiaries to, honor in accordance with their terms the employment
agreements and change-in-control agreements which have been Previously Disclosed
by the Company to PHFG as of the date hereof.
(d) Except as otherwise provided herein, nothing in this Section 5.10 shall
be interpreted as preventing PHFG or its Subsidiaries from amending, modifying
or terminating any of the Company Employee Plans, and any contracts,
arrangements, commitments or understandings of the Company or its Subsidiaries,
in accordance with their terms and applicable law.
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<PAGE> 125
5.10 STOCK EXCHANGE LISTING
PHFG shall use all reasonable efforts to cause the shares of PHFG Common
Stock to be issued in connection with the Merger to be approved for quotation on
the Nasdaq Stock Market's National Market, subject to official notice of
issuance, as of or prior to the Effective Time.
5.11 THE BANK MERGERS
PHFG and the Company shall take all action necessary and appropriate,
including causing the entering into of appropriate merger agreements (the "Bank
Merger Agreements"), to cause (i) the Company Massachusetts Banks to merge with
and into the PHFG Massachusetts Bank and (ii) the Company New Hampshire Bank to
merge with and into the PHFG New Hampshire Bank (individually a "Bank Merger"
and collectively the "Bank Mergers"), in each case in accordance with applicable
laws and regulations and the terms of the applicable Bank Merger Agreement and
as soon as practicable after consummation of the Merger.
5.12 AFFILIATES; RESTRICTIONS ON RESALE
(a) The Company has Previously Disclosed to PHFG, and PHFG has Previously
Disclosed to the Company, a schedule of each person that, to the best of its
knowledge, is deemed to be an "affiliate" of the Company and PHFG, respectively
(each an "Affiliate"), as that term is used in Rule 145 under the Securities Act
or Accounting Series Releases 130 and 135 of the Commission.
(b) Each of the Company and PHFG shall use its reasonable best efforts to
cause each person who may be deemed to be an Affiliate of the Company and PHFG,
respectively, to execute and deliver to PHFG as soon as practicable after the
date of this Agreement, and in any event prior to the date of the meetings of
shareholders of PHFG and the Company to be called pursuant to Section 5.2
hereof, a written agreement in the forms previously provided by PHFG to the
Company.
5.13 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
or statement herein 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.
5.14 FAILURE TO FULFILL CONDITIONS
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated hereby
cannot be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party or parties. Each party will promptly inform the
other party or parties of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger or a Bank Merger by any
Governmental Entity or third party or which would otherwise prevent or
materially delay completion of the Merger or a Bank Merger.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT -- PHFG AND THE COMPANY
The respective obligations of PHFG and the Company to effect the
transactions contemplated by this Agreement shall be subject to satisfaction of
the following conditions at or prior to the Effective Time.
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<PAGE> 126
(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 PHFG and the Company, including approval by the requisite vote
of the respective shareholders of PHFG and the Company of this Agreement, and
all corporate and shareholder action necessary to authorize the execution and
delivery of the Bank Merger Agreements and consummation of the transactions
contemplated thereby shall have been duly and validly taken by the Company
Banks, the PHFG New Hampshire Bank and the PHFG Massachusetts Bank.
(b) All approvals, consents and waivers from any Governmental Entity the
approval, consent or waiver of which is required for the consummation of the
Merger and the Bank Mergers shall have been received and all statutory waiting
periods in respect thereof have expired, provided, however, that no approval,
consent or waiver referred to in this Section 6.1(b) shall be deemed to have
been received if it shall include any condition or requirement that,
individually or in the aggregate, would so materially reduce the economic or
business benefits of the transactions contemplated by this Agreement to PHFG
that had such condition or requirement been known PHFG, in its reasonable
judgment, would not have entered into this Agreement.
(c) None of PHFG, 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 Entity which prohibits, restricts or makes illegal consummation of
the Merger or a Bank Merger.
(d) The Form S-4 shall have become effective under the Securities Act, and
PHFG 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 PHFG 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 PHFG Common Stock to be issued in connection with the
Merger shall have been approved for listing on the Nasdaq Stock Market's
National Market, subject to official notice of issuance.
(f) KPMG Peat Marwick LLP shall have issued a letter dated as of the
Effective Time to PHFG and to the Company to the effect that, based on a review
of this Agreement and related agreements and the facts and circumstances then
known to it, the Merger shall be accounted for as a pooling-of-interests under
generally accepted accounting principles, and PHFG and the Company shall have
received from the Affiliates of the other party the agreements referred to in
Section 5.12(b) hereof to the extent necessary to ensure in the reasonable
judgment of PHFG and the Company that the Merger shall be accounted for in such
manner.
6.2 CONDITIONS PRECEDENT -- THE COMPANY
The obligations of the Company to effect the transactions contemplated by
this Agreement shall be subject to satisfaction of the following conditions at
or prior to the Effective Time unless waived by the Company pursuant to Section
7.4 hereof.
(a) The representations and warranties of PHFG as set forth in Article IV
hereof shall be true and correct as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time (or on the date
when made in the case of any representation and warranty which specifically
relates to an earlier date), provided, however, that notwithstanding anything
herein to the contrary, this Section 6.2(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and correct
(exclusive of any exceptions in such representations and warranties relating to
materiality or Material Adverse Effect) unless the failure of any of the
representations or warranties to be so true and correct would have, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on PHFG.
(b) PHFG 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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<PAGE> 127
(c) PHFG shall have delivered to the Company a certificate, dated the date
of the Closing and signed by its Chairman, President and Chief Executive Officer
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(s) of Elias, Matz,
Tiernan & Herrick L.L.P., Carol L. Mitchell, Esq. and/or local counsel
reasonably acceptable to the Company, dated the date of the Closing, that
collectively address the matters set forth in Exhibit B hereto.
(e) The Company shall have received the written opinion of Arnold & Porter
(which shall be based on such written representations (including without
limitation the standard representations set forth in Revenue Procedure 86-42,
1986-2 C.B. 772) from PHFG, the Company and others as such counsel shall
reasonably request as to factual matters) to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code and
to the effect that (i) except for cash received in lieu of fractional share
interests, holders of Company Common Stock who receive PHFG Common Stock in the
Merger will not recognize gain or loss for federal income tax purposes, (ii) the
basis of such PHFG Common Stock will equal the basis of the Company Common Stock
for which it is exchanged, reduced by any amount allocable to a fractional share
interest for which cash is received, and (iii) the holding period of such PHFG
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.
(f) There shall not be pending any proceeding initiated by any Governmental
Entity to seek an order, injunction or decree which prevents consummation of the
Merger or a Bank Merger.
(g) PHFG 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 the Company may
reasonably request.
6.3 CONDITIONS PRECEDENT -- PHFG
The obligations of PHFG to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following conditions at or
prior to the Effective Time unless waived by PHFG 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
(exclusive of any exceptions in such representations and warranties relating to
materiality or Material Adverse Effect) unless the failure of any of the
representations or warranties to be so true and correct would have, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to PHFG a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer 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) PHFG shall have received the written opinion(s) of Arnold & Porter
and/or Devine, Millimet & Branch, Professional Association that collectively
address the matters set forth in Exhibit C hereto.
(e) PHFG shall have received the written opinion of Elias, Matz, Tiernan &
Herrick L.L.P. (which shall be based on such written representations (including
without limitation the standard representations set forth in Revenue Procedure
86-42, 1986-2 C.B. 722) from PHFG, the Company and others as such counsel shall
reasonably request as to factual matters) to the effect that the Merger and each
of the Bank Mergers will constitute a reorganization within the meaning of
Section 368(a) of the Code and that, accordingly, for federal
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<PAGE> 128
income tax purposes no gain or loss will be recognized by PHFG, the Company or
any PHFG Bank or Company Bank which is a party to a Bank Merger (except to the
extent that any such party may be required to recognize income due to the
recapture of bad debt reserves as a result of a Bank Merger).
(f) The consent, approval or waiver of each person (other than the
Governmental Entities referred to in Section 6.1(b) hereof) whose consent,
approval or waiver shall be required in connection with the Merger under any
loan or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or is otherwise bound shall have been obtained, except those consents or
approvals for which failure to obtain would not have, or could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
(g) There shall not be pending any proceeding initiated by any Governmental
Entity to seek an order, injunction or decree which prevents consummation of the
Merger or a Bank Merger.
(h) The Company shall have furnished PHFG 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 PHFG 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 either PHFG or the
Company (provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained herein) in
writing if there shall have been a breach by the other party of (i) any covenant
or undertaking of it contained herein or (ii) any representation or warranty of
it contained herein, which in the case of the Company would have, or could
reasonably be expected to have, a Material Adverse Effect on the Company and in
the case of PHFG would have, or could reasonably be expected to have, a Material
Adverse Effect on PHFG, in any case if such breach has not been cured by the
earlier of 30 days after the date on which written notice of such breach is
given to the party committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the applications
for prior approval referred to in Section 5.3 hereof are denied or withdrawn at
the request or recommendation of the applicable Governmental Entity 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, or if any Governmental Entity of competent jurisdiction shall have issued a
final nonappealable order enjoining or otherwise prohibiting the Merger or a
Bank Merger, unless in each such case 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;
(d) at any time, by any party hereto in writing, if the shareholders of
PHFG or the Company do not approve this Agreement after a vote taken thereon at
a meeting duly called for such purpose (including 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 such meetings of shareholders;
(e) by either the Company or PHFG 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
Effective Time to occur by such date;
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<PAGE> 129
(f) by either the Board of Directors of PHFG or the Board of Directors of
the Company if the Board of Directors of the other party shall have withdrawn,
modified or changed in a manner adverse to the terminating party its
recommendation of this Agreement and the transactions contemplated hereby
pursuant to Section 5.2 hereof;
(g) by PHFG if during the 15-day period following the date of this
Agreement it provides written notice to the Company to the effect that
additional matters Previously Disclosed to PHFG by the Company within such
period so materially and adversely affect the financial consequences of the
transactions contemplated hereby that in its reasonable judgment it would not
have entered into this Agreement had they been known as of the date hereof;
provided, however, that, if PHFG fails to terminate this Agreement within such
period, the matters so disclosed to PHFG by the Company will have been deemed to
have been disclosed to PHFG as of the date hereof; and
(h) by the Company, if its Board of Directors so determines by a vote of a
majority of the members of its entire Board, at any time during the three-day
period commencing with the Determination Date if both of the following
conditions are satisfied:
(i) the number obtained by dividing the Average Closing Price on the
Determination Date by the Starting Price (the "PHFG Ratio") shall be less
than .80; and
(ii) the PHFG Ratio shall be less than the number obtained by dividing
the Final Index Price on the Determination Date by the Initial Index Price
on the Starting Date and subtracting 0.15 from the quotient in this clause
(ii) (such number being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If the Company elects to
exercise its termination right pursuant to this Section 7.1(h), it shall give
written notice to PHFG (provided that such notice of election to terminate may
be withdrawn at any time within the aforementioned three-day period). During the
three-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 the
Company Common Stock hereunder, by adjusting the Exchange Ratio (calculated to
the nearest one one-thousandth) to equal the lesser of (x) a number (rounded to
the nearest thousandth) obtained by dividing (A) the product of the Starting
Price, 0.80 and the Exchange Ratio by (B) the Average Closing Price on the
Determination Date and (y) a number (rounded to the nearest thousandth) obtained
by dividing (A) the product of the Index Ratio and the Exchange Ratio by (B) the
PHFG Ratio. If PHFG so elects within such three-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(h) 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(h), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the closing prices
of a share of PHFG Common Stock on the Nasdaq Stock Market's National
Market (as reported in The Wall Street Journal, or if not reported therein,
in another authoritative source) during the period of 20 trading days
ending on the trading day prior to the Determination Date, rounded to the
nearest whole cent.
"Determination Date" shall mean the date on which the last required
approval of a Governmental Entity is obtained with respect to the Merger
and the Bank Mergers, without regard to any requisite waiting period in
respect thereof.
"Final Index Price" shall mean the sum of the Final Price for each
company comprising the Index Group multiplied by the appropriate weighting.
"Final Price," with respect to any company belonging to the Index
Group, shall mean the average of the daily closing sales prices of a share
of common stock of such company, as reported on the consolidated
transaction reporting system for the market or exchange on which such
common stock is principally traded, during the period of 20 trading days
ending on the trading day prior to the Determination Date.
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"Index Group" shall mean the 22 bank holding companies listed below,
the common stock of which shall be publicly traded and as to which there
shall not have been a publicly announced proposal since the Starting Date
and before the Determination Date for any such company to be acquired. In
the event that the common stock of any such company ceases to be publicly
traded or a proposal to acquire any such company is announced after the
Starting Date and before the Determination Date, such company shall be
removed from the Index Group, and the weights (which have been determined
based on the number of outstanding shares of common stock and the market
prices of such stock) attributed to the remaining companies shall be
adjusted proportionately for purposes of determining the Final Index Price.
The 22 bank holding companies and the weights attributed to them are as
follows:
<TABLE>
<CAPTION>
BANK HOLDING COMPANY WEIGHTING
-------------------- ---------
<S> <C>
City National Corp. ............................................... 7.7%
Westamerica Bancorporation......................................... 7.0
Webster Financial Corp. ........................................... 4.9
Affiliated Community Bancorp....................................... 1.1
SIS Bancorp........................................................ 1.1
UST Corp. ......................................................... 4.1
CCB Financial Corp. ............................................... 10.7
HUBCO, Inc. ....................................................... 4.2
Arrow Financial Corp. ............................................. 1.0
BSB Bancorp, Inc. ................................................. 1.3
Community Bank System, Inc. ....................................... 1.2
Evergreen Bancorp.................................................. 1.0
NBT Bancorp, Inc. ................................................. 1.2
North Fork Bancorporation, Inc. ................................... 11.0
FirstMerit Corporation............................................. 9.1
Keystone Financial, Inc. .......................................... 10.4
Sovereign Bancorp Inc. ............................................ 9.2
Washington Trust Bancorp........................................... 0.9
Banknorth Group, Inc. ............................................. 2.6
Chittenden Corp. .................................................. 2.7
Vermont Financial Services......................................... 1.9
One Valley Bancorp Inc. ........................................... 5.7
-----
100.0%
=====
</TABLE>
"Index Price," on a given date, shall mean the weighted average
(weighted in accordance with the factors listed above) of the closing
prices on such date of the common stocks of the companies comprising the
Index Group.
"Initial Index Price" shall mean the sum of each per share closing
price of the common stock of each company comprising the Index Group
multiplied by the applicable weighting, as such prices are reported on the
consolidated transactions reporting system for the market or exchange on
which such common stock is principally traded on the Starting Date.
"Starting Date" shall mean the last trading day immediately preceding
the date of the first public announcement of entry into this Agreement.
"Starting Price" shall mean the closing price of a share of PHFG
Common Stock on the Nasdaq Stock Market's National Market (as reported in
The Wall Street Journal, or if not reported therein, in another
authoritative source) on the Starting Date.
If any company belonging to the Index Group declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between the Starting Date
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and the Determination Date, the prices for the common stock of such company
shall be appropriately adjusted for the purposes of applying this Section
7.1(h).
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)
Sections 5.4(b) and 8.1 hereof and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b), (c), (d) or (e)
shall not relieve the breaching party from liability for willful breach of any
covenant, undertaking, representation or warranty giving rise to such
termination.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.8 and 5.9 hereof), provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive PHFG 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
PHFG 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 PHFG 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 PHFG or the Company have approved this
Agreement shall not modify either the amount or the 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 parties hereto, subject to the proviso to Section 7.4 hereof.
Any such amendment or supplement must be in writing and authorized by the
parties' respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel,
provided that 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 PHFG, and provided further that nothing contained herein shall
limit either party's rights to recover any liabilities or damages arising out of
the other party's willful breach of any provision of this Agreement.
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8.2 ENTIRE AGREEMENT
This Agreement (including the agreements to be executed and delivered
pursuant hereto) 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.
8.3 ASSIGNMENT; SUCCESSORS
A party hereto may not assign any of its rights or obligations under this
Agreement to any other person without the prior written consent of the other
party or parties. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto 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, except as
otherwise expressly provided in Section 5.8 hereof.
8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to PHFG:
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:
CFX Corporation
102 Main Street
Keene, New Hampshire 03431
Attn: Peter J. Baxter
President and Chief Executive Officer
Fax: 603-358-5028
With a required copy to:
Arnold & Porter
555 Twelfth Street
Washington, D.C. 20004
Attn: Steven Kaplan, Esq.
Fax: 202-942-5999
8.5 ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Agreement to the contrary, PHFG may
elect, subject to the filing of all necessary applications and the receipt of
all required regulatory approvals, to modify the structure of the
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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 Sections 6.2(e) and 6.3(e) hereof, (ii) any
such modification will not jeopardize pooling-of-interests accounting treatment,
(iii) the consideration to be paid to the holders of the Company Common Stock is
not thereby changed in kind or reduced in amount as a result of such
modification and (iv) such modification will not materially delay or jeopardize
receipt of any required regulatory approvals or any other condition to the
obligations of PHFG set forth in Sections 6.1 and 6.3 hereof.
8.6 INTERPRETATION
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The phrases "the date of this Agreement," "the
date hereof" and terms of similar import herein, unless the context otherwise
requires, shall be deemed to be the date first above written.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers as of the day and
year first above written.
<TABLE>
<S> <C>
PEOPLES HERITAGE FINANCIAL
Attest: GROUP, INC.
/s/ CAROL L. MITCHELL By: /s/ WILLIAM J. RYAN
------------------------------------------ ----------------------------------------
Name: Carol L. Mitchell Name: William J. Ryan
Title: Executive Vice President, General Title: Chairman, President and Chief
Counsel, Secretary and Treasurer Executive Officer
CFX CORPORATION
Attest:
/s/ E.L. HERBERT By: /s/ PETER J. BAXTER
------------------------------------------ ----------------------------------------
Name: E.L. Herbert Name: Peter J. Baxter
Title: Assistant Secretary Title: President and Chief Executive
Officer
</TABLE>
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EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
PEOPLES HERITAGE FINANCIAL GROUP, INC.
ARTICLE 1
NAME AND LOCATION
The name of the corporation is Peoples Heritage Financial Group, Inc.
(hereinafter referred to as the "Corporation") and it is located at One Portland
Square, Portland, Maine 04112-9540.
ARTICLE 2
CLERK; REGISTERED OFFICE
The name of the Corporation's Clerk is Carol L. Mitchell, and the address
of the Corporation's registered office is P.O. Box 9540, One Portland Square,
Portland, Maine 04112-9540.
ARTICLE 3
NATURE OF BUSINESS
The purpose of the Corporation is to act as a financial institution holding
company and to engage in any lawful act or activity for which a corporation may
be organized under the Maine Business Corporation Act. The Corporation shall
have all the powers of a corporation organized under said Act and under the
Maine statutes relating to financial institution holding companies.
ARTICLE 4
CAPITAL STOCK
The total number of shares of capital stock which the Corporation has
authority to issue is 105,000,000, of which 5,000,000 shall be serial preferred
stock, $.01 par value per share (hereinafter the "Preferred Stock"), and
100,000,000 shall be common stock, par value $.01 per share (hereinafter the
"Common Stock"). The aggregate par value of all authorized shares of capital
stock having a par value is $1,050,000. Except to the extent required by
governing law, rule or regulation, the shares of capital stock may be issued
from time to time by the Board of Directors without further approval of
stockholders. The Corporation shall have the authority to purchase its capital
stock out of funds lawfully available therefor, which funds shall include,
without limitation, the Corporation's unreserved and unrestricted capital
surplus.
A description of the different classes and series (if any) of the
Corporation's capital stock and a statement of the designations, and the
relative rights, preferences and limitations of the shares of each class of and
series (if any) of capital stock are as follows:
A. Common Stock. Except as provided in this Article 4 (or in any
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the exclusive voting power shall be vested in the Common Stock, the holders
thereof being entitled to one vote for each share of such Common Stock standing
in the holder's name on the books of the Corporation. Subject to any rights and
preferences of any class or series of stock having preference over the Common
Stock, holders of Common Stock shall be entitled to such dividends as may be
declared by the Board of Directors out of funds lawfully available therefor,
which funds shall include, without limitation, the Corporation's capital
surplus. Upon any liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, holders of Common Stock shall be
entitled to receive pro rata the remaining assets of the Corporation after the
holders of any class or series of stock having preference over the Common Stock
have been paid in full any sums which they may be entitled.
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B. Preferred Stock. The Board of Directors is hereby expressly authorized
by resolution or resolutions to provide, out of the unissued shares of Preferred
Stock, for series of Preferred Stock. Before any shares of any such series are
issued, the Board of Directors shall fix, and hereby is expressly empowered to
fix, by resolution or resolutions, the following provisions of the shares
thereof:
(a) the designation of such series and the number of shares to
constitute such series, which number may be increased or decreased (but not
below the number of shares then outstanding) from time to time by the Board
of Directors;
(b) whether the shares of such series shall have voting rights, and,
if so, the terms of such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates, the conditions
and dates upon which such dividends shall be payable, and the preference or
relation which such dividends shall bear to the dividends payable on any
shares of stock of any other class or any other series of this class;
(d) whether the shares of such series shall be subject to redemption
by the Corporation, and, if so, the times, prices and other conditions of
such redemption;
(e) the amount or amounts payable upon shares of such series upon, and
the rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any distribution of the
assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund, and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for retirement or other
corporate purposes and the terms and provisions relative to the operation
thereof;
(g) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series of
this class or any other securities, and, if so, the price or prices or the
rate or rates of conversion or exchange and the method, if any, of
adjusting the same, and any other terms and conditions of conversion or
exchange;
(h) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations and
restrictions thereof.
The powers, preferences and relative, participating, optional and other
special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall accrue and/or be
cumulative and as otherwise provided by applicable law.
ARTICLE 5
PREEMPTIVE RIGHTS
No holder of the capital stock of the Corporation shall be entitled as
such, as a matter of right, to subscribe for or purchase any part of any new or
additional issue of stock of any class whatsoever of the Corporation, or of
securities convertible into stock of any class whatsoever, whether now or
hereafter authorized, or whether issued for cash or other consideration or by
way of a dividend.
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ARTICLE 6
CONVERTIBLE DEBT SECURITIES
The Corporation may issue bonds, debentures, notes or other evidences of
indebtedness which may be convertible into other bonds, debentures, notes or
other evidences of indebtedness of the Corporation or into shares of stock of
any class of the Corporation within such period and upon such terms and
conditions as shall be fixed by the Board of Directors.
ARTICLE 7
DIRECTORS
The Corporation shall be managed by or under the direction of a Board of
Directors. The number of directors of the Corporation that shall constitute the
initial Board of Directors shall be six. The Board of Directors may increase or
decrease the number of directors by resolution, and the stockholders may
increase or decrease the number of directors by the affirmative vote of at least
67% of the shares entitled to vote generally in an election of directors, voting
as a single class, provided in each case that the minimum number of directors
shall be three and the maximum number of directors shall be 25, and further
provided that no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director.
A. Classification and Term. The Board of Directors shall be divided into
three classes as nearly equal in number as the then total number of directors
constituting the Board of Directors permits, with the term of office of one
class expiring each year. At the first annual meeting of stockholders following
the effective date of these Articles of Incorporation, directors of the first
class shall be elected to hold office for a term expiring at the next succeeding
annual meeting, directors of the second class shall be elected to hold office
for a term expiring at the second succeeding annual meeting, and directors of
the third class shall be elected to hold office for a term expiring at the third
succeeding annual meeting, and, with respect to directors of each class, until
their respective successors are elected and qualified. At each subsequent annual
meeting of stockholders, directors selected to succeed those whose terms are
expiring shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders and when their respective successors are elected
and qualified. Stockholders of the Corporation shall not be permitted to
cumulate their votes for the election of directors.
B. Removal. At a duly constituted meeting of stockholders called expressly
for the purpose, any director may be removed with or without cause by a vote of
the holders of at least 67% of the shares then entitled to vote in an election
of directors, voting as a single class, provided, however, that any director
also may be removed for cause in the manner specified in the Maine Business
Corporation Act.
C. Vacancies. Any vacancies occurring in the Board of Directors by reason
of an increase in the number of directors may be filled by the Board of
Directors, and any directors so chosen shall hold office until the next election
of directors by the stockholders. Any other vacancy in the Board of Directors,
whether by reason of death, resignation, removal or otherwise, may be filled by
the remaining directors, or by a sole remaining director, and any directors so
chosen shall hold office until their successors shall be elected and qualified.
Notwithstanding the foregoing, and except as otherwise required by law, whenever
the holders of any one or more series of Preferred Stock shall have the right,
voting separately as a class, to elect one or more directors of the Corporation,
the terms of the director or directors elected by such holders shall expire at
the next succeeding annual meeting of stockholders and vacancies created with
respect to any directorship of the directors so elected may be filled in the
manner specified by the resolution or resolutions of the Board of Directors
establishing such Preferred Stock.
D. Discharge of Duties. In discharging the duties of their respective
positions, the Board of Directors, committees of the Board and individual
directors shall, in considering the best interests of the Corporation, consider
the effects of any action upon the employees of the Corporation and its
subsidiaries, the depositors and borrowers of any banking subsidiary, the
communities in which offices or other establishments of the Corporation or any
subsidiary are located and all other pertinent factors.
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ARTICLE 8
SPECIAL MEETINGS, INFORMAL ACTION BY STOCKHOLDERS AND BYLAWS
A. Location. Meetings of stockholders shall be held at such place within
or without the State of Maine as may from time to time be fixed by the Board of
Directors.
B. Special Meetings. Special meetings of the stockholders, for any purpose
or purposes, may be called at any time by the Chairman of the Board, the
President or a majority of the Board of Directors and shall be called by the
Chairman of the Board, 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
the Corporation entitled to vote on the matter for which the meeting is called,
voting together as a single class; provided, however, that special meetings of
stockholders also may be called in the manner specified in the Maine Business
Corporation Act. The written request specified above shall state the purpose or
purposes of the meeting and shall be delivered at the principal office of the
Corporation addressed to the Chairman of the Board, the President or the Clerk.
C. Informal Action. Any action required to be taken at a meeting of the
stockholders, or any other action which may be taken at a meeting of the
stockholders, may be taken without a meeting if consent in writing, setting
forth the action so taken, shall be given by all of the stockholders entitled to
vote with respect to the subject matter thereof and filed with the Clerk of the
Corporation as part of the corporate records.
D. Bylaws. The Board of Directors shall have the exclusive power to make,
alter, amend and repeal the Bylaws.
ARTICLE 9
CERTAIN BUSINESS COMBINATIONS AND ACQUISITIONS OF STOCK
9.1 Definitions.
(a) Affiliate. An "Affiliate" of, or a Person "affiliated with," a
specified Person, means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
(b) Associate. The term "Associate" used to indicate a relationship with
any Person means:
(i) Any corporation or organization (other than the Corporation or a
Subsidiary of the Corporation), or any subsidiary or parent thereof, of
which such Person is an officer or partner or is, directly or indirectly,
the Beneficial Owner of 10% or more of any class of equity securities;
(ii) Any trust or other estate in which such Person has a 10% or
greater beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity;
(iii) Any relative or spouse of such Person, or any relative of such
spouse who has the same home as such Person; or
(iv) Any investment company registered under the Investment Company
Act of 1940 for which such Person or any Affiliate or Associate of such
Person serves as investment advisor.
(b) Beneficial Owner. A Person shall be considered the "Beneficial Owner"
of any shares of stock (whether or not owned of record):
(i) With respect to which such Person or any Affiliate or Associate of
such Person directly or indirectly has or shares (A) voting power,
including the power to vote or to direct the voting of such shares of stock
and/or (B) investment power, including the power to dispose of or to direct
the disposition of such shares of stock;
(ii) Which such Person or any Affiliate or Associate of such Person
has (A) the right to acquire (whether such right is exercisable immediately
or only after the passage of time) pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights,
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warrants or options, or otherwise, and/or (B) the right to vote pursuant to
any agreement, arrangement or understanding (whether such right is
exercisable immediately or only after the passage of time); or
(iii) Which are Beneficially Owned within the meaning of (i) or (ii)
of this Article 9.1(c) by any other Person with which such first-mentioned
Person or any of its Affiliates or Associates has any agreement,
arrangement or understanding, written or oral, with respect to acquiring,
holding, voting or disposing of any shares of stock of the Corporation or
any Subsidiary of the Corporation or acquiring, holding or disposing of all
or substantially all, or any Substantial Part, of the assets or business of
the Corporation or a Subsidiary of the Corporation.
For the purpose of determining whether a Person is the Beneficial Owner of a
percentage specified in this Article 9 of the outstanding Voting Shares, such
shares shall be deemed to include any Voting Shares which may be issuable
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants, options or otherwise and which are
deemed to be Beneficially Owned by such Person pursuant to the foregoing
provisions of this Article 9.1(c), but shall not include any other Voting Shares
which may be issuable in such manner.
(d) Business Combination. A "Business Combination" means:
(i) The sale, exchange, lease, transfer or other disposition to or
with a Related Person or any Affiliate or Associate of such Related Person
by the Corporation or any of its Subsidiaries (in a single transaction or a
series of related transactions) of all or substantially all, or any
Substantial Part, of its or their assets or businesses (including, without
limitation, any securities issued by a Subsidiary);
(ii) The purchase, exchange, lease or other acquisition by the
Corporation or any of its Subsidiaries (in a single transaction or a series
of related transactions) of all or substantially all, or any Substantial
Part, of the assets or business of a Related Person or any Affiliate or
Associate of such Related Person;
(iii) Any merger or consolidation of the Corporation or any Subsidiary
thereof into or with a Related Person or any Affiliate or Associate of such
Related Person or into or with another Person which, after such merger or
consolidation, would be an Affiliate or an Associate of a Related Person,
in each case irrespective of which Person is the surviving entity in such
merger or consolidation;
(iv) Any reclassification of securities, recapitalization or other
transaction (other than a redemption in accordance with the terms of the
security redeemed) which has the effect, directly or indirectly, of
increasing the proportionate amount of Voting Shares of the Corporation or
any Subsidiary thereof which are Beneficially Owned by a Related Person, or
any partial or complete liquidation, spinoff, splitoff or splitup of the
Corporation or any Subsidiary thereof; provided, however, that this Article
9.1(d) shall not relate to any transaction of the types specified herein
that has been approved by the affirmative vote of at least two thirds of
the Whole Board of Directors and a majority of the Continuing Directors; or
(v) The acquisition upon the issuance thereof of Beneficial Ownership
by a Related Person of Voting Shares or securities convertible into Voting
Shares or any voting securities or securities convertible into voting
securities of any Subsidiary of the Corporation, or the acquisition upon
the issuance thereof of Beneficial Ownership by a Related Person of any
rights, warrants or options to acquire any of the foregoing or any
combination of the foregoing Voting Shares or voting securities of a
Subsidiary.
As used in this definition, a "series of related transactions" shall be deemed
to include not only a series of transactions with the same Related Person, but
also a series of separate transactions with a Related Person or any Affiliate or
Associate of such Related Person.
Anything in this definition to the contrary notwithstanding, this
definition shall not be deemed to include any transaction of the type set forth
in Articles 9.1(d)(i) through 9.1(d)(iii) above, between or among any two or
more Subsidiaries of the Corporation or the Corporation and one or more
Subsidiaries of the Corporation if such transaction has been approved by the
affirmative vote of at least two thirds of the Whole Board of Directors and a
majority of the Continuing Directors.
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(e) Continuing Directors. A "Continuing Director" shall mean:
(i) an individual who is unaffiliated with a Related Person and who
was a member of the Board of Directors prior to the time that a Related
Person acquired 10% or more of the Voting Shares, or
(ii) an individual who is unaffiliated with a Related Person and who
is designated before his or her initial election as a Continuing Director
by a majority of the Continuing Directors.
(f) Independent Majority of Stockholders. "Independent Majority of
Stockholders" shall mean the holders of a majority of the outstanding Voting
Shares that are not Beneficially Owned, directly or indirectly, by a Related
Person.
(g) Offer. The term "Offer" shall mean every offer to buy or acquire,
solicitation of an offer to sell, tender offer or request or invitation for
tender of, a security or interest in a security for value; provided that the
term "Offer" shall not include (i) inquiries directed solely to the management
of the Corporation and not intended to be communicated to stockholders which are
designed to elicit an indication of management's receptivity to the basic
structure of a potential acquisition with respect to the amount of cash and/or
securities, manner of acquisition and formula for determining price, or (ii)
non-binding expressions of understanding or letters of intent with the
management of the Corporation regarding the basic structure of a potential
acquisition with respect to the amount of cash and/or securities, manner of
acquisition and formula for determining price.
(h) Person. The term "Person" shall mean any person, partnership,
corporation, group or other entity. When two or more Persons act as a
partnership, limited partnership, syndicate, association or other group for the
purpose of acquiring, holding or disposing of shares of stock, such partnership,
syndicate, associate or group shall be deemed a "Person."
(i) Related Person. The term "Related Person" shall mean any Person who or
which is (i) the Beneficial Owner of 10% or more of the Voting Shares; or (ii)
an Affiliate of the Corporation and at any time within the two-year period
immediately prior to the announcement of a Business Combination was the
Beneficial Owner, directly or indirectly, of 10% or more of the then outstanding
Voting Shares; or (iii) an assignee of or has otherwise succeeded to any Voting
Shares which were at any time within the two-year period immediately prior to
the announcement of a Business Combination Beneficially Owned by any Related
Person, if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(j) Substantial Part. The term "Substantial Part" as used with reference
to the assets of the Corporation, of any Subsidiary or of any Related Person
means assets having a value of more than 10% of the total consolidated assets of
the Corporation and its Subsidiaries as of the end of the Corporation's most
recent fiscal year ending prior to the time the determination is being made.
(k) Subsidiary. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the Person in
question.
(l) Voting Shares. "Voting Shares" shall mean shares of the Corporation
entitled to vote generally in an election of directors.
(m) Whole Board of Directors. "Whole Board of Directors" shall mean the
total number of directors which the Corporation would have if there were no
vacancies.
(n) Certain Determinations With Respect to Section 9.
(i) A majority of the Continuing Directors shall have the power to
determine for the purposes of this Article 9, on the basis of information
known to them: (A) the number of Voting Shares of which any Person is the
Beneficial Owner, (B) whether a Person is an Affiliate or Associate of
another, (C) whether a Person has an agreement, arrangement or
understanding with another as to the matters referred to in the definition
of "Beneficial Owner" as hereinabove defined, (D) whether the assets
subject to any Business Combination constitute a "Substantial Part" as
hereinabove defined, (E) whether two or more transactions constitute a
"series of related transactions" as hereinabove defined, (F) any matters
referred
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to in Article 9.1(n)(ii) below, and (G) such other matters with respect to
which a determination is required under this Article 9.
(ii) A Related Person shall be deemed to have acquired a share of the
Corporation at the time when such Related Person became the Beneficial
Owner thereof. With respect to shares owned by Affiliates, Associates or
other Persons whose ownership is attributed to a Related Person under the
foregoing definition of Beneficial Owner, if the price paid by such Related
Person for such shares is not determinable, the price so paid shall be
deemed to be the higher of (A) the price paid upon acquisition thereof by
the Affiliate, Associate or other Person, or (B) the market price of the
shares in question (as determined by a majority of the Continuing
Directors) at the time when the Related Person became the Beneficial Owner
thereof.
(o) Fiduciary Obligations. Nothing contained in this Article 9 shall be
construed to relieve any Related Person from any fiduciary obligation imposed by
law.
(p) Directors, Officers or Employees. Directors, officers or employees of
the Corporation or any Subsidiary thereof shall not be deemed to be a Person or
Associates with respect to their individual acquisitions of any class of equity
securities of the Corporation solely as a result of their capacities as such.
9.2 Approval of Business Combinations.
(a) Whether or not a vote of the stockholders is otherwise required in
connection with the transaction, neither the Corporation nor any of its
Subsidiaries shall become party to any Business Combination without the prior
affirmative vote at a meeting of the Corporation's stockholders as to all shares
owned by (i) the holders of not less than 80% of the outstanding Voting Shares,
voting as a single class, and (ii) an Independent Majority of Stockholders. Such
favorable votes shall be required notwithstanding that no vote may be required,
or that some lesser percentage may be specified by law or elsewhere in these
Articles of Incorporation or the Bylaws of the Corporation or otherwise.
(b) The provisions of Article 9.2(a) shall not apply to a particular
Business Combination, and such Business Combination shall require only such
stockholder vote (if any) as would be required without reference to Article
9.2(a), if the conditions specified in Article 9.2(c) are met or all of the
conditions set forth in Subparagraphs (i) through (vii) below are satisfied:
(i) The ratio of (A) the aggregate amount of the cash and the fair
market value of other consideration to be received per share of Common
Stock (as defined in Article 4 hereof) of the Corporation in such Business
Combination by holders of Common Stock other than the Related Person
involved in such Business Combination, to (B) the market price per share of
the Common Stock immediately prior to the announcement of the proposed
Business Combination, is at least as great as the ratio of (X) the highest
per share price (including brokerage commissions, transfer taxes and
soliciting dealers' fees) which such Related Person has theretofore paid in
acquiring any Common Stock prior to such Business Combination, to (Y) the
market price per share of Common Stock immediately prior to the initial
acquisition by such Related Person of any shares of Common Stock; and
(ii) The aggregate amount of the cash and the fair market value of
other consideration to be received per share of Common Stock in such
Business Combination by holders of Common Stock, other than the Related
Person involved in such Business Combination, is not less than the highest
per share price (including brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by such Related Person in acquiring any of
its holdings of Common Stock; and
(iii) If applicable, the ratio of (A) the aggregate amount of the cash
and the fair market value of other consideration to be received per share
of Preferred Stock (as defined in Article 4 hereof) of the Corporation in
such Business Combination by holders of Preferred Stock other than the
Related Person involved in such Business Combination, to (B) the market
price per share of the Preferred Stock immediately prior to the
announcement of the proposed Business Combination, is at least as great as
the ratio of (X) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees) which such
Related Person has theretofore paid in acquiring any Preferred Stock prior
to
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such Business Combination to (Y) the market price per share of Preferred
Stock immediately prior to the initial acquisition by such Related Person
of any shares of Preferred Stock; and
(iv) If applicable, the aggregate amount of the cash and the fair
market value of other consideration to be received per share of Preferred
Stock in such Business Combination by holders of Preferred Stock, other
than the Related Person involved in such Business Combination, is not less
than the highest per share price (including brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by such Related Person in
acquiring any of its holdings of Preferred Stock; and
(v) The consideration (if any) to be received in such Business
Combination by holders of stock other than the Related Person (whether
Common Stock or Preferred Stock) shall, except to the extent that a
stockholder agrees otherwise as to all or part of the shares which he or
she owns, be in the same form and of the same kind as the consideration
paid by the Related Person in acquiring stock already owned by it; and
(vi) After such Related Person becomes a Related Person and prior to
the consummation of such Business Combination:
(A) such Related Person shall have taken steps to ensure that the
Board of Directors of the Corporation included at all times
representation by Continuing Directors proportionate to the ratio that
the number of Voting Shares of the Corporation from time to time owned
by stockholders who are not Related Persons bears to all Voting Shares
of the Corporation outstanding at the time in question (with a
Continuing Director to occupy any resulting fractional position among
the directors);
(B) such Related Person shall not have acquired from the
Corporation, directly or indirectly, any shares of the Corporation
(except (X) upon conversion of convertible securities acquired by it
prior to becoming a Related Person, (Y) as a result of a pro rata stock
dividend, stock split or division of shares or (Z) in a transaction
which satisfied all applicable requirements of this Article 9);
(C) such Related Person shall not have acquired any additional
Voting Shares of the Corporation or securities convertible into or
exchangeable for Voting Shares except as a part of the transaction which
resulted in such Related Person's becoming a Related Person;
(D) such Related Person shall not have (X) received the benefit,
directly or indirectly (except proportionately as a stockholder), of any
loans, advances, guarantees, pledges or other financial assistance or
tax credits provided by the Corporation or any Subsidiary, or (Y) made
any change in the Corporation's business or equity capital structure or
entered into any contract, arrangement or understanding with the
Corporation, except any such change, contract, arrangement or
understanding as may have been approved by the favorable vote of not
less than a majority of the Whole Board of Directors and a majority of
the Continuing Directors of the Corporation; and
(E) except as provided by a majority of the Whole Board of
Directors and a majority of the Continuing Directors, there shall have
been: (X) no failure to declare and pay at the regular date therefor any
dividends (whether or not cumulative) on any outstanding Preferred
Stock; (Y) no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any subdivision of the
Common Stock); and (Z) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding shares of the
stock; and
(vii) A proxy statement complying with the requirements of the
Securities Exchange Act of 1934, as amended, shall have been mailed to all
holders of Voting Shares for the purpose of soliciting stockholder approval
at least 20 days prior to the consummation of such Business Combination
(whether or not such proxy statement is required to be mailed pursuant to
such Act or any successor provisions). Such proxy statement shall contain
at the front thereof, in a prominent place, any recommendations as to
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the advisability (or inadvisability) of the Business Combination which the
Continuing Directors, or any of them, may have furnished in writing and, if
deemed advisable by a majority of the Continuing Directors, an opinion of a
reputable investment banking firm as to the fairness (or lack of fairness)
of the terms of such Business Combination from the point of view of the
holders of Voting Shares other than any Related Person (such investment
banking firm to be selected by a majority of the Continuing Directors, to
be furnished with all information it reasonably requests, and to be paid a
reasonable fee for its services upon receipt by the Corporation of such
opinion).
(c) The provisions of Article 9.2(a) shall not apply to a particular
Business Combination, and such Business Combination shall require only such
stockholder vote, if any, as would be required without reference to Article
9.2(a), if such Business Combination is approved by (i) two thirds of the Whole
Board of Directors of the Corporation at a time prior to the acquisition of 10%
or more of the outstanding Voting Shares of the Corporation by the Related
Person, or (ii) a majority of the Continuing Directors after acquisition of 10%
or more of the outstanding Voting Shares by the Related Person but before
consummation of the particular Business Combination.
(d) Any amendment, change or repeal of Article 9.2(a) through (d) or any
other amendment of these Articles of Incorporation which would have the effect
of modifying or permitting circumvention of Article 9.2(a) through (d) shall
require the affirmative vote at a meeting of the Corporation's stockholders as
to all shares owned by (i) the holders of at least 80% of the then outstanding
Voting Shares, voting as a single class, and (ii) an Independent Majority of
Stockholders; provided, however, that this Article 9.2(d) shall not apply to,
and such vote shall not be required for, any such amendment, change or repeal
which is approved by the favorable vote of not less than a majority of the Whole
Board of Directors and a majority of the Continuing Directors, and any such
amendment, change or repeal so approved shall require only the vote, if any,
required by law or elsewhere in these Amended and Restated Articles of
Incorporation or the Bylaws of the Corporation or otherwise.
ARTICLE 10
AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in these Amended and Restated Articles of Incorporation, in
the manner now or hereafter prescribed by law, and all rights conferred upon
stockholders herein are granted subject to this reservation. No amendment,
alteration, change or repeal of these Amended and Restated Articles of
Incorporation shall be made unless it is first approved by the Board of
Directors of the Corporation pursuant to a resolution adopted by the affirmative
vote of a majority of the directors then in office, and thereafter is approved
by the holders of a majority of the shares of the Corporation entitled to vote
generally in an election of directors, voting together as a single class, as
well as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof, provided that, notwithstanding anything
contained in these Amended and Restated Articles of Incorporation to the
contrary, (i) the affirmative vote of the holders of at least 75% of the shares
of the Corporation entitled to vote generally in an election of directors,
voting together as a single class, as well as such additional vote of the
Preferred Stock as may be required by the provision of any series thereof, shall
be required to amend, alter, change or repeal any provision inconsistent with
Articles 5, 6, 7, 8 and this Article 10, provided, however, that such
supermajority vote shall not apply to, and such vote shall not be required for,
any amendment, addition, alteration, change or repeal which is approved by the
affirmative vote of at least two thirds of the Whole Board of Directors and a
majority of the Continuing Directors (in each case as defined in Article 9
hereof), and any such amendment, addition, alteration, change or repeal so
approved shall require only the vote, if any, required by law or elsewhere in
these Articles of Incorporation or the Bylaws of the Corporation or otherwise,
and (ii) Article 9.1 and 9.2 shall be amended in the manner specified in Article
9.2(d).
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EXHIBIT B
[MATTERS TO BE COVERED IN OPINION(s) OF COUNSEL TO BE DELIVERED TO THE
COMPANY PURSUANT TO SECTION 6.2(d) OF THE AGREEMENT]
(a) Each of PHFG and its Significant Subsidiaries is duly incorporated and
validly existing under the laws of the jurisdiction of its incorporation, and
PHFG 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 PHFG Common Stock, of which were issued and
outstanding of record as of [the end of the month preceding the closing date],
and 5,000,000 shares of PHFG Preferred Stock, none of which are issued and
outstanding as of the date hereof. All of the outstanding shares of PHFG Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable and the shareholders of PHFG have no preemptive rights with
respect to any shares of capital stock of PHFG. All of the outstanding shares of
capital stock of the PHFG Subsidiaries which are Significant Subsidiaries have
been duly authorized and validly issued, are fully paid and nonassessable and,
to the knowledge of such counsel, and except in the case of the PHFG Capital
Securities, are directly or indirectly owned by PHFG free and clear of all
liens, claims, encumbrances, charges, restrictions or rights of third parties of
any kind whatsoever.
(c) The Agreement has been duly authorized, executed and delivered by PHFG
and, assuming due authorization, execution and delivery by the Company,
constitutes a valid and binding obligation of PHFG enforceable in accordance
with its terms, except that the enforceability of the obligations of PHFG 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) Each Bank Merger Agreement has been duly authorized, executed and
delivered by the applicable PHFG Bank and, assuming due authorization, execution
and delivery by the applicable Company Bank, constitutes a valid and binding
obligation of the applicable PHFG Bank enforceable in accordance with its terms,
except that enforceability of the obligations of the applicable PHFG 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 applicable Bank Merger
Agreement.
(e) All corporate and shareholder actions required to be taken by PHFG by
law and its 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 applicable
PHFG Bank by law and its Articles of Incorporation and Bylaws to authorize the
execution and delivery of the applicable Bank Merger Agreement and consummation
of the applicable Bank Merger have been taken.
(f) All consents or approvals of or filings or registrations with any
Governmental Entity or, to such counsel's knowledge, any third party which are
necessary to be obtained by (i) PHFG to permit the execution, delivery and
performance of the Agreement and consummation of the Merger have been obtained
and (ii) a PHFG Bank to permit the execution, delivery and performance of the
applicable Bank Merger Agreement and consummation of the applicable Bank Merger
have been obtained.
(g) The shares of PHFG 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 PHFG and, when issued in accordance with the terms of the Agreement,
will be validly issued and fully paid and nonassessable.
(h) To such counsel's knowledge, and except as Previously Disclosed or as
disclosed in PHFG's Securities Documents, there are no material legal or
governmental proceedings pending to which PHFG or a PHFG Subsidiary is a party
or to which any property of PHFG or a PHFG Subsidiary is subject and no such
proceedings are threatened by governmental authorities or by others.
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Such counsel also shall state that nothing has caused it to believe that
the information relating to PHFG and the PHFG Subsidiaries 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 PHFG
and up to and including the date(s) of the meetings of shareholders to which
such Proxy Statement relates, contained any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon (i) certificates of
governmental officials and, as to matters of fact, certificates of officers of
PHFG or a PHFG Subsidiary and (ii) in the case of Elias, Matz, Tiernan & Herrick
L.L.P., Carol L. Mitchell, Esq. or such other Maine counsel reasonably
satisfactory to the Company with respect to matters of Maine law. The opinion of
such counsel may add other qualifications and explanations of the basis of their
opinion as may be reasonably acceptable to the Company.
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EXHIBIT C
[MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED TO PHFG
PURSUANT TO SECTION 6.3(d) OF THE AGREEMENT]
(a) Each of the Company and the Company Banks is duly incorporated and
validly existing under the laws of the jurisdiction of its incorporation, and
the Company is duly registered as a bank holding company under the BHCA.
(b) The authorized capital stock of the Company consists of 50,000,000
shares of Company Common Stock, of which shares are issued
and outstanding of record as of the date hereof, and 3,000,000 shares of Company
Preferred Stock, of which no shares are issued or outstanding. 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 each Company Bank
have been duly authorized and validly issued, are fully paid and nonassessable
(except as otherwise provided by the National Bank Act with respect to the
Company Massachusetts Bank which is a national bank) 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, 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 PHFG,
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) Each Bank Merger Agreement has been duly authorized, executed and
delivered by the applicable Company Bank and, assuming due authorization,
execution and delivery by the applicable PHFG Bank, constitutes a valid and
binding obligation of the applicable Company Bank enforceable in accordance with
its terms, except that enforceability of the obligations of the applicable
Company 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
applicable Bank Merger Agreement.
(e) All corporate and shareholder actions required to be taken by the
Company by law and its 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
applicable Company Bank by law and its Articles of Incorporation and Bylaws to
authorize the execution and delivery of the applicable Bank Merger Agreement and
consummation of the applicable Bank Merger have been taken.
(f) All consents or approvals of or filings or registrations with any
Governmental Entity or, to such counsel's knowledge, any third party which are
necessary to be obtained by (i) the Company to permit the execution, delivery
and performance of the Agreement and consummation of the Merger have been
obtained and (ii) a Company Bank to permit the execution, delivery and
performance of the applicable Bank Merger Agreement and consummation of the
applicable Bank Merger have been obtained.
(g) To such counsel's knowledge, and except as Previously Disclosed or as
disclosed in the Company's Securities Documents, there are no material legal or
governmental proceedings pending to which the Company or 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.
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Such counsel also shall state that nothing has caused it to believe that
the information relating to the Company and the Company Subsidiaries 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 PHFG
and up to and including the date(s) of the meetings of shareholders to which
such Proxy Statement relates, contained any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon (i) certificates of
governmental officials, 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
and (ii) counsel reasonably satisfactory to PHFG with respect to matters of New
Hampshire law. The opinion of such counsel may add other qualifications and
explanations of the basis of their opinion as may be reasonably acceptable to
PHFG.
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ANNEX II
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of October 27, 1997 (the "Agreement"),
between CFX Corporation, a New Hampshire corporation ("Issuer"), and Peoples
Heritage Financial Group, Inc., a Maine corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of October 27, 1997 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee (the "Merger"), with Grantee
as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan,
Grantee has required that Issuer agree, and Issuer has agreed, to grant to
Grantee the Option (as hereinafter defined);
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 4,793,062 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 .66 2/3 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $22.69, 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) The Holder (as hereinafter defined), may exercise the Option, in whole
or in part, at any time and from time to time, if, but only if, both a
Preliminary Purchase Event (as hereinafter defined) and a Purchase Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided, however, that if the
Option cannot be exercised on any day because of any injunction, order or
similar restraint issued by a court of competent jurisdiction, the period during
which the Option may be exercised shall be extended so that the Option shall
expire no earlier than on the 10th business day after such injunction, order or
restraint shall have been dissolved or when such injunction, order or restraint
shall have become permanent and no longer subject to appeal, as the case may be.
Each of the following shall be an "Exercise Termination Event": (A) the
Effective Time (as defined in the Plan) of the Merger, (B) termination of the
Plan in accordance with the terms thereof prior to the occurrence of a
Preliminary Purchase Event, other than a termination of the Plan by Grantee
pursuant to Section 7.1(b)(i) (a "Default Termination") and (C) 12 months after
termination of the Plan following the occurrence of a Preliminary Purchase Event
or pursuant to a Default Termination, provided that if a Preliminary Purchase
Event continues or occurs beyond such termination and prior to the passage of
such 12-month period, the Exercise Termination Event shall be 12 months from the
expiration of the last Preliminary Purchase Event to expire but in no event more
than 18 months after such termination. Notwithstanding anything to the contrary
contained herein, the Option may not be exercised (nor may any of Grantee's
rights under Sections 8, 9, 10 or 14(h) hereof be exercised) at any time when
Grantee shall be in willful breach of any of its covenants or agreements
contained in the Plan under circumstances that would entitle Issuer to terminate
the Plan. The term "Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee.
<PAGE> 148
(b) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent, Issuer or any of its
Subsidiaries 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 engage in an Acquisition Transaction. For
purposes of this Agreement, "Acquisition Transaction" shall mean (A) a
merger, consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than internal mergers, reorganizations, consolidations
or dissolutions involving only existing Subsidiaries effected in accordance
with the Plan), (B) the purchase, lease or other acquisition of all or a
substantial portion of the consolidated assets or consolidated deposits of
Issuer and its Subsidiaries or (C) a purchase or other acquisition
(including by way of merger, consolidation, share exchange, Tender Offer or
Exchange Offer (as such terms are hereinafter defined) or otherwise) of
securities representing 10% or more of the voting power of Issuer or any of
its Subsidiaries (any of the foregoing an "Acquisition Transaction");
(ii) 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);
(iii) (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 or become publicly
known 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 Bank Holding Company Act of 1956, as
amended, the Bank Merger Act, as amended, the Change in Bank Control Act of
1978, as amended, or any other applicable federal or state banking law for
approval to engage in an Acquisition Transaction; or
(iv) Issuer shall have breached any covenant or obligation contained
in the Plan and such breach would entitle Grantee to terminate the Plan
under Section 7.1(b)(i) 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
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.
(c) As used herein, a "Purchase Event" means any of the following events:
(i) The occurrence of the Preliminary Purchase Event described in
clause (i) of subsection (b) of this Section 3, except that the percentage
referred to in clause (C) shall be 25%; 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.
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<PAGE> 149
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 (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 60 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"), provided that if
prior notification to or approval of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") or any other Governmental Entity is
required in connection with such purchase, Holder shall promptly file the
required notice or application for approval and shall 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) and the period of
time that otherwise would run pursuant to this sentence shall run instead from
the date on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite waiting period
or periods shall have passed. Any exercise of the Option shall be deemed to
occur on the Notice Date relating thereto.
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, provided that failure or refusal of Issuer to
designate such a bank account shall not preclude Holder from exercising the
Option, and (ii) present and surrender this Agreement to Issuer at the address
of Issuer specified in Section 14(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 the provisions
of this Agreement.
(c) In addition to any other legend that may be 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 OCTOBER 27,
1997. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then
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<PAGE> 150
be closed or that certificates representing such shares of Issuer Common Stock
shall not then be actually delivered to Holder. Issuer shall pay all expenses,
and any and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and delivery of
stock certificates under this Section 4 in the name of Holder or its assignee,
transferee or designee.
(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 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 Incorporation or Bylaws or a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, debenture,
mortgage, indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(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
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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 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
more than 50% of the consolidated assets or deposits of Issuer and its
Subsidiaries to any person, other than Grantee or one of its Subsidiaries, then,
and in each such case (but at the election of Holder in the case of clause
(iii)), 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 the Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction, the
numerator of which shall be the number of shares of Issuer Common Stock for
which the Option was theretofore exercisable and the denominator of which shall
be the number of shares of Substitute Common Stock for which the Substitute
Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries
taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per share
of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (y) the
highest
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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 more than 50% of the consolidated assets of
Issuer and its subsidiaries, an amount equal to (i) 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 (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 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) At the request of Holder delivered after the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and prior to an Exercise
Termination Event, 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
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(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 ten business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Federal Reserve Board or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and to 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), in which case the ten-day period referred to in the first sentence of
this Section 8(b) shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. If the
Federal Reserve Board or any other Governmental Entity disapproves of any part
of Issuer's proposed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Holder. If the Federal Reserve Board or any
other Governmental Entity prohibits the repurchase in part but not in whole,
then Holder shall have the right (i) to revoke the repurchase request or (ii) to
the extent permitted by the Federal Reserve Board or other Governmental Entity,
determine whether the repurchase should apply to the Option and/or Option Shares
and to what extent to each, and Holder shall thereupon have the right to
exercise the Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of shares covered by
the Option in respect of which payment has been made pursuant to Section
8(a)(ii) and the number of shares covered by the portion of the Option (if any)
that has been repurchased. Holder shall notify Issuer of its determination under
the preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
(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 American Stock Exchange
("AMEX") (or if Issuer Common Stock is not quoted on the AMEX, the highest bid
price per share as quoted on the principal trading market or securities exchange
on which such shares are traded, as reported by a recognized source chosen by
Holder) during the 60 business days preceding the Request Date; provided,
however, that in the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of Issuer as determined by
a nationally-recognized investment banking firm selected by Holder, divided by
the number of shares of Issuer Common Stock outstanding at the time of such
sale. If the consideration to be offered, paid or received pursuant to either of
the foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent
nationally-recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any Subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as
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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, or (ii)
any of the transactions described in Section 7(b)(i), Section 7(b)(ii) or
Section 7(b)(iii) shall be consummated. The parties hereto agree that Issuer's
obligations to repurchase the Option or Option Shares under this Section 8 shall
not terminate upon the occurrence of an Exercise Termination Event unless no
Purchase Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
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 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 that occurs prior to an
Exercise Termination 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.
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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 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
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indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, the selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling Holders and the
underwriters in connection with the statement or omissions which results in such
expenses, losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party as a result of
the expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(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 Holder 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 it under the Securities Act or the
Exchange Act, or required pursuant to any state securities laws or the rules of
any stock exchange.
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 any securities exchange or national quotation system,
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
such securities exchange or national quotation system 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, this
Agreement (and the Option granted hereby) are exchangeable, without expense, at
the option of Holder, upon presentation and surrender of this Agreement at the
principal office of the Issuer for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Rights Agreement. Issuer shall not approve, adopt or amend, or propose
the approval, adoption or amendment of, any shareholder rights plan unless such
shareholder rights plan contains terms which provide, to the reasonable
satisfaction of Grantee, that (i) the Rights issued pursuant thereto will not
become exercisable by virtue of the fact that Grantee is the beneficial owner of
shares of Issuer Common Stock acquired or acquirable pursuant to the grant or
exercise of the Option and (ii) no restrictions or limitations with respect to
the exercise of any Rights acquired or acquirable by Grantee will result or be
imposed to the extent such Rights relate to the shares of Issuer Common Stock
described in clause (i) of this Section 12.
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This covenant shall survive for so long as Grantee is the beneficial owner of
shares of Issuer Common Stock acquired or acquirable pursuant to the grant or
exercise of the Option.
13. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $35,000,000
and, if it otherwise would exceed such amount, the Grantee, at its sole
election, shall either (i) reduce the number of shares of Issuer Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (iii) pay cash to the Issuer or (iv) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed $35,000,000 after taking into account the foregoing actions. As used
herein, the term "Total Profit" shall mean the aggregate amount (before taxes)
of the following: (i) the amount received by Grantee pursuant to Issuer's
repurchase of the Option (or any portion thereof) pursuant to Section 8 hereof,
(ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of the
Option Shares pursuant to Section 8 hereof, less (y) the Grantee's purchase
price for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged) to any unaffiliated party, less (y)
the Grantee's purchase price of such Option Shares, (iv) any amounts received by
Grantee on the transfer of the Option (or any portion thereof) to any
unaffiliated party and (v) any equivalent amount with respect to the Substitute
Option.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as hereinafter defined) of more than
$35,000,000, provided that nothing in this sentence shall restrict any exercise
of the Option permitted hereby on any subsequent date. As used herein, the term
"Notional Total Profit" with respect to any number of shares as to which Grantee
may propose to exercise this Option shall be the Total Profit determined as of
the date of such proposed exercise assuming that this Option were exercised on
such date for such number of shares and assuming that such shares, together with
all other Option Shares held by Grantee and its affiliates as of such date, were
sold for cash at the closing market price for the Common Stock as of the close
of business on the preceding trading day (less customary brokerage commissions).
14. Miscellaneous.
(a) Expenses. Except as otherwise provided in Sections 4 and 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
14(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:
CFX Corporation
102 Main Street
Keene, New Hampshire 03431
Attn: Peter J. Baxter
President and Chief Executive Officer
Fax: 603-358-5028
With a required copy to:
Arnold & Porter
555 12th Street
Washington, D.C. 20004
Attn: Steven Kaplan, Esq.
Fax: 202-942-5999
(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 may be assigned by either 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 its rights and
obligations hereunder in whole or in part in the event of the occurrence of a
Purchase Event prior to an Exercise Termination Event, provided, however, that
until the date 15 days following the date on which the Federal Reserve Board
approves an application by Grantee to acquire the shares of Issuer Common Stock
subject to the Option, Grantee may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf or (iv) any other manner
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approved by the Federal Reserve Board. 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.
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.
<TABLE>
<CAPTION>
Attest: CFX CORPORATION
<S> <C>
/s/ E.L. HERBERT By: /s/ PETER J. BAXTER
- --------------------------------------------- ---------------------------------------------
Name: E.L. Herbert Name: Peter J. Baxter
Title: Assistant Secretary Title: President and Chief Executive Officer
Attest: PEOPLES HERITAGE FINANCIAL GROUP, INC.
/s/ PETER J. VERRILL By: /s/ WILLIAM J. RYAN
- --------------------------------------------- -----------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Chief Title: Chairman, President and Chief
Operating Officer and Chief Financial Executive Officer
Officer
</TABLE>
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ANNEX III
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of October 27, 1997 (the "Agreement"),
between Peoples Heritage Financial Group, Inc., a Maine corporation ("Issuer"),
and CFX Corporation, a New Hampshire corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of October 27, 1997 (the "Plan"), providing for, among other
things, the merger of Grantee with and into Issuer (the "Merger"), with Issuer
as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan,
Grantee has required that Issuer agree, and Issuer has agreed, to grant to
Grantee the Option (as hereinafter defined);
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 2,769,736 shares (as adjusted as set forth herein) (the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of Common Stock, par value $.01 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $43.13, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 10.0% 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 PHFG Rights as provided in the PHFG Rights
Agreement.
3. Exercise of Option.
(a) The Holder (as hereinafter defined), may exercise the Option, in whole
or in part, at any time and from time to time, if, but only if, both a
Preliminary Purchase Event (as hereinafter defined) and a Purchase Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided, however, that if the
Option cannot be exercised on any day because of any injunction, order or
similar restraint issued by a court of competent jurisdiction, the period during
which the Option may be exercised shall be extended so that the Option shall
expire no earlier than on the 10th business day after such injunction, order or
restraint shall have been dissolved or when such injunction, order or restraint
shall have become permanent and no longer subject to appeal, as the case may be.
Each of the following shall be an "Exercise Termination Event": (A) the
Effective Time (as defined in the Plan) of the Merger, (B) termination of the
Plan in accordance with the terms thereof prior to the occurrence of a
Preliminary Purchase Event, other than a termination of the Plan by Grantee
pursuant to Section 7.1(b)(i) (a "Default Termination") and (C) 12 months after
termination of the Plan following the occurrence of a Preliminary Purchase Event
or pursuant to a Default Termination, provided that if a Preliminary Purchase
Event continues or occurs beyond such termination and prior to the passage of
such 12-month period, the Exercise Termination Event shall be 12 months from the
expiration of the last Preliminary Purchase Event to expire but in no event more
than 18 months after such termination. Notwithstanding anything to the contrary
contained herein, the Option may not be exercised (nor may any of Grantee's
rights under Sections 8, 9, 10 or 13(h) hereof be exercised) at any time when
Grantee shall be in willful breach of any of its covenants or agreements
contained in the Plan under circumstances that would entitle Issuer to terminate
the Plan. The term "Holder" shall mean the holder or holders of the Option from
time to time, and which is initially Grantee.
<PAGE> 161
(b) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent, Issuer or any of its
Subsidiaries 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 engage in an Acquisition Transaction. For
purposes of this Agreement, "Acquisition Transaction" shall mean (A) a
merger, consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than internal mergers, reorganizations, consolidations
or dissolutions involving only existing Subsidiaries effected in accordance
with the Plan), (B) the purchase, lease or other acquisition of all or a
substantial portion of the consolidated assets or consolidated deposits of
Issuer and its Subsidiaries or (C) a purchase or other acquisition
(including by way of merger, consolidation, share exchange, Tender Offer or
Exchange Offer (as such terms are hereinafter defined) or otherwise) of
securities representing 10% or more of the voting power of Issuer or any of
its Subsidiaries (any of the foregoing an "Acquisition Transaction");
(ii) 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);
(iii) (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 or become publicly
known 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 Bank Holding Company Act of 1956, as
amended, the Bank Merger Act, as amended, the Change in Bank Control Act of
1978, as amended, or any other applicable federal or state banking law for
approval to engage in an Acquisition Transaction; or
(iv) Issuer shall have breached any covenant or obligation contained
in the Plan and such breach would entitle Grantee to terminate the Plan
under Section 7.1(b)(i) 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
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.
(c) As used herein, a "Purchase Event" means any of the following events:
(i) The occurrence of the Preliminary Purchase Event described in
clause (i) of subsection (b) of this Section 3, except that the percentage
referred to in clause (C) shall be 25%; 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.
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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 (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 60 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"), provided that if
prior notification to or approval of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") or any other Governmental Entity is
required in connection with such purchase, Holder shall promptly file the
required notice or application for approval and shall 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) and the period of
time that otherwise would run pursuant to this sentence shall run instead from
the date on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite waiting period
or periods shall have passed. Any exercise of the Option shall be deemed to
occur on the Notice Date relating thereto.
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, provided that failure or refusal of Issuer to
designate such a bank account shall not preclude Holder from exercising the
Option, and (ii) present and surrender this Agreement to Issuer at the address
of Issuer specified in Section 13(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 the provisions
of this Agreement.
(c) In addition to any other legend that may be 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 OCTOBER 27,
1997. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then
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be closed or that certificates representing such shares of Issuer Common Stock
shall not then be actually delivered to Holder. Issuer shall pay all expenses,
and any and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and delivery of
stock certificates under this Section 4 in the name of Holder or its assignee,
transferee or designee.
(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 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 Incorporation or Bylaws or a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, debenture,
mortgage, indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(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
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<PAGE> 164
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 10.0% 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 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
more than 50% of the consolidated assets or deposits of Issuer and its
Subsidiaries to any person, other than Grantee or one of its Subsidiaries, then,
and in each such case (but at the election of Holder in the case of clause
(iii)), 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 the Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction, the
numerator of which shall be the number of shares of Issuer Common Stock for
which the Option was theretofore exercisable and the denominator of which shall
be the number of shares of Substitute Common Stock for which the Substitute
Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries
taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per share
of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (y) the
highest
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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 more than 50% of the consolidated assets of
Issuer and its subsidiaries, an amount equal to (i) 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 (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 10.0% 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 10.0% of the aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section 7
are given full force and effect (including, without limitation, any action that
may be necessary so that the holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute Common Stock are restricted securities, as defined in
Rule 144 under the Securities Act or any successor provision) than other shares
of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) At the request of Holder delivered after the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and prior to an Exercise
Termination Event, 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
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(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 ten business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Federal Reserve Board or any other
Governmental Entity is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and to 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), in which case the ten-day period referred to in the first sentence of
this Section 8(b) shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. If the
Federal Reserve Board or any other Governmental Entity disapproves of any part
of Issuer's proposed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Holder. If the Federal Reserve Board or any
other Governmental Entity prohibits the repurchase in part but not in whole,
then Holder shall have the right (i) to revoke the repurchase request or (ii) to
the extent permitted by the Federal Reserve Board or other Governmental Entity,
determine whether the repurchase should apply to the Option and/or Option Shares
and to what extent to each, and Holder shall thereupon have the right to
exercise the Option as to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of shares covered by
the Option in respect of which payment has been made pursuant to Section
8(a)(ii) and the number of shares covered by the portion of the Option (if any)
that has been repurchased. Holder shall notify Issuer of its determination under
the preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
(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 ("NMS") (or if Issuer Common Stock is not quoted on the NMS, the
highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded, as reported by a recognized
source chosen by Holder) during the 60 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally-recognized investment banking firm selected by
Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any Subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as
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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. The parties hereto agree that Issuer's
obligations to repurchase the Option or Option Shares under this Section 8 shall
not terminate upon the occurrence of an Exercise Termination Event unless no
Purchase Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
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 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 that occurs prior to an
Exercise Termination 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.
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<PAGE> 168
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 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
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indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, the selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the selling Holders and the
underwriters in connection with the statement or omissions which results in such
expenses, losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party as a result of
the expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall the selling Holders be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(g) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any Holder to
indemnify shall be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(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 Holder 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 it under the Securities Act or the
Exchange Act, or required pursuant to any state securities laws or the rules of
any stock exchange.
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 any securities exchange or national quotation system,
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
such securities exchange or national quotation system 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, this
Agreement (and the Option granted hereby) are exchangeable, without expense, at
the option of Holder, upon presentation and surrender of this Agreement at the
principal office of the Issuer for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any other
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $35,000,000
and, if it otherwise would exceed such amount, the Grantee, at its sole
election, shall either (i) reduce the number of shares of Issuer Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (iii) pay cash to the Issuer or (iv) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed $35,000,000 after taking into account the foregoing actions. As used
herein, the term "Total Profit" shall mean the aggregate amount (before taxes)
of the following: (i) the amount received by Grantee pursuant to Issuer's
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repurchase of the Option (or any portion thereof) pursuant to Section 8 hereof,
(ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of the
Option Shares pursuant to Section 8 hereof, less (y) the Grantee's purchase
price for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged) to any unaffiliated party, less (y)
the Grantee's purchase price of such Option Shares, (iv) any amounts received by
Grantee on the transfer of the Option (or any portion thereof) to any
unaffiliated party and (v) any equivalent amount with respect to the Substitute
Option.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as hereinafter defined) of more than
$35,000,000, provided that nothing in this sentence shall restrict any exercise
of the Option permitted hereby on any subsequent date. As used herein, the term
"Notional Total Profit" with respect to any number of shares as to which Grantee
may propose to exercise this Option shall be the Total Profit determined as of
the date of such proposed exercise assuming that this Option were exercised on
such date for such number of shares and assuming that such shares, together with
all other Option Shares held by Grantee and its affiliates as of such date, were
sold for cash at the closing market price for the Common Stock as of the close
of business on the preceding trading day (less customary brokerage commissions).
13. Miscellaneous.
(a) Expenses. Except as otherwise provided in Sections 4 and 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
13(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.
(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
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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 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
If to Grantee:
CFX Corporation
102 Main Street
Keene, New Hampshire 03431
Attn: Peter J. Baxter
President and Chief Executive Officer
Fax: 603-358-5028
With a required copy to:
Arnold & Porter
555 12th Street
Washington, D.C. 20004
Attn: Steven Kaplan, Esq.
Fax: 202-942-5999
(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 may be assigned by either 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 its rights and
obligations hereunder in whole or in part in the event of the occurrence of a
Purchase Event prior to an Exercise Termination Event, provided, however, that
until the date 15 days following the date on which the Federal Reserve Board
approves an application by Grantee to acquire the shares of Issuer Common Stock
subject to the Option, Grantee may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf or (iv) any other manner approved by the Federal Reserve Board.
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
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<PAGE> 172
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.
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.
<TABLE>
<CAPTION>
<S> <C>
Attest: CFX CORPORATION
/s/ E.L. HERBERT By: /s/ PETER J. BAXTER
- -------------------------------- -----------------------------------
Name: E.L. Herbert Name: Peter J. Baxter
Title: Assistant Secretary Title: President and Chief
Executive Officer
Attest: PEOPLES HERITAGE
FINANCIAL GROUP, INC.
/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
</TABLE>
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ANNEX IV
December 31, 1997
The Board of Directors
CFX Corporation
102 Main Street
Keene, NH 03431
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of CFX Corporation ("CFX") of the exchange ratio in
the proposed merger (the "Merger") of CFX with and into Peoples Heritage
Financial Group, Inc. ("PHFG") pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") dated as of October 27, 1997 between CFX and PHFG. It is our
understanding that the Merger will be structured as a pooling-of-interest
accounting transaction under generally accepted accounting principles.
As is more specifically set forth in the Merger Agreement, upon
consummation of the Merger, each outstanding share of common stock of CFX, par
value $0.66 2/3 per share ("CFX Common Stock"), except for any dissenting shares
and certain shares held by CFX and PHFG, will be exchanged for 0.667 of a share
(the "Exchange Ratio") of common stock of PHFG, $0.01 par value per share ("PHFG
Common Stock").
Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette"), as part of its investment
banking business, is continually engaged in the valuation of bank holding
companies and banks, thrift holding companies and thrifts and their securities
in connection with mergers and acquisitions, underwritings, private placements,
competitive bidding processes, market making as a NASD market maker, and for
various 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, trade the securities of CFX or PHFG, for our own account, and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities. To the extent we have any such positions as of the
date of this opinion it has been disclosed to CFX. Keefe Bruyette has served as
financial advisor to CFX in the negotiation of the Merger Agreement and in
rendering this fairness opinion and will receive a fee from CFX for those
services.
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In arriving at our opinion, we have reviewed, analyzed and relied upon
material bearing upon the financial and operating condition of CFX and PHFG and
the merger, including among other things, the following:
(i). Reviewed the Merger Agreement;
(ii). Reviewed certain historical financial and other information
concerning CFX for the three years ended December 31, 1996 and the quarter ended
September 30, 1997, including CFX's Annual Report to Stockholders and Annual
Reports on Form 10-K, and interim quarterly reports on Form 10-Q;
(iii). Reviewed certain historical financial and other information
concerning PHFG for the three years ended December 31, 1996 and the quarter
ended September 30, 1997, including PHFG's Annual Report to Stockholders and
Annual Reports on Form 10-K, and interim quarterly reports on Form 10-Q;
(iv). Reviewed and studied the historical stock prices and trading volumes
of the common stock of both CFX and PHFG;
(v). Held discussions with senior management of CFX and PHFG with respect
to their past and current financial performance, financial condition and future
prospects;
(vi). Reviewed certain internal financial data, projections and other
information of CFX and PHFG, including financial projections prepared by
management;
(vii). Analyzed certain publicly available information of other financial
institutions that we deemed comparable or otherwise relevant to our inquiry, and
compared CFX and PHFG from a financial point of view with certain of these
institutions;
(viii). Reviewed the financial terms of certain recent business
combinations in the banking industry that we deemed comparable or otherwise
relevant to our inquiry; and
(ix). Conducted such other financial studies, analyses and investigations
and reviewed such other information as we deemed appropriate to enable us to
render our opinion.
In conducting our review and arriving at our opinion, we have relied upon
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 the accuracy or completeness of any such
information. We have relied upon the management of CFX and 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
2
<PAGE> 175
assumed that such forecasts and projections reflect the best currently available
estimates and judgments of such managements and that such forecasts and
projections will be realized in the amounts and in the time periods currently
estimated by such managements. We are not experts in the independent
verification of the adequacy of allowances for loan and lease losses and we have
assumed that the current and projected aggregate reserves for loan and lease
losses for CFX and PHFG are adequate to cover such losses. We did not make or
obtain any independent evaluations or appraisals of any assets or liabilities of
CFX, PHFG, or any of their respective subsidiaries nor did we verify any of
CFX's or PHFG's books or records or review any individual loan or 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 financial position and results of operations of CFX and PHFG;
(ii) the assets and liabilities of CFX and PHFG; and (iii) the nature and terms
of certain other merger transactions involving banks and bank 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 knowledge of the banking industry
generally. Our opinion is necessarily based upon conditions as they exist and
can be evaluated on the date hereof and the information made available to us
through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio pursuant to the Merger Agreement is fair, from a
financial point of view, to the holders of the CFX Common Stock.
Very truly yours,
KEEFE, BRUYETTE & WOODS, INC.
3
<PAGE> 176
ANNEX V
-------
[McCONNELL LETTERHEAD]
December 31, 1997
The Board of Directors
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, ME 04112
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Peoples Heritage Financial Group, Inc. ("PHFG") of
the exchange ratio governing the exchange of PHFG common shares for the common
shares of CFX Corporation ("CFX") in connection with the proposed acquisition of
CFX by PHFG (the "Transaction") pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") dated as of October 27, 1997 between PHFG and CFX,
providing for the merger (the "Merger") of CFX with and into PHFG.
Pursuant to the Merger Agreement, upon the consummation of the Merger, each
issued and outstanding share of CFX Common Stock (other than any dissenting
shares under New Hampshire law and shares held by PHFG, CFX or any of their
respective 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 canceled and retired without consideration) shall become and be
converted into the right to receive 0.667 of a share of PHFG Common Stock,
subject to possible adjustment under certain circumstances, as provided in the
Merger Agreement and described in the Prospectus/Joint Proxy Statement dated
December 31, 1997 (the "Exchange Ratio"). Each holder of CFX Common Stock who
would otherwise be entitled to receive a fraction of a share of PHFG Common
Stock (after taking into account all of a shareholder's certificates) will
receive in lieu thereof the equivalent cash value of such fraction of a share,
without interest. It is our understanding that the Transaction is to be
accounted for as a pooling of interests.
In addition, upon consummation of the Merger, any options to purchase
shares of CFX Common Stock which remain unexercised immediately prior thereto
will become options to purchase an adjusted number of shares of PHFG Common
Stock at an adjusted exercise price, both of which are computed in accordance
with the fixed Exchange Ratio.
McConnell, Budd & Downes, Inc. ("MB&D"), as part of its investment banking
business, is engaged regularly 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. As financial advisor to PHFG in connection with the Transaction,
we will receive a fee for the rendering of this opinion. In the ordinary course
of our business, we may, from time to time, trade the equity securities of PHFG
and CFX in our capacity as a NASD market maker, for our own account, for the
accounts of our customers and for the accounts of individual employees of
McConnell, Budd & Downes, Inc. Accordingly we or our customers may, from time to
time, hold a long or short position in the equity securities of either or both
PHFG and CFX.
In arriving at our opinion, MB&D (i) reviewed the Merger Agreement and the
Prospectus/Joint Proxy Statement in substantially the form to be mailed to PHFG
shareholders; (ii) reviewed publicly available business and financial
information with respect to both PHFG and CFX and certain internal financial
information and financial projections prepared by the managements of PHFG and
CFX, respectively,
<PAGE> 177
McCONNELL LETTERHEAD PAGE 2
(iii) held discussions with members of the senior management and board of
directors of PHFG concerning the past and current results of operations of PHFG,
its current financial condition and management's opinion of its future
prospects; (iv) reviewed the historical reported price and record of trading
volume for both the PHFG Common Stock and the CFX Common Stock; (v) held
discussions with executive management of CFX concerning the current and past
results of operations of CFX, 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 Maine, Massachusetts and New Hampshire generally
and the relevant market areas for PHFG and CFX in particular; (vii) reviewed the
specific acquisition analysis models employed by MB&D to evaluate the potential
business combination with CFX; (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.
In the course of our review and analysis we considered, among other things,
such topics as relative capitalization, capital adequacy, the prospects for
earning asset growth in certain of the markets served by CFX as contrasted to
such prospects in certain of the markets served by PHFG, profitability,
availability of sources of non-interest income, relative asset quality, adequacy
of the reserves for loan losses and the composition of the loan portfolios of
each of PHFG and CFX and their respective subsidiaries. We also considered
management's estimates of cost savings, revenue enhancements and the likely
compound growth rate of earning assets which might result from a consolidation
of PHFG and CFX. We also considered the advantages and disadvantages of a
pooling stock transaction as contrasted with hypothetical purchase accounting
transactions. In the conduct of our review and analysis we have relied upon and
assumed, without independent verification, the accuracy and completeness of the
financial information provided to us by PHFG and CFX and information which is
otherwise publicly obtainable. In reaching our opinion, we have not assumed any
responsibility for the independent verification of such information or any
independent valuation or appraisal of any of the assets or the liabilities of
either PHFG or CFX, nor have we obtained from any other source any appraisals of
the assets or liabilities of either PHFG or CFX. We have also relied on the
management of PHFG as to the reasonableness of various financial and operating
forecasts, cost savings estimates and of the assumptions on which they are
based, which were provided to us or otherwise approved for use in our analyses.
In the course of rendering this opinion, which is being rendered prior to
the receipt of all required regulatory approvals necessary before consummation
of the Transaction, we have assumed that no conditions will be imposed by any
regulatory agency in connection with its approval of the Transaction that will
have a material adverse effect on the results of operations, the financial
condition or the prospects of PHFG following consummation of the Transaction.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the fixed Exchange Ratio is fair to the shareholders of PHFG
from a financial point of view.
Very truly yours,
MCCONNELL, BUDD & DOWNES, INC.
2
<PAGE> 178
ANNEX VI
NEW HAMPSHIRE BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS
A. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
293-A:13.01 DEFINITIONS. -- In this subdivision:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RSA 293-A:13.02 and who exercises that right when and in
the manner required by RSA 293-A:13.20 through 293-A:13.28.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
293-A:13.02 RIGHT TO DISSENT. -- (a) A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any of
the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(i) If shareholder approval is required for the merger by RSA
293-A:11.03 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
(ii) If the corporation is a subsidiary that is merged with its parent
under RSA 293-A:11.04.
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale.
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares.
(ii) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities.
<PAGE> 179
(iv) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights.
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under RSA 293-A:6.04.
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this subdivision shall not challenge the corporate action creating his
entitlement, unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
293-A:13.03 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. -- (a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
B. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
293-A:13.20 NOTICE OF DISSENTERS' RIGHTS. -- (a) If proposed corporate
action creating dissenters' rights under RSA 293-A:13.02 is submitted to a vote
at a shareholders' meeting, the meeting notice shall state that shareholders are
or may be entitled to assert dissenters' rights under this subdivision and be
accompanied by a copy of this subdivision.
(b) If corporate action creating dissenters' rights under RSA 293-A:13.02
is taken without a vote of shareholders or by consent pursuant to RSA
293-A:7.04, the corporation shall notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenters' notice described in RSA 293-A:13.22.
293-A:13.21 NOTICE OF INTENT TO DEMAND PAYMENT. -- (a) If proposed
corporate action creating dissenters' rights under RSA 293-A:13.02 is submitted
to a vote at a shareholders meeting, a shareholder who wishes to assert
dissenters' rights:
(1) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Shall not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this subdivision.
293-A:13.22 DISSENTERS' NOTICE. -- (a) If proposed corporate action
creating dissenters' rights under RSA 293-A:13.02 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of RSA 293-A:13.21.
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<PAGE> 180
(b) The dissenters' notice shall be sent no later than 10 days after
corporate action was taken, and shall:
(1) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited.
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received.
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date.
(4) Set a date by which the corporation shall receive the payment
demand, which date shall not be fewer than 30 nor more than 60 days after
the date the notice is delivered.
(5) Be accompanied by a copy of this subdivision.
293-A:13.23 DUTY TO DEMAND PAYMENT. -- (a) A shareholder sent a dissenters'
notice described in RSA 293-A:13.22 shall demand payment, certify whether he
acquired beneficial ownership of the shares before the date required to be set
forth, in the dissenters' notice pursuant to RSA 293-A:13.22(b)(3), and deposit
his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subdivision.
293-A:13.24 SHARE RESTRICTIONS. -- (a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under RSA 293-A:13.26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
293-A:13.25 PAYMENT. -- (a) Except as provided in RSA 293-A:13.27, as soon
as the proposed corporate action is taken, or upon receipt of a payment demand,
the corporation shall pay each dissenter who complied with RSA 293-A:13.23 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment shall be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under RSA
293-A:13.28; and
(5) A copy of this subdivision.
293-A13.26 FAILURE TO TAKE ACTION. -- (a) If the corporation does not take
the proposed action within 60 days after the date set for demanding payment and
depositing share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
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<PAGE> 181
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under RSA 293-A:13.22 and repeat the payment demand
procedure.
293-A:13.27 AFTER-ACQUIRED SHARES. -- (a) A corporation may elect to
withhold payment required by RSA 293-A:13.25 from a dissenter, unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenter's right to demand payment under RSA 293-A:13.28.
293-A:13.28 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. -- (a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate, less any payment under RSA 293-A:13.25, or reject the
corporation's offer under RSA 293-A:13.27 and demand payment of the fair value
of his shares and interest due, if:
(1) The dissenter believes that the amount paid under RSA 293-A:13.25
or offered under RSA 293-A:13.27 is less than the fair value of his shares
or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under RSA 293-A:13.25 within
60 days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within 30 days after the corporation made or offered payment for his shares.
C. JUDICIAL APPRAISAL OF SHARES
293-A:13.30 COURT ACTION. -- (a) If a demand for payment under RSA
293-A:13.28 remains unsettled, the corporation shall commence a proceeding
within 60 days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the 60-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decisions on the
question of their value. The appraisers have the powers described in the order
appointing
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them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or,
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under RSA
293-A:13.27.
293-A:13.31 COURT COSTS AND COUNSEL FEES. -- (a) The court in an appraisal
proceeding commenced under RSA 293-A:13.30 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under RSA 293-A:13.28.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of RSA 293-A:13.20 through RSA 293-A:13.28.
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this subdivision.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
5
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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 sec.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.
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
- ----------- ------- --------
<C> <S> <C>
2(a) Agreement and Plan of Merger, dated as of October 27, 1997, between (1)
PHFG and CFX, including Exhibits A to C thereto
2(b) Stock Option Agreement, dated as of October 27, 1997, between PHFG (as (1)
grantee) and CFX (as issuer)
2(c) Stock Option Agreement, dated as of October 27, 1997, between PHFG (as (1)
issuer) and CFX (as grantee)
2(d) Form of letter agreement, dated as of October 27, 1997, between PHFG (1)
and directors of CFX
2(e) Form of letter agreement, dated as of October 27, 1997, between CFX (1)
and directors of PHFG
3(a) Amended and Restated Articles of Incorporation of PHFG (1)
3(b) Bylaws of PHFG (2)
</TABLE>
II-1
<PAGE> 184
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT LOCATION
- ----------- ------- --------
<C> <S> <C>
4(a) Specimen Common Stock certificate (2)
5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. regarding legality of
securities being registered
8 Opinion of Arnold & Porter regarding certain federal income tax
consequences
23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P. (contained in the
opinion included as Exhibit 5)
23(b) Consent of Arnold & Porter (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 Shatswell, MacLeod & Company, P.C.
23(f) Consent of Deloitte & Touche LLP
23(g) Consent of McConnell, Budd & Downes, Inc.
23(h) Consent of Keefe, Bruyette & Woods, Inc.
24 Powers of Attorney (included in the signature page to this
Registration Statement)
99(a) Form of proxy for the CFX Special Meeting
99(b) Form of proxy for the PHFG Special Meeting
99(c) Other PHFG solicitation materials
99(d) Consent of each of Peter J. Baxter, P. Kevin Condron, Douglas S.
Hatfield, Jr., Philip A. Mason and Seth A. Resnicoff, M.D. to be named
as prospective directors of PHFG
</TABLE>
- ---------------
(1) Exhibit is incorporated by reference to the Form 8-K report filed by PHFG
with the SEC on November 3, 1997. In addition, Exhibits 2(a), 2(b) and 2(c)
above are attached as an Annexes to the Prospectus/Joint Proxy Statement
included herein and Exhibit 3(a) is attached as an exhibit to Exhibit 2(a).
(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.
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required information
is not applicable or is included in the consolidated financial statements or
related notes.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(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
II-2
<PAGE> 185
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 (3)
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.
(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-3
<PAGE> 186
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 16th day of December 1997.
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.
<TABLE>
<C> <S>
/s/ ROBERT P. BAHRE Date: December 16, 1997
- ------------------------------------------
Robert P. Bahre
Director
/s/ EVERETT W. GRAY Date: December 16, 1997
- ------------------------------------------
Everett W. Gray
Director
/s/ ANDREW W. GREENE Date: November 30, 1997
- ------------------------------------------
Andrew W. Greene
Director
/s/ KATHERINE M. GREENLEAF Date: December 1, 1997
- ------------------------------------------
Katherine M. Greenleaf
Director
/s/ DANA LEVENSON Date: November 27, 1997
- ------------------------------------------
Dana Levenson
Director
</TABLE>
II-4
<PAGE> 187
<TABLE>
<C> <S>
/s/ ROBERT A. MARDEN, SR. Date: December 16, 1997
- ------------------------------------------
Robert A. Marden, Sr.
Vice Chairman
/s/ MALCOLM W. PHILBROOK, JR. Date: November 26, 1997
- ------------------------------------------
Malcolm W. Philbrook, Jr.
Director
/s/ PAMELA P. PLUMB Date: December 1, 1997
- ------------------------------------------
Pamela P. Plumb
Vice Chairman
/s/ WILLIAM J. RYAN Date: December 16, 1997
- ------------------------------------------
William J. Ryan
Chairman, President and Chief Executive
Officer (principal executive officer)
/s/ CURTIS M. SCRIBNER Date: December 11, 1997
- ------------------------------------------
Curtis M. Scribner
Director
/s/ DAVIS P. THURBER Date: December 3, 1997
- ------------------------------------------
Davis P. Thurber
Director
/s/ PAUL R. SHEA Date: December 16, 1997
- ------------------------------------------
Paul R. Shea
Director
/s/ JOHN E. VEASEY Date: November 26, 1997
- ------------------------------------------
John E. Veasey
Director
/s/ PETER J. VERRILL Date: December 16, 1997
- ------------------------------------------
Peter J. Verrill
Executive Vice President, Chief
Financial Officer and Treasurer
(principal financial and accounting officer)
</TABLE>
II-5
<PAGE> 1
EXHIBIT 5
December 31, 1997
Board of Directors
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Re: Registration Statement on Form S-4
16,815,868 Shares of Common Stock
Ladies and Gentlemen:
We have acted as special counsel to Peoples Heritage Financial Group, Inc.
(the "Company") in connection with the preparation and filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of the registration statement on Form S-4 (the "Registration
Statement") relating to the issuance of up to 16,815,868 shares of the Company's
common stock, $.01 par value per share (the "Shares"), in connection with the
proposed merger of CFX Corporation with and into the Company, all as described
in the Registration Statement. As such counsel, we have made such legal and
factual examinations and inquiries as we deemed advisable for the purpose of
rendering this opinion.
Based upon the foregoing, it is our opinion that the Shares, when issued,
delivered and sold in the manner described in the Registration Statement, will
be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement, and we consent to the use of our name under
the heading "Legal Opinion" in the Prospectus/Joint Proxy Statement constituting
a part thereof.
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ GERARD L. HAWKINS
------------------------------------
Gerard L. Hawkins, a Partner
<PAGE> 1
EXHIBIT 8
December 31, 1997
CFX Corporation
102 Main Street
Keene, New Hampshire 03431
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the proposed merger (the "Merger") of CFX Corporation (the
"Company") with and into Peoples Heritage Financial Group, Inc. ("PHFG").
In preparing our opinion, you have directed us to assume that (1) the
Merger and certain related transactions will be consummated in accordance with
the terms, conditions and other provisions of (a) the Agreement and Plan of
Merger, between PHFG and CFX, dated as of October 27, 1997 (the "Plan of
Merger"), (b) the Articles of Merger, (1) advance copies of which will be
reviewed by us prior to filing, (c) the Bank Merger Agreements, (d) certain
letter agreements, dated as of October 27, 1997 (i) between directors and
executive officers of the Company and PHFG and (ii) between directors and
executive officers of PHFG and the Company, (e) the Company Stock Option
Agreement and (f) the PHFG Stock Option Agreement, and (2) all of the factual
information, descriptions, representations and assumptions set forth or referred
to in (a) this letter (an advance copy of which has been provided to you), (b)
the documents described in clause (1) of this paragraph (the "Agreements"), (c)
in letters of representations of CFX and PHFG dated as of the date hereof (the
"Letters"), and in the Registration Statement on Form S-4 (the "Form S-4") filed
by PHFG in connection with the Merger and to which this opinion is being filed
as an exhibit, are accurate and complete and will be accurate and complete at
the Effective Time.
We have not independently verified any factual matters relating to the
Merger in connection with or apart from our preparation of this opinion.
Accordingly, our opinion
--------
(1) Terms not otherwise defined in this letter shall have the meanings
assigned to them in the Plan of Merger.
<PAGE> 2
CFX Corporation
December 31, 1997
Page 2
does not take into account any matters not set forth herein which might have
been disclosed by independent verification.
Opinion
Assuming that the Merger is consummated in accordance with the terms and
conditions set forth in the Agreement and based on the facts set forth or
referred to herein, including all assumptions and representations in any such
documents, and subject to the qualifications and other matters set forth herein,
it is our opinion that for federal income tax purposes --
1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Except for cash received in lieu of any fractional share interests,
holders of Company Common Stock who receive solely PHFG Common Stock in
exchange for their shares of Company Common Stock in the Merger will not
recognize gain or loss.
3. The basis of PHFG Common Stock received in the Merger will be the
same as the basis of Company Common Stock for which it was exchanged,
reduced by any amount allocable to a fractional share interest for which
cash is received.
4. The holding period of the shares of PHFG Common Stock will include
the holding period of the Company Common Stock for which it is exchanged,
provided that such Company Common Stock was held as a capital asset at the
Effective Time.
This opinion may not be applicable to Company shareholders who receive
their shares of Company Common Stock pursuant to the exercise of employee stock
options or otherwise as compensation or who are not citizens or residents of the
United States.
Our opinion is limited to the foregoing federal income tax consequences of
the Merger, which are the only matters as to which you have requested an
opinion, and you must judge whether the matters addressed herein are sufficient
for your purposes. We do not address any other federal income tax consequences
of the Merger or other matters of federal law and have not considered matters
(including state or local tax consequences) arising under the laws of any
jurisdiction other than matters of federal law arising under the laws of the
United States.
<PAGE> 3
CFX Corporation
December 31, 1997
Page
Our opinion is based on the understanding that the relevant facts are, and
will be at the Effective Time, as set forth or referred to in this letter. If
this understanding is incorrect or incomplete in any respect, our opinion could
be affected.
Our opinion is also based on the Code, Treasury Regulations, case law, and
Internal Revenue Service rulings as they now exist. These authorities are all
subject to change and such change may be made with retroactive effect. We can
give no assurance that after any such change, our opinion would not be
different. Moreover, our opinion will not be binding on the Internal Revenue
Service or the courts.
We undertake no responsibility to update or supplement our opinion.
We hereby consent to the filing with the Securities and Exchange Commission
of this opinion as an exhibit to the Form S-4 and to the reference to our firm
under the heading "THE MERGER - Certain Federal Income Tax Consequences"
contained therein. In giving such consent, we do not thereby admit that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
ARNOLD & PORTER
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of (i) our report dated January 22, 1997 included in
the Annual Report on Form 10-K of Peoples Heritage Financial Group, Inc. for the
year ended December 31, 1996, which report refers to a change in method of
accounting for mortgage servicing rights effective January 1, 1995, (ii) our
reports relating to Community Bankshares, Inc. dated January 22, 1997 included
in (x) the Current Report on Form 8-K of CFX Corporation filed on December 12,
1997, incorporated herein by reference to such Current Report on Form 8-K, and
(y) the Annual Report on Form 10-K of Community Bankshares, Inc. for the year
ended December 31, 1996, incorporated herein by reference to the Current Report
on Form 8-K of CFX Corporation filed on August 29, 1997, and (iii) our reports
dated January 22, 1996 relating to The Safety Fund Corporation included in (x)
the Current Report on Form 8-K of CFX Corporation filed on December 12, 1997,
incorporated herein by reference to such Current Report on Form 8-K, and (y) the
Annual Report on Form 10-K of The Safety Fund Corporation for the year ended
December 31, 1996, incorporated herein by reference to the Current Report on
Form 8-K of CFX Corporation filed on August 29, 1997, and to the references to
our firm under the heading "Experts" in the Prospectus/Joint Proxy Statement.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
December 29, 1997
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of (i) our report dated January 29, 1997 (except for
Note W as to which the date is March 24, 1997) contained in the Annual Report on
Form 10-K of CFX Corporation for the year ended December 31, 1996 and (ii) our
report dated January 29, 1997 (except for Note A -- "Significant Accounting
Policies -- Principles of Presentation and Consolidation" as to which the date
is August 29, 1997 and Note V as to which the date is October 27, 1997) included
in the Current Report on Form 8-K of CFX Corporation filed on December 12, 1997,
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the Prospectus/Joint Proxy Statement.
WOLF & COMPANY, P.C.
Boston, Massachusetts
December 31, 1997
<PAGE> 1
EXHIBIT 23(e)
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our reports dated January 13, 1997 (except for
Note 20 as to which the date is February 13, 1997) relating to Portsmouth Bank
Shares, Inc. included in (x) the Current Report on Form 8-K of CFX Corporation
filed on December 12, 1997 and incorporated herein by reference to such Current
Report on Form 8-K, and (y) the Annual Report on Form 10-K of Portsmouth Bank
Shares, Inc. for the year ended December 31, 1996, incorporated herein by
reference to the Current Report on Form 8-K of CFX Corporation filed on August
29, 1997, and to the reference to our firm under the heading "Experts" in the
Prospectus/Joint Proxy Statement.
SHATSWELL, MACLEOD & COMPANY, P.C.
West Peabody, Massachusetts
December 31, 1997
<PAGE> 1
EXHIBIT 23(f)
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated January 27, 1995 relating to
Orange Savings Bank included in the Current Report on Form 8-K of CFX
Corporation filed on December 12, 1997, incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the Prospectus/Joint
Proxy Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 31, 1997
<PAGE> 1
EXHIBIT 23(g)
December 31, 1997
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 V to the Prospectus/Joint Proxy Statement forming a part of
this Registration Statement on Form S-4 and to all references to our firm in
such Prospectus/Joint Proxy Statement. In giving such consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.
McCONNELL, BUDD & DOWNES, INC.
By: /s/ DAVID A. BUDD
------------------------------------
Name: David A. Budd
Title: Managing Director
<PAGE> 1
EXHIBIT 23(h)
December 31, 1997
We hereby consent to the use in this Registration Statement on Form S-4 of
our letter to the Board of Directors of CFX Corporation included as Annex IV 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/ FRANK S. CICERO
------------------------------------
Name: Frank S. Cicero
Title: Vice President
<PAGE> 1
CFX CORPORATION
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 9, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of Common Stock of CFX Corporation ("CFX"),
hereby appoints Peter J. Baxter and Christopher V. Bean 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 CFX which the
undersigned is entitled to vote at the Special Meeting of Shareholders to be
held at the Keene Country Club, Base Hill Road, Keene, New Hampshire 03431, on
Monday, February 9, 1998, at 10:00 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 CFX 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 OCTOBER 27, 1997, BETWEEN PEOPLES HERITAGE FINANCIAL
GROUP, INC. AND CFX. 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 October 27, 1997,
between Peoples Heritage Financial Group, Inc. ("PHFG") and CFX, which provides,
among other things, for (i) the merger of CFX with and into PHFG (the "Merger")
and (ii) the conversion of each share of Common Stock of CFX outstanding
immediately prior to the Merger (other than any dissenting shares under New
Hampshire law and certain other shares) into the right to receive 0.667 of a
share of Common Stock of PHFG, subject to possible adjustment under certain
circumstances, plus cash in lieu of any fractional share interest.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
THE BOARD OF DIRECTORS OF CFX RECOMMENDS A VOTE FOR APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER. SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF
DIRECTORS.
Dated:________________ , 1998
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
PEOPLES HERITAGE FINANCIAL GROUP, INC.
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 9, 1998
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 William J. Ryan and Peter J. Verrill 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 Portand Marriott Hotel, 200 Sable Oaks Drive, South Portland,
Maine 04106, on Monday, February 9, 1998, at 10:00 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 OCTOBER 27, 1997, BETWEEN PHFG AND CFX CORPORATION.
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 October 27, 1997,
between PHFG and CFX Corporation ("CFX"), which provides, among other things,
for (i) the merger of CFX with and into PHFG (the "Merger") and (ii) the
conversion of each share of Common Stock of CFX outstanding immediately prior to
the Merger (other than any dissenting shares under New Hampshire law and certain
other shares) into the right to receive 0.667 of a share of Common Stock of
PHFG, subject to possible adjustment under certain circumstances, plus cash in
lieu of any fractional share interest.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
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: , 1998
-------------------
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
[PEOPLES HERITAGE LOGO]
December 31, 1997
To: Participants in the Thrift Incentive Plan of Peoples Heritage Financial
Group, Inc. or the 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 the Special
Meeting, you will be asked to consider and vote on a proposal to approve an
Agreement and Plan of Merger, dated as of October 27, 1997 (the "Agreement"),
between PHFG and CFX Corporation ("CFX"), pursuant to which, among other things,
CFX will be merged with and into PHFG. I hope you will take advantage of the
opportunity to direct, on a confidential basis, the manner in which shares of
Common Stock of PHFG allocated to your accounts under PHFG's Thrift Incentive
Plan (the "TIP") or PHFG's Profit Sharing Employee Stock Ownership Plan (the
"ESOP") will be voted.
Enclosed with this letter is the Prospectus/Joint Proxy Statement, which
describes the matter to be voted upon, a voting instruction ballot for either
the ESOP or the TIP ( the "Plan"), which will permit you to vote the shares
allocated to your account under the Plan, 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 Plan by marking, dating, signing and returning
the enclosed voting instruction ballot in the envelope provided to American
Stock Transfer & Trust Company, PHFG's transfer agent. Your voting instructions
will remain completely confidential. Only PHFG's transfer agent will have access
to your ballot in order to certify the totals for the Plans to Peoples Heritage
Bank, which acts as Trustee for the Plan, for the purpose of having those shares
voted. No person associated with PHFG or Peoples Heritage Bank will see the
individual voting instructions.
I urge each of you to vote, as a means of participating in the governance
of the affairs of PHFG. If your voting instructions are not received, the shares
allocated to your account in the Plan will be voted by the Trustee in its
discretion in accordance with the exercise of its fiduciary duties and the
shares allocated to your account in the TIP will not be voted. While I hope that
you will vote in the manner recommended by the Board of Directors, the most
important thing is that you vote in whatever manner you deem appropriate. Please
take a moment to do so.
Sincerely yours,
/s/ William J. Ryan
WILLIAM J. RYAN
Chairperson, President and
Chief Executive Officer
<PAGE> 2
PEOPLES HERITAGE FINANCIAL GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 9, 1998
THIS BALLOT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of Common Stock of Peoples Heritage Financial
Group, Inc. ("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 Marriott Hotel, 200
Sable Oaks Drive, South Portland, Maine 04106, on Monday, February 9, 1998, at
10:00 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 WILL BE VOTED
FOR THE PROPOSAL TO ADOPT AN AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER
27, 1997, BETWEEN PHFG AND CFX CORPORATION. IF YOU DO NOT RETURN THIS BALLOT,
SHARES HELD BY YOU PURSUANT TO THE ESOP WILL BE VOTED BY THE TRUSTEE IN ITS
DISCRETION IN ACCORDANCE WITH THE EXERCISE OF ITS FIDUCIARY DUTIES.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE.
<PAGE> 3
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 October 27, 1997,
between PHFG and CFX Corporation ("CFX"), which provides, among other things,
for (i) the merger of CFX with and into PHFG (the "Merger") and (ii) the
conversion of each share of Common Stock of CFX outstanding immediately prior to
the Merger (other than any dissenting shares under New Hampshire law and certain
other shares) into the right to receive 0.667 of a share of Common Stock of
PHFG, subject to possible adjustment under certain circumstances, plus cash in
lieu of any fractional share interest.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
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: , 1998
-------------------
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> 4
PEOPLES HERITAGE FINANCIAL GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 9, 1998
THIS BALLOT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of Common Stock of Peoples Heritage Financial
Group, Inc. ("PHFG") pursuant to PHFG's Thrift Incentive Plan (the "TIP"),
hereby instructs Peoples Heritage Bank, as Trustee for the TIP, 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 TIP at the Special Meeting of
Shareholders to be held at the Portland Marriott Hotel, 200 Sable Oaks Drive,
South Portland, Maine 04106, on Monday, February 9, 1998, at 10:00 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 WILL BE VOTED
FOR THE PROPOSAL TO ADOPT AN AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER
27, 1997, BETWEEN PHFG AND CFX CORPORATION. IF YOU DO NOT RETURN THIS BALLOT,
SHARES HELD BY YOU PURSUANT TO THE TIP WILL NOT BE VOTED.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE.
<PAGE> 5
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 October 27, 1997,
between PHFG and CFX Corporation ("CFX"), which provides, among other things,
for (i) the merger of CFX with and into PHFG (the "Merger") and (ii) the
conversion of each share of Common Stock of CFX outstanding immediately prior to
the Merger (other than any dissenting shares under New Hampshire law and certain
other shares) into the right to receive 0.667 of a share of Common Stock of
PHFG, subject to possible adjustment under certain circumstances, plus cash in
lieu of any fractional share interest.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
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: , 1998
-------------------
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(d)
CONSENT
The undersigned hereby consents to being named as a prospective director of
Peoples Heritage Financial Group, Inc. in the Registration Statement on Form S-4
filed by Peoples Heritage Financial Group, Inc. with the Securities and Exchange
Commission on or about December 31, 1997, to which Registration Statement this
Consent is an Exhibit, and in any amendments (including post-effective
amendments) thereto.
/s/ PETER J. BAXTER
-------------------------------------
Peter J. Baxter
Date: December 18, 1997
<PAGE> 2
CONSENT
The undersigned hereby consents to being named as a prospective director of
Peoples Heritage Financial Group, Inc. in the Registration Statement on Form S-4
filed by Peoples Heritage Financial Group, Inc. with the Securities and Exchange
Commission on or about December 31, 1997, to which Registration Statement this
Consent is an Exhibit, and in any amendments (including post-effective
amendments) thereto.
/s/ P. KEVIN CONDRON
--------------------------------------
P. Kevin Condron
Date: December 18, 1997
<PAGE> 3
CONSENT
The undersigned hereby consents to being named as a prospective director of
Peoples Heritage Financial Group, Inc. in the Registration Statement on Form S-4
filed by Peoples Heritage Financial Group, Inc. with the Securities and Exchange
Commission on or about December 31, 1997, to which Registration Statement this
Consent is an Exhibit, and in any amendments (including post-effective
amendments) thereto.
/s/ DOUGLAS S. HATFIELD, JR.
--------------------------------------
Douglas S. Hatfield, Jr.
Date: December 18, 1997
<PAGE> 4
CONSENT
The undersigned hereby consents to being named as a prospective director of
Peoples Heritage Financial Group, Inc. in the Registration Statement on Form S-4
filed by Peoples Heritage Financial Group, Inc. with the Securities and Exchange
Commission on or about December 31, 1997, to which Registration Statement this
Consent is an Exhibit, and in any amendments (including post-effective
amendments) thereto.
/s/ PHILIP A. MASON
--------------------------------------
Philip A. Mason
Date: December 18, 1997
<PAGE> 5
CONSENT
The undersigned hereby consents to being named as a prospective director of
Peoples Heritage Financial Group, Inc. in the Registration Statement on Form S-4
filed by Peoples Heritage Financial Group, Inc. with the Securities and Exchange
Commission on or about December 31, 1997, to which Registration Statement this
Consent is an Exhibit, and in any amendments (including post-effective
amendments) thereto.
/s/ SETH A. RESNICOFF, M.D.
--------------------------------------
Seth A. Resnicoff, M.D.
Date: December 18, 1997
