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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
April 10, 1998
- --------------------------------------------------------------------------------
(Date of earliest event reported)
Peoples Heritage Financial Group, Inc.
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(Exact name of registrant as specified in its charter)
Maine 0-16947 01-0437984
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
P.O. Box 9540, One Portland Square, Portland, Maine 04112-9540
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(Address of principal executive offices) (Zip Code)
(207) 761-8500
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(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As of the end of the day on April 10, 1998, following receipt of all
required regulatory and stockholder approvals, Peoples Heritage Financial Group,
Inc. ("PHFG") completed the acquisition of CFX Corporation ("CFX") pursuant to
the Agreement and Plan of Merger, dated as of October 27, 1997, between PHFG and
CFX (the "Agreement"). The acquisition was effected by means of the merger of
CFX with and into PHFG (the "Merger"). Upon consummation of the Merger, each
share of common stock, $.66 2/3 par value per share, of CFX (the "CFX Common
Stock") outstanding immediately prior thereto was converted into the right to
receive 0.667 of a share of common stock, par value $.01 per share, of PHFG,
including each attached right issued pursuant to the Rights Agreement, dated
September 12, 1989, between PHFG and the Rights Agent named therein (together,
the "PHFG Common Stock"), with cash in lieu of fractional share interests.
PHFG's Registration Statement on Form S-4 (No. 333-43551), which was
declared effective by the Securities and Exchange Commission (the "Commission")
on December 31, 1997, contains detailed information regarding the Merger and
related matters. In addition, the information set forth under Item 5 of this
Current Report on Form 8-K is incorporated herein by reference.
ITEM 5. OTHER EVENTS
Other matters related to PHFG's acquisition of CFX are noted below.
Board of Directors. Effective following the annual meeting of
stockholders of PHFG on April 28, 1998, the following persons, who were
immediately prior to consummation of the Merger serving as members of the Board
of Directors of CFX, will become members of the Board of Directors of PHFG:
Peter J. Baxter, who will become Vice Chairman of the Board of Directors of
PHFG, P. Kevin Condron, Douglas S. Hatfield, Jr., Philip A. Mason and Seth A.
Resnicoff, M.D.
Executive Officers. Upon consummation of the Merger, Peter J. Baxter
became Executive Vice President and Chief Operating Officer of PHFG and
Christopher W. Bramley became Executive Vice President and Chief Operating
Officer of Family Bank, FSB ("Family Bank"), PHFG's Massachusetts-based banking
subsidiary. Messrs. Baxter and Bramley previously served as President and Chief
Executive Officer and Executive Vice President of CFX, respectively. In
connection with the foregoing, PHFG and each of Messrs. Baxter and Bramley
entered into a Severance Agreement in the form included as Exhibit 10.1 hereto.
Mr. Bramley will be elected President of Family Bank on April 23, 1998.
Subsidiary Mergers. Subsequent to consummation of the Merger, the three
banking subsidiaries of CFX were merged with and into banking subsidiaries of
PHFG. Specifically, (i) CFX Bank was merged with and into Bank of New Hampshire
("BNH"), PHFG's New Hampshire-based banking subsidiary, (ii) Safety Fund
National Bank was merged with and
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into Family Bank and (iii) Orange Savings Bank was merged with and into Family
Bank (collectively, the "Bank Mergers").
Certain Dispositions. In order to satisfy certain commitments made by
PHFG to the U.S. Department of Justice and the Board of Governors of the Federal
Reserve System in connection with the Merger, CFX Bank and First Essex Bank, FSB
(the "Purchaser") entered into a Purchase and Assumption Agreement, dated as of
March 28, 1998 (the "Branch Agreement"), pursuant to which BNH, as successor to
CFX Bank upon consummation of the merger of CFX Bank with and into BNH, will
sell to the Purchaser five branch offices formerly maintained by CFX Bank and
located in Concord (two), Hillsborough (one) and Manchester (two), New Hampshire
(the "Branch Offices") and the related assets and liabilities (the "Branch
Sale"). Purchaser will assume the deposits at the Branch Offices, which amounted
to approximately $159 million at February 28, 1998, as well as purchase
approximately $67 million of loans and approximately $2 million of real and
personal property related to the Branch Offices. The Purchaser has agreed to pay
a 10% premium on the average deposits acquired over a specified time period
prior to closing of the Branch Sale. The Branch Sale is subject to the receipt
of all required regulatory approvals and is expected to close in mid-1998. A
copy of the press release announcing the execution of the Branch Agreement is
filed as Exhibit 99.1 hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) The following consolidated financial statements of CFX are
incorporated herein by reference to the Annual Report on Form 10-K for the year
ended December 31, 1997 filed by CFX with the Commission on March 30, 1998:
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Income for the Years Ended December 31,
1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
Reports of Wolf & Company, P.C., KMPG Peat Marwick LLP and Shatswell,
MacLeod & Company, P.C.
(b) The following pro forma financial statements of PHFG are included
pursuant to Item 7(b) of Form 8-K.
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PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed consolidated
balance sheet combines the consolidated historical balance sheets of PHFG and
CFX, assuming the Merger was consummated as of December 31, 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. 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 cost savings,
operating synergies and revenue enhancements which are expected to be realized
subsequent to consummation of the Merger and the Bank Mergers or, except as
indicated, the effects of the Branch Sale.
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 December 31, 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. Reference is made in this regard to the Annual Reports on Form
10-K filed by PHFG and CFX for the year ended December 31, 1997, respectively.
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PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
PHFG AND CFX
DECEMBER 31, 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 $ 339,270 $ 87,671 -- $ 426,941
Federal funds sold 6,091 7,000 -- 13,091
Securities available for sale,
at market value 1,268,055 534,550 -- 1,802,605
Securities held to maturity -- 28,184 -- 28,184
Loans held for sale 360,631 37,737 -- 398,368
Loans and leases 4,489,365 2,034,856 -- 6,524,221
Less: Allowance for loan and lease losses 68,085 21,898 -- 89,983
---------- ---------- -------- ----------
Net loans and leases 4,421,280 2,012,958 -- 6,434,238
---------- ---------- -------- ----------
Premises and equipment 75,968 38,761 -- 114,729
Goodwill and other intangibles 118,019 8,698 -- 126,717
Mortgage servicing rights 50,808 8,894 -- 59,702
Other assets 155,215 109,314 -- 264,529
---------- ---------- -------- ----------
Total assets $6,795,337 $2,873,767 -- $9,669,104
========== ========== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest-bearing $4,057,789 $1,714,488 -- $5,772,277
Non-interest bearing 744,851 227,508 -- 972,359
---------- ---------- -------- ----------
4,802,640 1,941,996 -- 6,744,636
Borrowings from the Federal Home
Loan Bank of Boston 940,991 453,755 -- 1,394,746
Federal funds purchased and securities
sold under repurchase agreements 370,219 198,610 -- 568,829
Other borrowings 18,762 -- -- 18,762
Other liabilities 87,659 33,689 15,698(1) 137,046
---------- ---------- -------- ----------
Total liabilities 6,220,271 2,628,050 15,698(1) 8,864,019
---------- ---------- -------- ----------
Corporation-obligated, mandatorily redeemable
securities of subsidiary trust 100,000 -- -- 100,000
---------- ---------- -------- ----------
Shareholders' equity:
Preferred Stock -- -- -- --
Common Stock:
PHFG 286 -- 164(2) 450
CFX -- 16,078 (16,078)(2) --
Paid-in capital 271,790 149,106 15,127(2) 436,023
Retained earnings 224,784 79,080 (15,698)(1) 288,166
Net unrealized gain on securities available for sale 3,565 2,240 -- 5,805
Treasury stock at cost (25,359) (787) 787 (25,359)
---------- ---------- -------- ----------
Total shareholders' equity 475,066 245,717 (15,698)(1) 705,085
---------- ---------- -------- ----------
Total liabilities and shareholders' equity $6,795,337 $2,873,767 $ -- $9,669,104
========== ========== ======== ==========
</TABLE>
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Notes to Pro Forma Combined Condensed Consolidated Balance Sheet
(1) Reflects an estimated $25.2 million of after-tax one-time
reorganization and restructuring costs related to the Merger and the Bank
Mergers, net of an estimated $9.5 million after-tax gain from the Branch Sale.
The one-time reorganization and restructuring costs consist of costs relating
to termination of employment contracts and severance obligations ($7.5
million), professional fees ($6.3 million), write-downs of fixed assets ($5.1
million), data processing/integration costs ($3.4 million) and other costs
($2.9 million). The actual amount of the one-time reorganization and
restructuring costs related to the Merger and the Bank Mergers is still being
evaluated and could be more or less than the amount indicated, as could the
estimated gain from the Branch Sale.
(2) Reflects the par value of the PHFG Common Stock issued in exchange
for CFX Common Stock in connection with the Merger, with related adjustment to
paid-in capital. The PHFG Common Stock issued in connection with the Merger was
calculated by multiplying the number of outstanding shares of CFX Common Stock
immediately prior to consummation thereof by the Exchange Ratio. This
calculation resulted in approximately 16,393,709 shares of PHFG Common Stock
issuable in connection with the Merger, which does not reflect cash to be paid
in lieu of fractional share interests. In addition, PHFG assumed options to
acquire approximately 380,672 shares of PHFG Common Stock (as adjusted by the
Exchange Ratio) upon consummation of the Merger.
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PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PHFG AND CFX
YEAR ENDED DECEMBER 31, 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 and fees on loans and leases $366,029 $155,480 $521,509
Interest and dividends on securities 76,183 44,059 120,242
-------- -------- --------
Total interest and dividend income 442,212 199,539 641,751
-------- -------- --------
Interest expense:
Interest on deposits 148,803 71,009 219,812
Interest on borrowed funds 47,220 30,243 77,463
-------- -------- --------
Total interest expense 196,023 101,252 297,275
-------- -------- --------
Net interest income 246,189 98,287 344,476
Provision for loan losses -- 4,548 4,548
-------- -------- --------
Net interest income after
provision for loan losses 246,189 93,739 339,928
-------- -------- --------
Noninterest income:
Customer services 23,191 5,113 28,304
Mortgage banking services 18,771 6,996 25,767
Trust and investment advisory services 8,809 3,015 11,824
Insurance commissions 1,899 -- 1,899
Net securities gains (losses) 150 2,547 2,697
Other noninterest income 4,118 7,871 11,989
-------- -------- --------
56,938 25,542 82,480
-------- -------- --------
Noninterest expenses:
Salaries and employee benefits 92,703 38,730 131,433
Occupancy and equipment 26,180 12,127 38,307
Distributions on securities of subsidiary trust 8,351 -- 8,351
Amortization of goodwill and deposit premiums 8,120 623 8,743
Advertising and marketing 6,624 2,322 8,946
Merger expenses 354 11,031 11,385
Charges related to CFX Funding(2) -- 7,206 7,206
Other noninterest expenses 45,674 20,511 66,185
-------- -------- --------
188,006 92,550 280,556
-------- -------- --------
Income before income tax expense 115,121 26,731 141,852
Income tax expense 41,720 7,797 49,517
-------- -------- --------
Net income $ 73,401 $ 18,934 $ 92,335
======== ======== ========
Earnings per share:
Basic $2.64 $0.79 $2.11
Diluted 2.59 0.78 2.07
Weighted average shares outstanding:
Basic 27,806 23,866 43,725
Diluted 28,363 24,329 44,590
</TABLE>
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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
HFG FX Combined(1)
------- ------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases 288,999 128,533 $417,532
Interest and dividends on securities 52,173 39,772 91,945
------- ------- --------
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 2,366 6,693
Merger expenses 5,105 4,522 9,627
Other noninterest expenses 39,665 19,347 59,012
------- ------- --------
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:
Basic $2.10 $1.01 $1.87
Diluted 2.06 0.99 1.84
Weighted average shares outstanding:
Basic 25,035 23,383 40,632
Diluted 25,426 23,897 41,365
</TABLE>
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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 and fees on loans and leases $253,787 $109,601 $363,388
Interest and dividends on securities 52,062 39,207 91,269
-------- -------- --------
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
Merger expenses 4,958 -- 4,958
Other noninterest expenses 33,579 19,506 53,085
------- -------- --------
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:
Basic $ 1.80 $ 0.93 $ 1.64
Diluted 1.78 0.89 1.61
Weighted average shares outstanding:
Basic 24,696 23,180 40,157
Diluted 24,999 24,069 41,053
</TABLE>
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Note to Pro Forma Combined Condensed Consolidated Statements of
Operations
(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. No adjustment has been reflected in the pro forma
combined statements of operations for the anticipated cost savings, operating
synergies and revenue enhancements.
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.
(2) Relates to the discontinuance of the securitization business of CFX
Funding, a 51% owned subsidiary of CFX.
(c) The following exhibits are included with this Report:
Exhibit 2.1 Agreement and Plan of Merger, dated as of
October 27, 1997, between PHFG and CFX(1)
Exhibit 10.1 Form of Severance Agreement between PHFG and each
of Peter J. Baxter and Christopher W. Bramley
Exhibit 23.1 Consent of Wolf & Company, P.C.
Exhibit 23.2 Consent of Shatswell, MacLeod & Company, P.C.
Exhibit 23.3 Consents of KPMG Peat Marwick LLP
Exhibit 99.1 Press Release, dated March 30, 1998
- ----------
(1) Incorporated by reference to the Current Report on Form 8-K filed
by PHFG on November 3, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
By: /s/ Peter J. Verrill
--------------------------------
Name: Peter J. Verrill
Title: Executive Vice President,
Chief Financial Officer and Treasurer
Date: April 22, 1998
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EXHIBIT 10.1
SEVERANCE AGREEMENT
This AGREEMENT, made and entered into as of the 10th day of April 1998,
between PEOPLES HERITAGE FINANCIAL GROUP, INC. (the "Company") and
____________________ (the "Executive");
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Company in a key executive
capacity and possesses intimate knowledge of the business and affairs of the
Company; and
WHEREAS, the Company desires to ensure, insofar as possible, that it
will continue to have the benefit of the Executive's services and to protect its
confidential information and goodwill; and
WHEREAS, the Company recognizes that circumstances may arise in which a
change in the control of the Company occurs, thereby causing uncertainty of
employment without regard to the Executive's competence or past contributions;
and
WHEREAS, the Company and the Executive wish to provide reasonable
security to the Executive against changes in the Executive's relationship with
the Company in the event of such change in control;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. DEFINITIONS
(a) ACCRUED BENEFIT MEANS:
(i) All salary earned or accrued through the date the
Executive's employment is terminated;
(ii) reimbursement for any and all monies advanced in
connection with the Executive's employment for
reasonable and necessary expenses incurred by the
Executive through the date the Executive's
employment is terminated;
(iii) any and all other compensation previously earned
and deferred at the election of the Executive or
pursuant to any deferred
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compensation plans then in effect together with any
interest or desired earnings thereon;
(iv) annual bonus, if any, accrued for a Year prior to
the Year in which employment terminates, but not
yet paid to the Executive, under any bonus or
incentive compensation plan or plans in which the
Executive is a participant;
(v) a pro rata portion of the maximum bonus payable to
the Executive for the Year in which employment
terminates under any bonus or incentive
compensation plan or plans in which the Executive
is a participant, determined as if the Executive
had remained in employment for the full Year and
prorated based upon weeks, including partial weeks,
of employment during that Year;
(vi) all other payments and benefits to which the
Executive may be entitled under the terms of any
applicable compensation arrangement or benefit plan
or program of the Company.
(b) ACT means the Securities Exchange Act of 1934, as amended.
(c) AFFILIATE of any specified persons means any other person
that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under direct or indirect common
control with such specified person. For the purposes of this
definition, "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies
of a person, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
(d) ANNUAL COMPENSATION. Annual compensation shall mean the
sum of:
(i) the Executive's annual salary at the rate in effect
on the date of a termination of employment as
described in Section 3 or in Section 7(d) (or, in
the event of a termination for Good Reason under
Section 1(k)(i)(A) below, the annual salary as in
effect immediately before the actions giving rise
to Good Reason); plus
(ii) the greatest of the bonuses either paid or accrued
in either the Year of the Change in Control or the
immediately preceding Year.
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(e) BASE AMOUNT means an amount equal to the Executive's
Annualized Includable Compensation for the Base Period as
defined in Section 280G(d)(1) and (2) of the Code (as
hereinafter defined).
(f) CAUSE means (i) the executive's conviction of, or plea of
NOLO CONTENDERE to, a felony; or (ii) willful and intentional
misconduct, willful neglect, or gross negligence, in the performance of
the Executive's duties, which has caused a demonstrable and serious
injury to the Company, monetary or otherwise.
The Executive shall be given written notice that the
Company intends to terminate his employment for Cause. Such
written notice shall specify the particular acts, or failures to
act, on the basis of which the decision to so terminate
employment was made.
In the case of a termination for Cause as described in
Clause (ii), above, the Executive shall be given the opportunity
within 30 days of the receipt of such notice to meet with the
Board to defend such acts, or failures to act, prior to
termination. The Company may suspend the Executive's title and
authority pending such meeting, and such suspension shall not
constitute "Good Reason," as defined in subsection (k) below.
(g) CHANGE IN CONTROL OF THE COMPANY shall mean a Change in
Control of a nature that would be required to be reported in response
to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the
Act or any successor thereto, provided that without limiting the
foregoing, a Change in Control of the Company also shall be deemed to
have occurred if:
(i) any "person" (as defined under Section 3(a)(9) of
the Act) or "group" of persons (as provided under
Rule 13d-3 of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 or
otherwise under the Act), directly or indirectly
(including as provided in Rule 13d-3(d)(1) of the
Act), of capital stock of the Company the holders
of which are entitled to vote for the election of
directors ("voting stock") representing that
percentage of the Company's then outstanding voting
stock (giving effect to the deemed ownership of
securities by such person or group, as provided in
Rule 13d-3(d)(1) of the Act, but not giving effect
to any such deemed ownership of securities by
another person or group) equal to or greater than
thirty-five percent (35%) of all such voting stock;
(ii) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason
to constitute at least a majority thereof. Any
person becoming a director subsequent
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to such date
whose election, or nomination for election, is, at
any time, approved by a vote of at least a majority
of the directors comprising the Incumbent Board
shall be considered as though he were a member of
the Incumbent Board;
(iii) The Company combines with another person or entity,
whether through a merger, asset sale,
reorganization or otherwise, and (A) any person or
group of persons holds at any time after such
combination, voting stock equal to or greater than
thirty-five percent (35%) determined by reference
to the voting securities of the surviving entity,
or (B) the Company's directors, as of the date
immediately before such combination, constitute
less than a majority of the Board of Directors of
the combined entity.
(h) CODE means the Internal Revenue Code of 1986, including
any amendments thereto.
(i) EFFECTIVE DATE means the date this Agreement is executed
by the parties.
(j) EMPLOYMENT PERIOD means a period commencing on the date of
a Change in Control of the Company and ending on the earlier of (i) the
last day of the twenty-four months following the month in which the
Change in Control occurs, or (ii) the Executive's Normal Retirement
Date.
(k) GOOD REASON means:
(i) any breach of this Agreement by the Company,
including without limitation (A) any reduction
during the employment period in the amount of the
Executive's base salary or aggregate benefits as in
effect from time to time, (B) failure to provide
the Executive with the same fringe benefits that
were provided to the Executive immediately prior to
a Change in Control of the Company, or with a
package of fringe benefits (including paid
vacations) that, though one or more of such
benefits may vary from those in effect immediately
prior to such a Change in Control, is substantially
comparable in all material respects to such fringe
benefits taken as a whole, or (C) any other breach
by the Company of its obligations contained in
Section 6 below;
(ii) without the Executive's express written consent,
the assignment to the Executive of any duties which
are materially inconsistent with the Executive's
positions, duties, responsibilities and status
immediately prior to the Change in Control of the
Company, a
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<PAGE> 5
material change in the Executive's reporting
responsibilities, titles or offices as an employee
and as in effect immediately prior to the Change in
Control, or a significant reduction, in the
Executive's title, duties or responsibilities, or
in the level of his support services;
(iii) the relocation of the Executive's principal place
of employment, without the Executive's written
consent, to a location outside the same
metropolitan area in which the Executive was
employed at the time of such Change in Control, or
the imposition of any requirement that the
Executive spend more than ninety business days per
year at a location other than such principal place
of employment;
(iv) any purported termination of the Executive's
employment for Cause, Disability or Retirement
which is not effected pursuant to a Notice of
Termination satisfying the requirements of
paragraph (m) below.
Upon the occurrence of any of the events described in (i), (ii),
(iii) or (iv) above, the Executive shall give the Company written
notice that such event constitutes Good Reason, and the Company shall
thereafter have thirty (30) days in which to cure. If the Company has
not cured in that time, the event shall constitute Good Reason.
(l) NORMAL RETIREMENT DATE means Normal Retirement Date as
defined in the Peoples Heritage Financial Group, Inc. Retirement Plan.
(m) NOTICE OF TERMINATION. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination provision relied upon in this Agreement and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the
provision so indicated.
(n) PERSON or GROUP means a "person" or "group," as defined in
Section 1(g)(i) hereof.
(o) YEAR means a calendar year unless otherwise specifically
provided.
2. TERM OF AGREEMENT. This Agreement shall begin on the date first
set forth above and shall continue until January 1, 2001, provided that, on such
January 1, and each succeeding January 1, the term shall be renewed for an
additional period of one year unless either party has given written notice that
the term is not so renewed, which notice must be delivered to the other party at
least one year prior to the date of any such renewal, and
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<PAGE> 6
further provided that if a Change in Control of the Company occurs during such
term, the term shall in all events continue through the last day of the
Employment Period. This Agreement is also subject to earlier termination as
provided in Section 3 below. All rights and obligations hereunder shall survive
to the extent necessary to the intended enforcement thereof.
3. TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL.
(a) The Company and the Executive shall each retain the right
to terminate the employment of the Executive at any time prior to a
Change in Control of the Company. In the event the Executive's
employment is terminated prior to a Change in Control of the Company,
this Agreement shall, except as provided in Subsection (b) and Section
20 below, be terminated and of no further force and effect, and any and
all rights and obligations of the parties hereunder shall cease.
(b) If the Executive's employment is terminated by the Company
prior to the occurrence of a Change in Control of the Company, and if
it can be shown that the Executive's termination (i) was at the
direction or request of a third party that had taken steps reasonably
calculated to effect the Change in Control of the Company thereafter,
or (ii) otherwise occurred in connection with, or in anticipation of,
the Change in Control of the Company, the Executive shall have the
rights described in Section 7(d) below, as if a Change in Control of
the Company had occurred on the date immediately preceding such
termination.
4. EMPLOYMENT FOLLOWING A CHANGE IN CONTROL. If a Change in Control
of the Company occurs when the Executive is employed by the Company, the Company
will continue thereafter to employ the Executive, and the Executive will remain
in the employ of the Company, during the Employment Period, in accordance with
the terms and provisions of this Agreement.
5. DUTIES. During the Employment Period, the Executive shall serve
in such capacities and positions as may be assigned by the Company consistent
with the Executive's capacities and positions on the Effective Date and shall
devote the Executive's best efforts and all of the Executive's business time,
attention and skill to the business and affairs of the Company, as such business
and affairs now exist and as they may hereafter be conducted.
6. COMPENSATION. During the Employment Period, the Executive shall
be compensated by the Company as follows:
(a) the Executive shall receive, at such intervals and in
accordance with such standard policies as in effect on the date of the
Change in Control of the Company, an annual salary not less than the
Executive's annual salary as in effect on the date of the Change in
Control of the Company, subject to adjustment as hereinafter provided;
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<PAGE> 7
(b) the Executive shall be included in all plans providing
incentive compensation to executives, including but not limited to
bonus, deferred compensation, annual or other incentive compensation,
supplemental pension, stock ownership, stock option, stock
appreciation, stock bonus and similar or comparable plans as any such
plans are extended by the Company from time to time to senior corporate
officers, key employees and other employees of comparable status;
(c) the Executive shall be reimbursed, at such intervals and
in accordance with such standard policies as may be in effect on the
date of the Change in Control of the Company, for any and all monies
advanced in connection with the Executive's employment for reasonable
and necessary expenses incurred by the Executive on behalf of the
Company, including travel expenses;
(d) the Executive shall be included, to the extent eligible
thereunder, in any and all plans providing but not limited to, group
life insurance, hospitalization, disability, medical, dental, pension,
profit sharing and stock bonus plans, and shall be provided any and all
other benefits and perquisites made available to other employees of
comparable status and position at the expense of the Company on a
comparable basis;
(e) the Executive shall receive annually not less than the
amount of paid vacation and not fewer than the number of paid holidays
received annually immediately prior to the Change in Control of the
Company or available annually to other employees of comparable status
and position with the Company; and
(f) During the Employment Period the Board of Directors of the
Company, or an appropriate committee thereof, will consider and
appraise, at least annually, the contributions of the Executive to the
Company's operating efficiency, growth, production and profits and, in
accordance with past practice, due consideration shall be given to the
upward adjustment of the Executive's compensation rate, at least
annually, commensurate with increases generally given to other senior
corporate officers and key employees and as the scope of the
Executive's duties expands.
7. TERMINATION OF EMPLOYMENT. Any termination by the Company or the
Executive of the Executive's employment during the Employment Period shall be
communicated by written Notice of Termination to the Executive if such notice is
delivered by the Company and to the Company if such notice is delivered by the
Executive. The Notice of Termination shall comply with the requirements of
Section 17 below.
(a) TERMINATION FOR DISABILITY. If during the Employment
Period, the Executive's employment is terminated on account of the
Executive's disability, as determined under the Company's long-term
disability plan (as in effect on the date of a Change in Control of the
Company), the Executive shall receive any Accrued
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<PAGE> 8
Benefits, and shall remain eligible for all benefits as provided
pursuant to the terms of any long-term disability programs of the
Company in effect at the time of such termination.
(b) TERMINATION ON THE EXECUTIVE'S DEATH. If, during the
Employment Period, the Executive's employment is terminated on account
of the Executive's death, the Executive's estate or his designated
beneficiary (or beneficiaries), as applicable, shall receive all the
Executive's Accrued Benefits.
(c) VOLUNTARY TERMINATION OR TERMINATION FOR CAUSE. If, during
the Employment Period, (i) the Executive shall terminate employment
with the Company other than for Good Reason, or (ii) the Executive's
employment is terminated for Cause, the Executive shall receive from
the Company his Accrued Benefits.
(d) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE
EXECUTIVE FOR GOOD REASON. If, during the Employment Period, the
Executive's employment with the Company is terminated by the Company
other than for Cause, or by the Executive for Good Reason, then:
(i) the Executive shall be entitled to receive from the
Company his Accrued Benefit, except that, for this
purpose, Accrued Benefit shall not include any
entitlement to severance under any Company
severance policy generally applicable to the
Company's salaried employees;
(ii) the Executive shall receive from the Company, no
less than ten days following termination of his
employment, a lump sum payment (the "Termination
Payment") equal to three times the Executive's
Annual Compensation;
(iii) all rights under any equity or long-term incentive
plan shall be fully vested;
(iv) rights, if any, to supplemental pension shall be
fully vested; and
(v) the Executive shall continue to be covered at the
expense of the Company by the same or equivalent
hospital, medical, dental, accident, disability and
life insurance coverage as in effect for the
Executive immediately prior to termination of his
employment, until the earlier of (A) thirty-six
months following termination of employment, or (B)
the date the Executive has commenced new employment
and has thereby become eligible for comparable
benefits.
8
<PAGE> 9
8. CERTAIN SUPPLEMENTAL PAYMENTS BY THE COMPANY.
(a) In the event the Executive's employment is terminated
pursuant to Section 7(d) above, and if in connection therewith it is
determined that (A) part or all of the compensation and benefits to be
paid to the Executive constitute "parachute payments" under Section
280G of the Code, and (B) the payment thereof will cause the Executive
to incur excise tax under Section 4999 of the Code, the Company, on or
before the date for payment of such excise tax, shall pay the
Executive, in lump sum, an amount (the "Gross-Up Amount") such that,
after payment of all federal, state and local income tax and any
additional excise tax under Section 4999 of the Code in respect of the
Gross-Up Amount payment, the Executive will be fully reimbursed for the
amount of such excise tax.
(b) The determination of the Parachute Amount, the Base Amount
and the Gross-Up Amount, as well as any other calculations necessary to
implement this Section 8 shall be made by a nationally recognized
accounting or benefits consulting firm selected by the Executive and
reasonably satisfactory to the Company and which has not performed
services, other than minor indirect or incidental services, for either
the Company or the Executive for three years prior to the date the
Consultant is retained for this purpose. The Consultant's fee shall be
paid by the Company.
(c) As promptly as practicable following such determination
and the elections hereunder, the Company shall pay to or distribute to
or for the benefit of the Executive such amounts as are then due to the
Executive under this Agreement and shall promptly pay to or distribute
for the benefit of the Executive in the future such amounts as become
due to the Executive under this Agreement.
(d) As a result of the uncertainty in the application of
Section 280G of the Code at the time of an initial determination
hereunder, it is possible that payments will not have been made by the
Company which should have been made under clause (a) of this Section 8
("Underpayment"). In the event that there is a final determination by
the Internal Revenue Service, or a final determination by a court of
competent jurisdiction, that an Underpayment has been made and the
Executive thereafter is required to make any payment of an excise tax,
income tax, any interest or penalty, the accounting or benefits
consulting firm selected under clause (b) above shall determine the
amount of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of the
Executive.
9. FURTHER OBLIGATIONS OF THE EXECUTIVE. During and following the
Executive's employment by the Company, the Executive shall hold in confidence
and not directly or indirectly disclose or use or copy or make lists of any
confidential information or proprietary data of the Company, except to the
extent authorized in writing by the Board of Directors of the Company or
required by any court or administrative agency, other than to an
9
<PAGE> 10
employee of the Company or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by the Executive of duties as
an executive of the Company. Confidential information shall not include any
information known generally to the public or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that of the Company. All records, files, documents and
materials or copies thereof, relating to the Company's business which the
Executive shall prepare, or use, or come into contact with, shall be and remain
the sole property of the Company and shall be promptly returned to the Company
upon termination of employment with the Company.
10. EXPENSES AND INTEREST. If, after a Change in Control of the
Company, a good faith dispute arises with respect to the enforcement of the
Executive's rights under this Agreement, or if any legal or arbitration
proceeding shall be brought in good faith to enforce or interpret any provision
contained herein, or to recover damages for breach hereof, the Executive shall
recover from the Company any reasonable attorney's fees and necessary costs and
disbursements incurred as a result of such dispute, and prejudgment interest on
any money judgment or arbitration award obtained by the Executive calculated at
the rate of interest announced by Peoples Heritage Bank, or the successor
thereto, from time to time as its prime rate from the date that payments to him
should have been made under this Agreement.
11. PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation during and
after the Employment Period to pay the Executive the compensation and to make
the arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any setoff,
counterclaim, recoupment, defense or other right which the Company may have
against him or anyone else. All amounts payable by the Company hereunder shall
be paid without notice or demand. Each and every payment made hereunder by the
Company shall be final and the Company will not seek to recover all or any part
of such payment from the Executive or from whomsoever may be entitled thereto,
for any reason whatever except as provided in Section 8(d) above.
12. SUCCESSORS.
(a) (i) If the Company sells, assigns, or transfers all or
substantially all of its business and assets to any
Person, excluding Affiliates of the Company, or if
the Company merges into or consolidates or
otherwise combines with any Person which is a
continuing or successor entity, then the Company
shall assign all of its rights, title and interest
in this Agreement as of the date of such event to
the Person which is either the acquiring or
successor Company, and such Person shall assume in
writing and perform from and after the date of such
written assignment all of the terms, conditions and
provisions imposed by this Agreement upon the
Company. Failure of the Company to obtain such
10
<PAGE> 11
written assignment shall be a breach of this
Agreement. In case of such assignment by the
Company and of written assumption and agreement by
such Person, all further rights as well as all
other obligations of the Company under this
Agreement thenceforth shall cease and terminate and
thereafter the expression "the Company" wherever
used herein shall be deemed to mean such Person or
Persons.
(ii) This Agreement and all rights of the Executive
shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives,
estates, executors, administrators, heirs and
beneficiaries. All amounts payable to the Executive
hereunder shall be paid, in the event of the
Executive's death, to the Executive's estate, heirs
and representatives. This Agreement shall inure to
the benefit of, be binding upon and be enforceable
by, any successor, surviving or resulting Company
or other entity to which all or substantially all
of the Company's business and assets shall be
transferred. This Agreement shall not be terminated
by the voluntary or involuntary dissolution of the
Company.
13. ENFORCEMENT. The provisions of this Agreement shall be regarded
as divisible, and if any such provisions or any part hereof are declared invalid
or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
14. AMENDMENT. This Agreement may not be amended or modified at any
time except by a written instrument executed by the Company and the Executive if
such amendment or modification occurs before any Change in Control, or by the
Executive and the Company after any Change in Control.
15. WITHHOLDING. The Company shall be entitled to withhold from
amounts to be paid to the Executive hereunder any federal, state or local
withholding or other taxes, or charge which it is from time to time required to
withhold. The Company shall be entitled to rely on an opinion of counsel if any
question as to the amount or requirement of any such withholding shall arise.
16. GOVERNING LAW: ARBITRATION. This Agreement and the rights and
obligations hereunder shall be governed by and construed in accordance with the
laws of the State of Maine. Any dispute arising out of this Agreement shall be
determined by arbitration in the State of Maine under the rules of the American
Arbitration Association then in effect and judgment upon any award pursuant to
such arbitration may be enforced in any court having jurisdiction thereof.
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<PAGE> 12
17. NOTICE. Notices given pursuant to this Agreement shall be in
writing and shall be deemed given when received and, if mailed, shall be mailed
by United States registered or certified mail, return receipt requested,
addressee only postage prepaid, to the Company at:
Peoples Heritage Financial Group, Inc.
P.O. Box 9540
One Portland Square
Portland, ME 04112
Attn: Clerk
or if to the Executive, at the address set forth below the Executive's signature
line of this Agreement, or to such other address as the party to be notified
shall have given to the other.
18. NO WAIVER. No waiver by any party at any time of any breach by
another party of, or compliance with, any condition or provision of this
Agreement to be performed by another party shall be deemed a waiver of similar
or dissimilar provisions or conditions at any time.
19. HEADINGS. The headings herein contained are for reference only
and shall not affect the meaning or interpretation of any provision of this
Agreement.
20. RIGHTS UNDER EXISTING EMPLOYMENT AGREEMENT. The Company
acknowledges that it has assumed all the obligations of CFX Corporation ("CFX"),
as predecessor in interest to the Company by merger, under the Employment
Agreement, dated August ___, 1997,(1) by and between CFX and the Executive
(the "Employment Agreement"). Notwithstanding any provision of this Agreement
or the Employment Agreement to the contrary, in the event the Executive's
employment with the Company is terminated for any reason within one year of the
date of this Agreement, the Executive's employment with the Company shall be
deemed to have been terminated upon the occurrence of or within one year after a
"Triggering Event," as that term is defined in the Employment Agreement and the
Executive shall (i) be entitled to receive the payments and benefits set forth
in Section 7 of the Employment Agreement and not this Agreement, it being agreed
that in no event shall the Executive be entitled to receive benefits under both
this Agreement and the Employment Agreement, and (ii) comply with the
requirements of Sections 10 and 11 of the Employment Agreement. After such
one-year period, and provided that the Executive has not become entitled to
receive benefits under the Employment Agreement, the Employment Agreement shall
terminate and be of no further force and effect without any action on the part
of the Company, as successor to CFX, and the Executive, and the Executive
thereafter shall be entitled to receive such severance benefits as he may be
entitled to receive in accordance with the terms of this Agreement. In the event
the Company enters into an
- -----------------
(1) August 12 and 14 in the case of Peter J. Baxter and Christopher W. Bramley,
respectively.
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<PAGE> 13
employment or severance agreement with any other executive officer at the same
job range level at the Company on terms more favorable than those set forth in
this Agreement (other than in connection with an acquisition by the Company),
the Executive shall be entitled to enter into a contract on such more favorable
terms. The parties agree that this Agreement shall constitute a written
modification to the Employment Agreement which satisfies the requirements of
Section 19 thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
By: ______________________________________________
Name: William J. Ryan
Title: Chairman, President and Chief Executive
Officer
__________________________________________________
Executive:
Address:
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Current Report on Form 8-K,
the Registration Statements on Form S-8 (Nos. 33-22205, 33-22206, 33-80310,
333-17467 and 333-46367) and the Registration Statement on Form S-3 (No.
333-34931) of Peoples Heritage Financial Group, Inc. of our report, dated
January 30, 1998, except for Note W as to which the date is February 9, 1998, on
the consolidated balance sheets of CFX Corporation and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1997, which report appears in the December 31, 1997
Annual Report on Form 10-K of CFX Corporation.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
April 9, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Current Report on Form 8-K,
the Registration Statements on Form S-8 (Nos. 33-22205, 33-22206, 33-80310,
333-17467 and 333-46367) and the Registration Statement on Form S-3 (No.
333-34931) of Peoples Heritage Financial Group, Inc. of our report, dated
January 13, 1997, except for Note 20 as to which the date is February 13, 1997,
relating to Portsmouth Bank Shares, Inc. and Subsidiary, which report appears in
the December 31, 1997 Annual Report on Form 10- K of CFX Corporation.
/s/ Shatswell, MacLeod & Company, P.C.
West Peabody, Massachusetts
April 9, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Current Report on Form 8-K,
the Registration Statements on Form S-8 (Nos. 33-22205, 33-22206, 33-80310,
333-17467 and 333-46367) and the Registration Statement on Form S-3 (No.
333-34931) of Peoples Heritage Financial Group, Inc. of our report, dated
January 22, 1996, relating to the consolidated statement of operations of The
Safety Fund Corporation for the year ended December 31, 1995, which report
appears in the December 31, 1995 Annual Report on Form 10-KSB of The Safety Fund
Corporation and in the December 31, 1997 Annual Report on Form 10-K of CFX
Corporation.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
April 8, 1998
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Current Report on Form 8-K,
the Registration Statements on Form S-8 (Nos. 33-22205, 33-22206, 33-80310,
333-17467 and 333-46367) and the Registration Statement on Form S-3 (No.
333-34931) of Peoples Heritage Financial Group, Inc. of our report, dated
January 22, 1997, relating to the consolidated balance sheet of Community
Bankshares, Inc. and subsidiaries as of December 31, 1996, 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 the year ended June 30, 1995, which report appears in the December 31,
1996 Annual Report on Form 10-K of Community Bankshares, Inc and in the December
31, 1997 Annual Report on Form 10-K of CFX Corporation.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
April 8, 1998
<PAGE> 1
EXHIBIT 99.1
PEOPLES HERITAGE RECEIVES REGULATORY APPROVALS TO ACQUIRE CFX CORPORATION
$10 BILLION BANKING AND FINANCIAL SERVICES COMPANY CREATED
BANK OF NEW HAMPSHIRE TO BE STATE'S LARGEST BANK
Portland, Maine, March 30, 1998 -- Peoples Heritage Financial Group,
Inc. (NASDAQ: PHBK), a $6.8 billion multi-bank and financial services holding
company headquartered in Portland, Maine, announced today that is has received
all regulatory approvals which are necessary to complete its acquisition of
Keene, New Hampshire-based CFX Corporation (AMEX:CFX) with assets of $2.8
billion. The legal completion of the merger is scheduled for April 10, 1998,
with operational consolidations scheduled for late spring and mid-summer.
"This is a strong strategic move to make us New England's leading and
largest community banking company," said William J. Ryan, Chairman, President
and Chief Executive Officer of Peoples Heritage Financial Group.
Under the terms of the agreement between the parties, each share of
common stock of CFX outstanding just prior to the completion of the acquisition
(other than dissenting shares) will be converted into the right to receive 0.667
of a share of common stock of Peoples Heritage. Approximately 16.3 million
shares of Peoples Heritage common stock will be issued in the transaction, which
will be a tax free reorganization and will be accounted for as a
pooling-of-interests. In addition to the exchange of outstanding shares shortly
after the effective legal date of the acquisition, outstanding options to
acquire common stock of CFX will be converted, based on the share exchange
ratio, to options to acquire approximately 450,000 shares of common stock of
Peoples Heritage.
CFX operates banks in New Hampshire and Massachusetts that will be
merged into the Peoples Heritage owned banks in the two states. Peoples
Heritage's New Hampshire banking subsidiary, Bank of New Hampshire (BNH), will
gain the leading deposit market share in the state. Peoples Heritage's
Massachusetts banking subsidiary, Family Bank, will extend its market share into
central Massachusetts and hold the state's tenth largest market share. The
Company's Maine banking affiliate, Peoples Heritage Bank, which already holds
Maine's largest deposit market position, will not be directly affected by the
acquisition of CFX, which has no presence in the state.
In order to satisfy commitments made by PHFG to regulatory authorities
in conjunction with the approval of the acquisition of CFX, CFX Bank has entered
into an agreement to divest five branches in New Hampshire -- two each in
Concord and Manchester and one in Hillsborough -- with total deposits of
approximately $160 million. The branches will be sold to First Essex Bank, FSB,
headquartered in Andover, Massachusetts. First Essex Bancorp, Inc., the parent
holding company of First Essex Bank,
<PAGE> 2
has $1.1 billion in assets and operates banking offices in northern
Massachusetts and southern New Hampshire.
CFX operates 56 banking offices through CFX Bank and the recently
acquired Portsmouth Savings Bank, Concord Savings Bank and Centerpoint Bank in
New Hampshire, and Orange Savings Bank and Safety Fund National Bank in
Massachusetts. All CFX branches in New Hampshire, except for those being
divested, will become BNH offices and the 13 Orange and Safety Fund branches in
Massachusetts will become Family Bank branches.
Following completion of the mergers, BNH will have 84 branches and
approximately $4.5 billion in assets, and Family Bank will have 35 branches,
including four in southern New Hampshire, and approximately $1.5 billion in
assets.
(end)
2
