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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
July 20, 1998
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(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
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(Former name, former address and former fiscal year, if changed since
last report)
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ITEM 5. OTHER EVENTS
This Current Report on Form 8-K/A amends the Current Report on Form 8-K
filed by Peoples Heritage Financial Group, Inc. ("PHFG") on July 20, 1998 to
file certain documents relating to the matters discussed therein.
As previously reported, on July 20, 1998, PHFG announced that it and
SIS Bancorp, Inc. (the "Company") had entered into an Agreement and Plan of
Merger, dated as of July 20, 1998 (the "Agreement"), which sets forth the terms
and conditions pursuant to which the Company would be merged with and into
Peoples Heritage Merger Corp., a wholly-owned subsidiary of PHFG (the "Merger").
The Agreement provides, among other things, that as a result of the Merger, each
outstanding share of common stock of the Company (subject to certain exceptions)
will be converted into the right to receive 2.25 shares of PHFG's common stock,
plus cash in lieu of any fractional share interest. Consummation of the Merger
is subject to a number of conditions, including, but not limited to, (i) the
approval of the Agreement and the Merger by the shareholders of the Company and
(ii) the receipt of requisite regulatory approvals. A copy of the agreement is
filed as Exhibit 2.1 hereto and is incorporated herein by reference.
Pursuant to the Agreement, the Company's Massachusetts-based banking
subsidiary, Springfield Institution for Savings, will be merged into PHFG's
Massachusetts-based banking subsidiary, Family Bank, FSB. It is PHFG's current
intention to conduct business in the market areas in which Springfield
Institution for Savings conducted business prior to such bank merger under the
name Springfield Institution for Savings. The Company's other banking
subsidiary, Connecticut-based Glastonbury Bank and Trust Company, will be held
as a separate institution.
Pursuant to the Agreement, one director of the Company will become a
director of PHFG and F. William Marshall, Jr., the Company's President and Chief
Executive Officer, will become an executive officer of PHFG and Vice Chairman of
PHFG's Senior Management Committee.
In connection with the Agreement, PHFG and the Company entered into a
Stock Option Agreement, dated as of July 20, 1998, pursuant to which the Company
granted PHFG an option (the "Option") to purchase up to 1,385,383 shares of the
Company's common stock (subject to adjustment as set forth therein), which
represents 19.9% of the Company's outstanding shares of common stock, at a
purchase price of $44.00 per share (subject to adjustment as set forth therein).
The Option will become exercisable upon the occurrence of certain events, as
specified in the Stock Option Agreement, none of which has occurred as of the
date hereof. A copy of the Stock Option Agreement is filed as Exhibit 10.1
hereto and is incorporated herein by reference.
In connection with the Agreement, the Company and the Rights Agent for
the Company's Rights Agreement adopted an amendment to the Rights Agreement,
dated as of July 20, 1998, which generally provides that the Agreement and the
Option Agreement and the transactions contemplated thereby shall have no
consequences for purposes of such Rights Agreement. The amendment to the Rights
Agreement is filed as Exhibit 99.4 hereto and is incorporated herein by
reference.
On the date of execution of the Agreement, PHFG and the Company issued
a joint press release announcing such execution, and on the same day PHFG made a
presentation
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to analysts to elaborate on the strategic rationale and financial implications
of the transaction. A copy of the press release and portions of the analysts
presentation were filed as Exhibits 99.1 and 99.2, respectively, to the Current
Report on Form 8-K filed by PHFG on July 20, 1998 and are incorporated herein by
reference.
The foregoing descriptions of and references to all of the
above-mentioned agreements and documents are qualified in their entirety by
reference to the complete texts of the agreements and documents which are filed
herewith and incorporated by reference herein as exhibits to this Current Report
on Form 8-K.
The press release and the portions of the analyst presentation
incorporated herein by reference contain 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.
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 the Company 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.
On July 20, 1998, PHFG also issued a press release announcing its
earnings for the three and six months ended June 30, 1998. A copy of this press
release was filed as 99.3 to the Current Report on Form 8-K filed by PHFG on
July 20, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Not applicable.
(b) Not applicable.
(c) The following exhibits are included with this Report:
Exhibit 2.1 Agreement and Plan of Merger, dated as of
July 20, 1998, among PHFG, Peoples Heritage
Merger Corp. and the Company.
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Exhibit 10.1 Stock Option Agreement, dated as of July 20,
1998, between the Company and PHFG.
Exhibit 10.2 Form of letter agreement between affiliates
of the Company and PHFG.
Exhibit 10.3 Form of letter agreement between affiliates
of PHFG and PHFG.
Exhibit 99.1 Press Release, dated July 20, 1998(1)
Exhibit 99.2 Portions of Analysts Presentation(1)
Exhibit 99.3 Press Release, dated July 20, 1998(1)
Exhibit 99.4 Amendment, dated as of July 20, 1998, to
Rights Amendment, dated as of January 22,
1997, between the Company and ChaseMellon
Shareholder Services L.L.C., as Rights
Agent.
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(1) Incorporated by reference to the Current Report on Form 8-K filed by PHFG
on July 20, 1998.
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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
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Name: Peter J. Verrill
Title: Executive Vice President,
Chief Financial Officer and Treasurer
Date: July 24, 1998
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AGREEMENT AND PLAN OF MERGER
AMONG
PEOPLES HERITAGE FINANCIAL GROUP, INC.,
PEOPLES HERITAGE MERGER CORP.
AND
SIS BANCORP, INC.
DATED AS OF JULY 20, 1998
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AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
ARTICLE I DEFINITIONS...................................................... 1
ARTICLE II THE MERGER....................................................... 7
2.1 The Merger....................................................... 7
2.2 Effective Time; Closing.......................................... 8
2.3 Treatment of Capital Stock....................................... 8
2.4 Stockholder Rights; Stock Transfers.............................. 9
2.5 Fractional Shares................................................ 9
2.6 Dissenting Shares................................................ 10
2.7 Exchange Procedures.............................................. 10
2.8 Anti-Dilution Provisions......................................... 11
2.9 Options.......................................................... 11
2.10 Additional Actions............................................... 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 13
3.1 Capital Structure................................................ 13
3.2 Organization, Standing and Authority of the Company.............. 13
3.3 Ownership of the Company Subsidiaries............................ 13
3.4 Organization, Standing and Authority of the Company
Subsidiaries..................................................... 14
3.5 Authorized and Effective Agreement............................... 14
3.6 Securities Documents and Regulatory Reports...................... 16
3.7 Financial Statements............................................. 16
3.8 Material Adverse Change.......................................... 17
3.9 Environmental Matters............................................ 17
3.10 Tax Matters...................................................... 18
3.11 Legal Proceedings................................................ 19
3.12 Compliance with Laws............................................. 19
3.13 Certain Information.............................................. 20
3.14 Employee Benefit Plans........................................... 20
3.15 Certain Contracts................................................ 22
3.16 Brokers and Finders.............................................. 23
3.17 Insurance........................................................ 23
3.18 Properties....................................................... 23
3.19 Labor............................................................ 24
3.20 Loans; Nonperforming and Classified Assets....................... 24
3.21 Administration of Fiduciary Accounts............................. 25
3.22 Derivative Transactions.......................................... 25
3.23 Year 2000........................................................ 25
3.24 Required Vote; Company Rights Agreement; Antitakeover
Provisions....................................................... 25
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3.25 Fairness Opinion................................................. 26
3.26 Accounting for the Merger; Reorganization........................ 26
3.27 Disclosures...................................................... 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PHFG........................... 27
4.1 Capital Structure................................................ 27
4.2 Organization, Standing and Authority of PHFG..................... 27
4.3 Ownership of the PHFG Subsidiaries............................... 27
4.4 Organization, Standing and Authority of the
PHFG Subsidiaries................................................ 28
4.5 Authorized and Effective Agreement............................... 28
4.6 Securities Documents and Regulatory Reports...................... 29
4.7 Financial Statements............................................. 30
4.8 Material Adverse Change.......................................... 31
4.9 Environmental Matters............................................ 31
4.10 Tax Matters...................................................... 31
4.11 Legal Proceedings................................................ 32
4.12 Compliance with Laws............................................. 32
4.13 Certain Information.............................................. 33
4.14 Employee Benefit Plans........................................... 34
4.15 Certain Contracts................................................ 35
4.16 Brokers and Finders.............................................. 35
4.17 Insurance........................................................ 35
4.18 Properties....................................................... 36
4.19 Labor............................................................ 36
4.20 Loans............................................................ 36
4.21 Administration of Fiduciary Accounts............................. 37
4.22 Year 2000........................................................ 37
4.23 Ownership of Company Common Stock................................ 37
4.24 Fairness Opinion................................................. 37
4.25 Accounting for the Merger; Reorganization........................ 38
4.26 Disclosures...................................................... 38
ARTICLE V COVENANTS................................................... 38
5.1 Reasonable Best Efforts.......................................... 38
5.2 Stockholder Meeting.............................................. 38
5.3 Regulatory Matters............................................... 39
5.4 Investigation and Confidentiality................................ 40
5.5 Press Releases................................................... 40
5.6 Business of the Parties.......................................... 40
5.7 Current Information.............................................. 45
5.8 Indemnification; Insurance....................................... 45
5.9 Employee Benefit Plans and Arrangements.......................... 47
5.10 Directors........................................................ 49
5.11 Stock Exchange Listing........................................... 49
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5.12 The Bank Merger; Conversion...................................... 49
5.13 Compliance with Connecticut Transfer Act......................... 50
5.14 Affiliates; Restrictions on Resale............................... 50
5.15 Charitable Foundation............................................ 50
5.16 Disclosure Supplements........................................... 51
5.17 Failure to Fulfill Conditions.................................... 51
ARTICLE VI CONDITIONS PRECEDENT............................................. 51
6.1 Conditions Precedent - PHFG, Merger Sub and the Company.......... 51
6.2 Conditions Precedent - The Company............................... 52
6.3 Conditions Precedent - PHFG and Merger Sub....................... 53
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT............................... 55
7.1 Termination...................................................... 55
7.2 Effect of Termination............................................ 58
7.3 Survival of Representations, Warranties and Covenants............ 59
7.4 Waiver........................................................... 59
7.5 Amendment or Supplement.......................................... 59
ARTICLE VIII MISCELLANEOUS.................................................. 60
8.1 Expenses......................................................... 60
8.2 Entire Agreement................................................. 60
8.3 Assignment; Successors........................................... 60
8.4 Notices.......................................................... 60
8.5 Alternative Structure............................................ 61
8.6 Interpretation................................................... 62
8.7 Counterparts..................................................... 62
8.8 Governing Law.................................................... 62
Exhibit A Matters to be covered by Opinion(s) of Counsel to PHFG
Exhibit B Matters to be covered by Opinion of Counsel to the Company
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of July 20,
1998, among Peoples Heritage Financial Group, Inc. ("PHFG"), a Maine
corporation, Peoples Heritage Merger Corp. ("Merger Sub"), a Maine corporation
and a wholly-owned subsidiary of PHFG, and SIS Bancorp, Inc. (the "Company"), a
Massachusetts corporation.
W I T N E S E T H:
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 stockholders 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;
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.
"Affiliate" shall have the meaning specified in Section 5.14(a) hereof.
"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Bank Merger" shall have the meaning set forth in Section 5.12(a)
hereof.
"Bank Merger Agreement" shall have the meaning set forth in Section
5.12(a) hereof.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" shall mean the Bank Insurance Fund administered by the FDIC.
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"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 Bank and the
Company Connecticut Bank.
"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company Connecticut Bank" shall mean Glastonbury Bank and Trust
Company, a Connecticut commercial bank and trust company and a wholly-owned
subsidiary of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof.
"Company ESOP" means the Company's Employee Stock Ownership Plan, as
amended.
"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, 1997, 1996 and 1995 and the consolidated
statements of operations, stockholders' equity and cash flows (including related
notes and schedules, if any) of the Company for each of the three years ended
December 31, 1997, 1996 and 1995 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, stockholders' 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, 1997.
"Company Massachusetts Bank" shall mean Springfield Institution for
Savings, a Massachusetts-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 Plan.
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"Company Preferred Stock" shall mean the Preferred Stock, $0.01 par
value per share, of the Company.
"Company Rights" shall mean the rights granted pursuant to the Company
Rights Agreement.
"Company Rights Agreement" shall mean the Rights Agreement, dated as of
January 22, 1997, between the Company and ChaseMellon Stockholder Services
L.L.C., in its capacity as Rights Agent.
"Company Stock Option Agreement" shall have the meaning set forth in
the third WHEREAS clause to this Agreement.
"Company Stock Option Plan" shall mean the Company's Director Stock
Option Plan and Management Stock Option Plan, as amended.
"Company Restricted Stock Plan" shall mean the Company's Director
Restricted Stock Plan and Management Restricted Stock Plan, as amended.
"Confidentiality Agreement" shall mean the confidentiality agreement,
dated June 29, 1998, between the Company and PHFG.
"Connecticut Commissioner" shall mean the Banking Commissioner of the
State of Connecticut.
"Connecticut Transfer Act" shall mean the Connecticut Transfer Act
(Connecticut General Statutes, Section 22a-134 through 22a-134d).
"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" shall mean any federal, state or local
environmental law or regulation, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Clean Air Act, the Clean Water Act and the
Occupational Safety and Health Act, each as amended, regulations promulgated
thereunder, and state and local counterparts.
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"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(c)
hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FFIEC" shall mean the Federal Financial Institutions Examination
Council.
"FHLB" shall mean the 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" shall mean 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.
"Lien" shall mean any charge, mortgage, pledge, security interest,
restriction, claim, lien or encumbrance.
"Loan" shall have the meaning set forth in Section 3.20(a) hereof.
"Massachusetts Bank Commissioner" shall mean the Commissioner of Banks
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 Agreement, provided, however,
that Material Adverse Effect shall not be deemed to include (a) the impact of
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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.
"MBCL" shall mean the Massachusetts Business Corporation Law, as
amended.
"Merger" shall have the meaning set forth in Section 2.1(a) hereof.
"MHPF" shall mean the Massachusetts Housing Partnership Fund.
"NASD" shall mean the National Association of Securities Dealers, Inc.,
or any successor thereto.
"OCC" shall mean the Office of the Comptroller of the Currency of the
U.S. Department of the Treasury, or any successor thereto.
"OTS" shall mean the Office of Thrift Supervision of the U.S.
Department of the Treasury, or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"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.
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"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, 1997, 1996 and 1995 and the consolidated statements of income, stockholders'
equity and cash flows (including related notes and schedules, if any) of PHFG
for each of the three years ended December 31, 1997, 1996 and 1995 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, stockholders' 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, 1997.
"PHFG Maine Bank" shall mean Peoples Heritage Savings Bank, a
Maine-chartered 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 granted pursuant to the PHFG Rights
Agreement.
"PHFG Rights Agreement" shall mean the 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 5.16 hereof.
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"Proxy Statement" shall mean the prospectus/proxy statement contained
in the Form S-4, as amended or supplemented, and to be delivered to stockholders
of 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.
"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(a) 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 Merger Sub (the "Merger") in accordance with Section 906 of the
MBCA and Section 79 of the MBCL. Merger Sub 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 Merger
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Corp." Upon consummation of the Merger, the separate corporate existence of the
Company shall terminate.
(b) From and after the Effective Time, the Merger shall have the
effects set forth in Section 905 of the MBCA and Section 80 of the MBCL.
(c) Upon consummation of the Merger, the Articles of Incorporation
and Bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation and Bylaws of the Surviving Corporation,
respectively, until altered, amended or repealed in accordance with their terms
and applicable law.
(d) The authorized capital stock of the Surviving Corporation
shall be as stated in the Articles of Incorporation of Merger Sub immediately
prior to the Effective Time.
(e) The directors and officers of Merger Sub immediately prior to
the Effective Time shall be the directors and officers of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation.
2.2 EFFECTIVE TIME; CLOSING
The Merger shall become effective upon the occurrence of the filing of
(i) articles of merger with the Secretary of State of the State of Maine
pursuant to Section 906(7) of the MBCA and (ii) articles of merger with the
Secretary of State of the Commonwealth of Massachusetts pursuant to Section
79(c) of the MBCL, unless a later date and time is specified as the effective
time (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
stockholder:
(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;
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(b) each share of Merger Sub common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding; and
(c) subject to Sections 2.5 and 2.6 hereof, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held by 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 2.25 shares of PHFG Common
Stock (subject to possible adjustment as set forth in Sections 2.8 and 7.1(g)
hereof, the "Exchange Ratio").
2.4 STOCKHOLDER 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 stockholder 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,
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or if not reported therein, in another authoritative source), rounded to the
nearest whole cent.
2.6 DISSENTING SHARES
Each outstanding share of Company Common Stock the holder of which has
perfected his or her right to dissent under the MBCL and has not effectively
withdrawn or lost such right as of the Effective Time (the "Dissenting Shares")
shall not be converted into or represent a right to receive shares of PHFG
Common Stock hereunder, and the holder thereof shall be entitled only to such
rights as are granted by the MBCL. 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 MBCL (any stockholder duly
making such demand being hereinafter called a "Dissenting Stockholder"). If any
Dissenting Stockholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his or her 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(c) 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 5.14(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 5.14(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
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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 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 Company Stock Option Plan
and stock option agreement by which it is evidenced, including without
limitation all such terms pertaining to the acceleration and vesting of the
holder's exercise rights thereunder, except that from and after the Effective
Time, (i) PHFG and the Human Resources Committee of its Board of Directors shall
be
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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 the 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 25,000,000
shares of Company Common Stock and 5,000,000 shares of Company Preferred Stock.
As of the date hereof, there are 6,961,724 shares of Company Common Stock issued
and outstanding, 98,250 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 762,850 shares of
Company Common Stock pursuant to the Company Stock Option Plan, as Previously
Disclosed, and (iii) shares of Company Common Stock and/or Company Preferred
Stock issuable upon the exercise of Company Rights, there are no Rights
authorized, issued or outstanding with respect to the capital stock of the
Company. The Company has not repurchased any shares of Company Common Stock
during the two years preceding the date hereof, except for any such repurchases
(including the number of shares, date repurchased, repurchase price and the
purpose thereof) as are Previously Disclosed.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts with full
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted and is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
licensing or qualification, except where the failure to be so licensed,
qualified or in good standing would not have a Material Adverse Effect on the
Company. The Company is duly registered as a bank holding company under the BHCA
and the regulations of the FRB thereunder. The Company has heretofore delivered
or made available to PHFG true and complete copies of the Articles of
Organization and Bylaws of the Company as in effect as of the date hereof.
3.3 OWNERSHIP OF THE COMPANY SUBSIDIARIES
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary and identified its Significant Subsidiaries. Except for (i) capital
stock or other ownership interests in the
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Company Subsidiaries, (ii) stock in the FHLB of Boston and the Federal Reserve
Bank of Boston and (iii) securities and other interests held in a fiduciary
capacity and beneficially owned by third parties or taken in consideration of
debts previously contracted, 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 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 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 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 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 Articles of Incorporation 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 stockholders 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 stockholders. This Agreement has been duly and
validly
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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 Merger), nor compliance by the Company with any of the provisions
hereof (i) does or will conflict with or result in a breach of any provisions of
the Articles of Organization or Bylaws of the Company or the equivalent
documents of any Company Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of the Company or a Company Subsidiary pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or a Company
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental and stockholder 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 Connecticut 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 stockholders 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 Commonwealth of Massachusetts pursuant to the
MBCL, 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 OTS, the Massachusetts Bank Commissioner and the Central Fund as
may be applicable in connection with the 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 Subsidiary in connection with (i) the execution and
delivery by the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby and (ii) the execution and delivery by the
Company Massachusetts Bank of the Bank Merger Agreement and the consummation by
the Company Massachusetts 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
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Agreement as shall be necessary for (i) consummation of the transactions
contemplated by this Agreement and the Bank Merger Agreement and (ii) the
continuation by 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 the Company Massachusetts Bank's conversion from mutual
to stock form, each of the Company and the Company Massachusetts Bank, as
applicable, has timely filed with the applicable Governmental Entities 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 its acquisition of all of the outstanding capital stock
of the Company Massachusetts Bank, in the case of the Company, and since January
1, 1994 in the case of each Company Bank, the Company and each Company Bank have
duly filed with the applicable Governmental Entities 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 a 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, 1997, 1996 and 1995 and
the consolidated statements of operations, stockholders' equity and cash flows
for each of the three years ended December 31, 1997, 1996 and 1995, are
accompanied by the audit reports of PricewaterhouseCoopers LLP, independent
public accountants with respect to the Company. The Company Financial Statements
referred to herein, as well as the Company Financial Statements to be delivered
pursuant to Section 5.7 hereof, fairly present or will fairly present, as the
case may be, the consolidated financial condition of the Company as of the
respective dates set forth therein, and the consolidated results of operations,
stockholders' equity and cash flows of the Company for the respective periods or
as of the respective dates set forth therein.
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(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 March 31, 1998 in the ordinary course of
business, neither the Company nor any Company Subsidiary has any liabilities,
whether absolute, accrued, contingent or otherwise, material to the financial
condition, results of operations or business of the Company on a consolidated
basis.
3.8 MATERIAL ADVERSE CHANGE
Since March 31, 1998, (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
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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 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) 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
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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, could reasonably be expected to have, individually or in the
aggregate, 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 Articles of Organization and Bylaws or equivalent documents,
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
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authorities), and none of them has received any written communication requesting
that it enter into any of the foregoing.
3.13 CERTAIN INFORMATION
None of the information relating to the Company and the 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 stockholders of the Company and up to and including the
date(s) of the meeting of stockholders 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 stockholders in connection with the
meeting of stockholders at which this Agreement will be considered by such
stockholders 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.
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(c) 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
any 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 March 31,
1998 included in the Company Financial Statements, other than liabilities
incurred in the ordinary course of business in connection therewith subsequent
to the date thereof.
(e) To the best of the Company's knowledge, no prohibited
transaction (which shall mean any transaction prohibited by Section 406 of ERISA
and not exempt under Section 408 of ERISA or Section 4975 of the Code) has
occurred with respect to any Company Employee Plan which would result in the
imposition, directly or indirectly, of a material excise tax under Section 4975
of the Code or otherwise have a Material Adverse Effect on the Company.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to the
date hereof, and full payment will be so made (or proper accruals will be so
established) of all contributions which are required for periods after the date
hereof and prior to the Effective Time, under the terms of each Company Employee
Plan or ERISA; no accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any Company Pension Plan, and there is no "unfunded current liability" (as
defined in Section 412 of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee
Plans have been operated in compliance in all material respects with the
applicable provisions of ERISA, the Code, all regulations, rulings and
announcements promulgated or issued thereunder and all other applicable
governmental laws and regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the
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Company Employee Plans or any trust related thereto or any fiduciary thereof
relating to a Company Employee Plan.
(i) The consummation of the transactions contemplated by this
Agreement would not, directly or indirectly (including, without limitation, as a
result of any termination of employment prior to or following the Effective
Time) reasonably be expected to (i) entitle any director, officer, employee or
consultant of or to the Company or any Company Subsidiary to any payment
(including severance pay or similar compensation) or any increase in
compensation, (ii) result in the vesting or acceleration of any benefits under
any Company Employee Plan or (iii) result in any material increase in benefits
payable under any Company Employee Plan.
(j) Neither the Company nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would not
reasonably be expected to be deductible as a result of the limitations under
Section 162(m) of the Code and the regulations issued thereunder.
(k) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result of
any termination of employment prior to or following the Effective Time), none of
the Company, PHFG or any of their respective Subsidiaries will be obligated to
make a payment that would be characterized as an "excess parachute payment" to
an individual who is a "disqualified individual" (as such terms are defined in
Section 280G of the Code), without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
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 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, (iv) 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 (v)
any other agreement, arrangement or understanding which would be required to be
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filed as an exhibit to the Company's Annual Report on Form 10-K under the
Exchange Act and which has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default
or in non-compliance, which default or non-compliance could reasonably be
expected to have a Material Adverse Effect on the Company, under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party or by which its assets, business or operations may be
bound or affected, whether entered into in the ordinary course of business or
otherwise and whether written or oral, and there has not occurred any event that
with the lapse of time or the giving of notice, or both, would constitute such a
default or non-compliance.
3.16 BROKERS AND FINDERS
Except for an agreement with CIBC Oppenheimer Corp., as Previously
Disclosed, neither the Company nor any Company Subsidiary, nor any of their
respective directors, officers or employees, has employed any broker or finder
or incurred any liability for any broker or finder fees or commissions in
connection with the transactions contemplated hereby.
3.17 INSURANCE
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
(other than equities of redemption under applicable foreclosure laws) to all of
the material properties and assets, real and personal, reflected on the
consolidated statement of financial condition of the Company as of March 31,
1998 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
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due or payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of its banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent and (iv) as reflected on the consolidated statement of financial
condition of the Company as of March 31, 1998 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 March 31, 1998: (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 material provision thereof; (ii)
each Loan which has been classified as "substandard," "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
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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
Between December 31, 1997 and the date hereof, neither the Company nor
any of its Subsidiaries entered into any futures contract, option contract,
interest rate caps, interest rate floors, interest rate exchange agreement or
other derivative instruments.
3.23 YEAR 2000
Neither the Company nor any of its Subsidiaries has reason to believe
that it will receive a rating of less than "satisfactory" on any Year 2000
Report of Examination of any Governmental Entity. The Company has disclosed or
made available to PHFG a complete and accurate copy of its plan, including an
estimate of the anticipated associated costs, for addressing the issues set
forth in the statements of the FFIEC dated May 5, 1997, entitled "Year 2000
Project Management Awareness," and December 17, 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," as such issues
affect it and its Subsidiaries, and such plan is in material compliance with the
schedule set forth in the FFIEC statements.
3.24 REQUIRED VOTE; COMPANY RIGHTS AGREEMENT; ANTITAKEOVER PROVISIONS
(a) The affirmative vote of the holders of a majority of the
issued and outstanding shares of Company Common Stock is the only vote of
stockholders of the Company required to approve this Agreement and the
transactions contemplated hereby on behalf of the Company.
(b) The amendment to the Company Rights Agreement previously
furnished to PHFG has been duly authorized and adopted by the Company and the
Company has
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otherwise taken all action necessary so that the Company's entering into this
Agreement and the Company Option Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not enable or
require the Company Rights to be exercised, distributed or triggered by any
person or entity.
(c) There is no Acquiring Person, and none of a Stock Acquisition
Date, a Distribution Date or a Triggering Event has occurred, in each case as
such terms are defined in the Company Rights Agreement.
(d) Assuming the accuracy of the representation and warranty of
PHFG contained in Section 4.23 hereof, no "control share acquisition," "business
combination moratorium," "fair price" or other form of antitakeover statute or
regulation, including without limitation Chapters 110D and 110F of the MBCL, is
applicable to this Agreement and the transactions contemplated hereby. The Board
of Directors of the Company has taken all necessary action so that the
provisions of Sections 6.3.1, 6.3.2(B) and 6.6 of the Company's Articles of
Organization do not and will not apply to this Agreement and the Company Option
Agreement and the transactions contemplated hereby and thereby.
3.25 FAIRNESS OPINION
The Company has received a written opinion of CIBC Oppenheimer Corp. 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.
3.26 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, as a result of any action or omission by
the Company or any Company Subsidiary, (i) for pooling-of-interests accounting
treatment under generally accepted accounting principles or (ii) as a
reorganization under Section 368(a) of the Code.
3.27 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, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF 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 200,000,000 shares of
PHFG Common Stock and 5,000,000 shares of PHFG Preferred Stock. As of July 15,
1998, there were 87,631,378 shares of PHFG Common Stock issued and outstanding,
2,309,810 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, (ii) shares of PHFG Common Stock and/or PHFG
Preferred Stock issuable upon the exercise of PHFG Rights and (iii) by virtue of
this Agreement. The PHFG Common Stock to be issued in connection with the Merger
is duly authorized (subject to receipt of all governmental approvals) and, when
issued in accordance with the terms hereof, will be validly issued and fully
paid and nonassessable.
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 or made available 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. 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,
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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.
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) Each of PHFG and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and (subject to receipt of all
necessary governmental approvals) 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 and Merger
Sub. This Agreement has been duly and validly executed and delivered by PHFG and
Merger Sub and, assuming due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of PHFG and Merger
Sub which is enforceable against PHFG and Merger Sub in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby (including the Merger and
the Bank Merger), nor compliance by PHFG and Merger Sub with any of the
provisions hereof (i) does or will conflict with or result in a breach of any
provisions of the Articles of Incorporation or Bylaws of 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,
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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 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 Connecticut 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 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 Commonwealth of Massachusetts pursuant to the
MBCL, 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 OTS, the Massachusetts Bank Commissioner and the Central Fund as
may be applicable in connection with the 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 Subsidiary in connection with (i) the execution and delivery by
PHFG and Merger Sub of this Agreement and the consummation by PHFG and Merger
Sub of the transactions contemplated hereby and (ii) the execution and delivery
by the PHFG Massachusetts Bank of the Bank Merger Agreement and the consummation
by the PHFG Massachusetts Bank of the transactions contemplated thereby.
(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 Agreement 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 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
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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 applicable Governmental Entities 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 a 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, or is not in the process of
being, 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, 1997, 1996 and 1995 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years ended December 31, 1997, 1996 and 1995, 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, stockholders' 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 March 31, 1998 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 March 31, 1998, 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.
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(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 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, could reasonably be
expected to have, individually or in the aggregate, 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
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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 and Bylaws or equivalent documents, 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 stockholders of the Company and up
to and including the date(s) of the meeting of stockholders 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 stockholders of the Company
in connection with the meeting of stockholders at which this Agreement will be
considered by such stockholders will comply as to form in all material respects
with the Securities 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 March 31, 1998 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
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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.
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 Keefe, Bruyette & Woods, 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
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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 (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 March 31, 1998 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 March 31, 1998 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 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,
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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 YEAR 2000
Neither PHFG nor any of its Subsidiaries has reason to believe that it
will receive a rating of less than "satisfactory" on any Year 2000 Report of
Examination of any Governmental Entity. PHFG has disclosed or made available to
the Company a complete and accurate copy of its plan, including an estimate of
the anticipated associated costs, for addressing the issues set forth in the
statements of the FFIEC dated May 5, 1997, entitled "Year 2000 Project
Management Awareness," and December 17, 1997, entitled "Safety and Soundness
Guidelines Concerning the Year 2000 Business Risk," as such issues affect it and
its Subsidiaries, and such plan is in material compliance with the schedule set
forth in the FFIEC statements.
4.23 OWNERSHIP OF COMPANY COMMON STOCK
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,
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) which in the aggregate represent 5% or more of the outstanding
Company Common Stock.
4.24 FAIRNESS OPINION
PHFG has received a written opinion of Keefe, Bruyette & Woods, 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.
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4.25 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, as a result of any action or omission by PHFG
or any PHFG Subsidiary, (i) for pooling-of-interests treatment under generally
accepted accounting principles or (ii) as a reorganization under Section 368(a)
of the Code.
4.26 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.
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 Merger 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 STOCKHOLDER MEETING
The Company shall take all action necessary to properly call and
convene a special meeting of its stockholders as soon as practicable after the
date hereof to consider and vote upon this Agreement and the transactions
contemplated hereby. The Board of Directors of the Company will recommend that
the stockholders of the Company approve this Agreement and the transactions
contemplated hereby, provided that the Board of Directors of the Company may
fail to make such recommendation, or withdraw, modify or change any such
recommendation, if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
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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 the Company shall thereafter promptly mail the Proxy Statement
to its stockholders. 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 Merger). 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 stockholders 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 Subsidiaries to any Governmental Entity
in connection with the transactions contemplated by this Agreement and the Bank
Merger Agreement.
(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 Agreement.
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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 stockholders,
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) Each of the Company and PHFG shall hold all information
furnished by or on behalf of the other party or any of such party's Subsidiaries
or representatives pursuant to Section 5.4(a) in confidence to the extent
required by, and in accordance with, the Confidentiality Agreement.
(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
Company and the Company Subsidiaries shall carry on their respective businesses
in the ordinary course consistent with past practice. The
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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. 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, other than (i)
quarterly cash dividends at a rate per share of Company Common Stock
not in excess of $.16 per share and with record and payment dates
consistent with past practice, provided that the declaration of the
last quarterly dividend by the Company prior to the Effective Time and
the payment thereof shall be coordinated with, and subject to the
approval of, PHFG so as to preclude any duplication of dividend benefit
and be consistent with the condition set forth in Section 6.3(f) hereof
(it being the intention of the parties that the stockholders of the
Company receive dividends for any particular quarter on either the
Company Common Stock or the PHFG Common Stock but not both), and (ii)
dividends paid by a Company Subsidiary on its capital stock to the
Company;
(ii) issue any shares of its capital stock, other than
pursuant to (i) Company Options outstanding as of the date hereof
pursuant to the Company Stock Option Plan, as Previously Disclosed
pursuant to Section 3.1 hereof, and (ii) the Company Stock Option
Agreement; issue, grant, modify or authorize any Rights, other than
pursuant to the Company Stock Option Agreement; purchase any shares of
Company Common Stock; or effect any recapitalization, reclassification,
stock dividend, stock split or like change in capitalization;
(iii) amend its Articles of Organization 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
or permit any such Lien to exist; or waive or release any material
right or cancel or compromise any material debt or claim;
(iv) except as Previously Disclosed by the Company to
PHFG, 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 accelerate the payment of any employee benefit or incentive to,
or provide any 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;
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(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 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, 1997, 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, 1997, 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 $500,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(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;
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(xii) enter into any futures contract, option contract,
interest rate caps, interest rate floors, interest rate exchange
agreement or other derivative instruments, other than for purposes of
hedging interest rate risk on U.S. dollar-denominated securities and
other financial instruments 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;
(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 its Significant 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, provided, however, that PHFG shall advise the Company of any proposed
material acquisitions to be made by PHFG. 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 $.15 per share of
PHFG Common Stock, provided, 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;
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(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,
Merger Sub or the PHFG Massachusetts 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 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
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equity securities of the Company or a Company Subsidiary, provided, however,
that any sale or disposition of an inactive subsidiary shall not constitute an
"Acquisition Transaction."
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.
5.8 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time, PHFG (the "Indemnifying
Party") shall indemnify and hold harmless 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, 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 and the transactions contemplated
hereby and thereby, to the fullest extent which such Indemnified Parties would
be entitled under the Bylaws of the Company, the Articles of Incorporation and
Bylaws or equivalent documents of any Company Subsidiary, as applicable, or any
agreement, arrangement or understanding which has been Previously Disclosed by
the Company pursuant to Section 3.15(a)(iii) hereof, in each case as in effect
on the date hereof. Without limiting the foregoing, PHFG also agrees that
limitations on liability existing in favor of the Indemnified Parties as
provided in the Articles of Organization, Bylaws or similar governing documents
of the Company and its Subsidiaries as in effect on the date hereof with respect
to matters occurring prior to the Effective Time shall survive the Merger and
the Bank Merger and shall continue in full force and effect from and after the
Effective Time.
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(b) Any Indemnified Party wishing to claim indemnification under
Section 5.8(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
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.
(c) 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 six 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.
(d) 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.
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(e) 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 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, as well as the severance plan referred to in paragraph (c) below, 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 with the same amount of service credit for purposes of such PHFG
Employee Plans as such employees.
(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. For a period of six months following the Effective Time, PHFG
shall notify all employees of the Company and its Subsidiaries whose employment
was terminated other than for cause, disability or retirement at or following
the Effective Time, and who so wishes to continue to be so notified, of
opportunities for positions with PHFG or a PHFG Subsidiary for which PHFG
reasonably believes such persons are qualified and to consider any application
for such positions submitted by such persons, provided, however, that any
decision to offer employment to any such person shall be made in the sole
discretion of PHFG.
(c) An employee of the Company or a Company Subsidiary (other than
an employee who is party to an employment agreement or a severance agreement)
whose employment 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,
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the PHFG employee severance plan applicable to the Merger, a copy of which the
Company acknowledges has been provided to it by PHFG.
(d) Prior to the Effective Time, the Company shall use its
reasonable best efforts to negotiate an amendment or waiver to the outstanding
loan to the Company ESOP which permits the Merger and the other transactions
contemplated hereby and is reasonably acceptable to PHFG, and in the event that
the Company is unable to negotiate such an amendment or waiver, the Company
agrees to arrange for alternative financing provided by a third party or the
Company on substantially the same terms as the existing loan to the Company
ESOP, it being the intention of the parties that the foregoing actions be
effective at or prior to the Effective Time.
(e) PHFG agrees that those employees of the Company or any Company
Subsidiary who are participants in the Company ESOP as of the date hereof (and
their beneficiaries to the extent relevant) shall be the only persons to be
allocated shares which are released from pledge as a result of payments of
principal on the loan to the Company ESOP which are due for payment in 1998. The
Company may amend the Company ESOP to provide that, in the event that the
Effective Time occurs prior to December 31, 1998, a participant who is not
actively employed on December 31, 1998 may nonetheless share in such allocation
if such participant was actively employed as of the Effective Time. PHFG agrees
that it will not amend, merge or terminate the Company ESOP with an effective
date earlier than the later of the Effective Time and January 1, 1999.
(f) PHFG agrees to use its reasonable best efforts to negotiate
and enter into an employment agreement as of the Effective Time with F. William
Marshall, Jr. which is mutually agreeable to the parties and pursuant to which
PHFG agrees to employ Mr. Marshall as an Executive Vice President and Vice
Chairman of its Senior Management Committee until December 31, 2001 with
compensation and benefits which in the aggregate are substantially comparable to
the compensation and benefits which Mr. Marshall receives from the Company as of
the date hereof, except as otherwise may be agreed by the parties.
(g) Following the Effective Time, PHFG shall, and shall cause its
appropriate Subsidiaries to, honor in accordance with their terms the employment
agreements and severance agreements which have been Previously Disclosed by the
Company to PHFG as of the date hereof, except to the extent that any such
agreements may be superseded or terminated in accordance with their terms at or
following the Effective Time.
(h) Except as otherwise provided herein, including without
limitation paragraph (e) above, nothing in this Section 5.9 shall be interpreted
as preventing PHFG or its Subsidiaries from amending, modifying, merging 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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5.10 DIRECTORS
PHFG agrees to take all action necessary to appoint or elect, effective
as of the Effective Time, one non-employee director of the Company as of the
date hereof who is designated by the Company and who both meets the director
qualification requirements set forth in PHFG's Bylaws and is otherwise
acceptable to PHFG as a director of PHFG. Such person shall serve until the
first annual meeting of stockholders of PHFG following the Effective Time and
until his or her successor is elected and qualified. Subject to compliance with
the director qualification requirements set forth in PHFG's Bylaws and the
fiduciary duties of the Board of Directors of PHFG, PHFG shall include such
person on the list of nominees for director presented by the Board of Directors
of PHFG and for which said Board shall solicit proxies at the first annual
meeting of stockholders of PHFG following the Effective Time, which person shall
be nominated for a three-year term.
5.11 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.
5.12 THE BANK MERGER; CONVERSION
(a) PHFG and the Company shall take all action necessary and
appropriate, including causing the entering into of an appropriate merger
agreement (the "Bank Merger Agreement"), to cause the Company Massachusetts Bank
to merge with and into the PHFG Massachusetts Bank (the "Bank Merger") in
accordance with applicable laws and regulations and the terms of the Bank Merger
Agreement as soon as practicable after consummation of the Merger. The Bank
Merger Agreement shall provide that it is the intention of the PHFG
Massachusetts Bank, as the surviving institution in the Bank Merger, to conduct
business in the market areas in which the Company Massachusetts Bank previously
conducted business under the trade name "SIS Bank" to the extent permitted by,
and subject to the terms of, the Interagency Statement on Branch Names, dated
May 1, 1998, issued by the FRB, the FDIC, the OCC and the OTS, and any other
applicable laws, regulations and policy statements.
(b) If requested by PHFG prior to the Effective Time, the Company
shall cause the Company Connecticut Bank to take all action which is necessary
and appropriate to convert to a national bank or a federally-chartered savings
bank regulated by the OCC or the OTS, respectively, as soon as practicable after
such request, provided that any such conversion shall not be a condition to
consummation of the Merger and the Bank Merger and such transactions shall not
be delayed in order to facilitate any such conversion.
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5.13 COMPLIANCE WITH CONNECTICUT TRANSFER ACT
The Company shall take all action which is necessary and appropriate to
ensure its full compliance under the Connecticut Transfer Act, including but not
necessarily limited to undertaking and completing the necessary environmental
assessments on each parcel of real estate in Connecticut directly or indirectly
owned by the Company immediately prior to the Effective Time.
5.14 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
meeting(s) of stockholders to be called pursuant to Section 5.2 hereof, a
written agreement in the forms previously agreed to by PHFG and the Company.
5.15 CHARITABLE FOUNDATION
Promptly after the Effective Time, and subject to the receipt of any
required approval or consent of a Governmental Entity, PHFG or the PHFG
Massachusetts Bank shall (i) establish a charitable foundation that will qualify
as an exempt organization under Section 501(c)(3) of the Code (the "Foundation")
and (ii) contribute $3.0 million to the Foundation on its behalf. The Foundation
shall be dedicated to the promotion of charitable purposes, including community
development, grants and donations to support housing assistance and affordable
housing programs, not-for-profit community groups and other similar types of
organizations or civic minded projects, primarily in the market areas served by
the Company Massachusetts Bank prior to consummation of the Bank Merger. The
Board of Directors of the Foundation shall be appointed annually by PHFG or the
PHFG Massachusetts Bank, as applicable, and shall be responsible for
establishing the policies of the Foundation with respect to grants or donations,
consistent with the stated purposes of the Foundation. The initial directors of
the Foundation shall consist of non-employee directors of the Company as of the
date hereof who remain such until the Effective Time and who are so willing to
serve and such other person or persons as may be selected by PHFG or the PHFG
Massachusetts Bank, as applicable.
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5.16 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.
5.17 FAILURE TO FULFILL CONDITIONS
In the event that either of the parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated hereby cannot be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party or parties. Each party will
promptly inform the other party or parties of any facts applicable to it that
would be likely to prevent or materially delay approval of the Merger or the
Bank Merger by any Governmental Entity or third party or which would otherwise
prevent or materially delay completion of the Merger or the Bank Merger.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT - PHFG, MERGER SUB AND THE COMPANY
The respective obligations of PHFG, Merger Sub and the Company to
effect the transactions contemplated by this Agreement shall be subject to
satisfaction of the following conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the Merger shall have been duly
and validly taken by PHFG and the Company, including approval by the requisite
vote of the stockholders of the Company of this Agreement, and all corporate and
stockholder action necessary to authorize the execution and delivery of the Bank
Merger Agreement and consummation of the transactions contemplated thereby shall
have been duly and validly taken by the PHFG Massachusetts Bank and the Company
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 Merger shall have been received and all statutory
waiting periods in respect thereof shall have expired, provided, however, that
no approval, consent or waiver referred
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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 the 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.
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 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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(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 of Elias,
Matz, Tiernan & Herrick L.L.P., (which may rely, to the extent reasonable, on
the opinions of Carol L. Mitchell, Esq. and/or local counsel reasonably
acceptable to the Company), dated the date of the Closing, that addresses the
matters set forth in Exhibit A hereto.
(e) The Company shall have received the written opinion of
Sullivan & Worcester LLP (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 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 the 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 AND MERGER SUB
The obligations of PHFG and Merger Sub to effect the transactions
contemplated by this Agreement shall be subject to satisfaction of the following
conditions at or prior to the Effective Time unless waived by 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)
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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 of Sullivan &
Worcester LLP that addresses the matters set forth in Exhibit B 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 the Bank Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code and that, accordingly, for federal income tax
purposes no gain or loss will be recognized by PHFG, the Company, the PHFG
Massachusetts Bank or the Company Massachusetts Bank (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 the Bank Merger).
(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, certain additional information
provided in writing to KPMG Peat Marwick LLP by the Company's independent public
accountants, PricewaterhouseCoopers LLP, 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 shall have received from the
Affiliates of the Company the agreements referred to in Section 5.14(b) hereof
to the extent necessary to ensure in the reasonable judgment of PHFG that the
Merger shall be accounted for in such manner.
(g) 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 and the Bank
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
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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.
(h) 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 the Bank Merger.
(i) 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 the Bank Merger;
(d) at any time, by any party hereto in writing, if the
stockholders of the Company do not approve this Agreement after a vote taken
thereon at a meeting duly called for such purpose (including any adjournment
thereof);
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(e) by either the Company or PHFG in writing if the Effective Time
has not occurred by the close of business on April 15, 1999, 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;
(f) by the Board of Directors of PHFG if the Board of Directors of
the Company shall have withdrawn, modified or changed in a manner adverse to
PHFG its recommendation of this Agreement and the transactions contemplated
hereby pursuant to Section 5.2 hereof;
(g) 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
five-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 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 by the 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(g), it shall give
written notice to PHFG (provided that such notice of election to terminate may
be withdrawn at any time within the aforementioned five-day period). During the
five-day period commencing with its receipt of such notice, 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 (as then in effect) by (B) the Average
Closing Price and (y) a number (rounded to the nearest one one-thousandth)
obtained by dividing (A) the product of the Index Ratio and the Exchange Ratio
(as then in effect) by (B) the PHFG Ratio. If PHFG so elects within such
five-day period, it shall give prompt written notice to the Company of such
election and the revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 7.1(g) 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(g), 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
56
<PAGE> 61
Market (as reported in THE WALL STREET JOURNAL, or if not reported
therein, in another authoritative source) during the period of 20
consecutive 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 Merger, without regard to any requisite waiting
period in respect thereof.
"Final Index Price" shall mean the average of the Index Prices
for the 20 consecutive trading days ending on the trading day prior to
the Determination Date.
"Index Group" shall mean the 20 financial institutions 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 20 financial institutions and
the weights attributed to them are as follows:
Company Weighting
------- ---------
Arrow Financial Corp. 0.8%
Banknorth Group, Inc. 2.8
BSB Bancorp, Inc. 1.2
CCB Financial Corporation 10.3
Chittenden Corporation 2.3
City National Corp. 8.3
Community Bank System, Inc. 1.2
Evergreen Bancorp 1.1
FirstMerit Corporation 8.5
HUBCO, Inc. 3.7
Keystone Financial, Inc. 8.4
NBT Bancorp, Inc. 1.3
57
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Company Weighting
------- ---------
North Fork Bancorporation, Inc. 17.1
One Valley Bancorp Inc. 5.3
Sovereign Bancorp, Inc. 10.7
UST Corp. 3.7
Vermont Financial Services 1.7
Washington Trust Bancorp 1.2
Webster Financial Corporation 4.2
Westamerica Bancorporation 6.2
-----
100.0%
=====
"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, 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 such 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 or PHFG declares or effects
a stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the Starting Date 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(g).
For purposes of this Section 7.1, a termination of this Agreement on
behalf of PHFG also shall be deemed to be a termination on behalf of Merger Sub.
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
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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 2.7, 2.9, 5.8, 5.9, 5.10 and 5.15
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 stockholder or former stockholder 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 stockholders of 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 the stockholders of 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
stockholders without the approval of the stockholders 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.
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ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES
Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel,
provided that 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.
8.2 ENTIRE AGREEMENT
This Agreement (including the agreements to be executed and delivered
pursuant hereto), the Company Stock Option Agreement and the Confidentiality
Agreement contain the entire agreement among the parties with respect to the
transactions contemplated hereby and supersede 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 Sections 5.8 and 5.10 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:
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<PAGE> 65
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:
SIS Bancorp, Inc.
1441 Main Street
Springfield, Massachusetts 01102
Attn: F. William Marshall, Jr.
President and Chief Executive Officer
Fax: 413-748-8464
With a required copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Stephen J. Coukos, Esq.
Fax: 617-338-2880
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 acquisition
of the Company set forth herein (including without limitation by converting the
PHFG Massachusetts Bank to a national bank regulated by the OCC), 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) 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
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<PAGE> 66
modification and (iii) such modification will not materially delay or jeopardize
receipt of any required regulatory approvals or any other condition to the
obligations of 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.
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<PAGE> 67
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.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
Attest:
/s/ Carol L. Mitchell By: /s/ William J. Ryan
- ------------------------------------- ---------------------------------
Name: Carol L. Mitchell Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President and
General Counsel and Secretary
PEOPLES HERITAGE MERGER CORP.
Attest:
/s/ Carol L. Mitchell By: /s/ William J. Ryan
- ------------------------------------- ---------------------------------
Name: Carol L. Mitchell Name: William J. Ryan
Title: Executive Vice President and Title: Chairman, President and
Secretary Chief Executive Officer
SIS BANCORP, INC.
Attest:
/s/ Michael E. Tucker By: /s/ F. William Marshall, Jr.
- ------------------------------------- ---------------------------------
Name: Michael E. Tucker Name: F. William Marshall, Jr.
Title: Clerk Title: President and Chief
Executive Officer
63
<PAGE> 68
EXHIBIT A
[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 PHFG consists of 200,000,000
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 Merger Sub and, assuming due authorization, execution and delivery
by the Company, constitutes a valid and binding obligation of PHFG and Merger
Sub enforceable in accordance with its terms, except that the enforceability of
the obligations of PHFG and Merger Sub may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the rights of
creditors, (ii) equitable principles limiting the right to obtain specific
performance or other similar equitable relief and (iii) considerations of public
policy, and except that certain remedies may not be available in the case of a
nonmaterial breach of the Agreement.
(d) The Bank Merger Agreement has been duly authorized, executed
and delivered by the PHFG Massachusetts Bank and, assuming due authorization,
execution and delivery by the Company Massachusetts Bank, constitutes a valid
and binding obligation of the PHFG Massachusetts Bank enforceable in accordance
with its terms, except that enforceability of the obligations of the PHFG
Massachusetts Bank may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors, (ii) equitable
principles limiting the right to obtain specific performance or other similar
equitable relief and (iii) considerations of public policy, and except that
certain remedies may not be available in the case of a nonmaterial breach of the
Bank Merger Agreement.
(e) All corporate and shareholder actions required to be taken by
PHFG and Merger Sub by law and its respective Articles of Incorporation and
Bylaws to authorize the execution and delivery of the Agreement and consummation
of the Merger have been taken,
<PAGE> 69
and all corporate and shareholder actions required to be taken by the PHFG
Massachusetts Bank by law and its Articles of Incorporation and Bylaws to
authorize the execution and delivery of the Bank Merger Agreement and
consummation of the Bank Merger have been taken.
(f) All consents or approvals of or filings or registrations with
any Governmental Entity or, to such counsel's knowledge, any third party which
are necessary to be obtained by (i) PHFG to permit the execution, delivery and
performance of the Agreement and consummation of the Merger have been obtained
and (ii) PHFG Massachusetts Bank to permit the execution, delivery and
performance of the Bank Merger Agreement and consummation of the Bank Merger
have been obtained.
(g) The shares of 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.
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.
2
<PAGE> 70
EXHIBIT B
[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
25,000,000 shares of Company Common Stock, of which _______ shares are issued
and outstanding of record as of the date hereof, and 5,000,000 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
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable and, to the knowledge of such counsel, are directly or indirectly
owned by the Company free and clear of all liens, claims, encumbrances, charges,
restrictions or rights of third parties of any kind whatsoever. To such
counsel's knowledge, except for the Company Stock Option Agreement or as
otherwise Previously Disclosed under the 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
and Merger Sub, constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except that the enforceability of the
obligations of the Company may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors,
(ii) equitable principles limiting the right to obtain specific performance or
other similar equitable relief and (iii) considerations of public policy, and
except that certain remedies may not be available in the case of a nonmaterial
breach of the Agreement.
(d) The Bank Merger Agreement has been duly authorized, executed
and delivered by the Company Massachusetts Bank and, assuming due authorization,
execution and delivery by the PHFG Massachusetts Bank, constitutes a valid and
binding obligation of the Company Massachusetts Bank enforceable in accordance
with its terms, except that enforceability of the obligations of the Company
Massachusetts Bank may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors, (ii) equitable
principles limiting the right to obtain specific performance or other similar
equitable relief and (iii) considerations of public policy, and except that
certain remedies may not be available in the case of a nonmaterial breach of the
Bank Merger Agreement.
<PAGE> 71
(e) All corporate and shareholder actions required to be taken by
the Company by law and its Articles of Organization 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
Company Massachusetts Bank by law and its Articles of Organization and Bylaws to
authorize the execution and delivery of the Bank Merger Agreement and
consummation of the Bank Merger have been taken.
(f) All consents or approvals of or filings or registrations with
any Governmental Entity or, to such counsel's knowledge, any third party which
are necessary to be obtained by (i) the Company to permit the execution,
delivery and performance of the Agreement and consummation of the Merger have
been obtained and (ii) the Company Massachusetts Bank to permit the execution,
delivery and performance of the Bank Merger Agreement and consummation of the
Bank Merger have been obtained.
(g) To such counsel's knowledge, and except as Previously
Disclosed or as disclosed in the Company's Securities Documents, there are no
material legal or governmental proceedings pending to which the Company or a
Company Subsidiary is a party or to which any property of the Company or a
Company Subsidiary is subject and no such proceedings are threatened by
governmental authorities or by others.
Such counsel also shall state that 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 certificates of
governmental officials, certificates or opinions of other counsel to the Company
or a Company Subsidiary reasonably satisfactory to PHFG and, as to matters of
fact, certificates of officers of the Company or a Company Subsidiary. The
opinion of such counsel may add other qualifications and explanations of the
basis of their opinion as may be reasonably acceptable to PHFG.
2
<PAGE> 1
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of July 20, 1998, between Peoples
Heritage Financial Group, Inc., a Maine corporation ("Grantee"), and SIS
Bancorp, Inc., a Massachusetts corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), providing for, among
other things, the merger of Issuer with and into a wholly-owned subsidiary of
Grantee (the "Merger");
WHEREAS, as a condition and an inducement to Grantee to enter into the
Merger Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined); and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 1,385,383 fully paid and nonassessable shares (the "Option Shares")
of common stock, par value $0.01 per share, of Issuer (the "Common Stock") at a
price per share equal to $44.00 (the "Option Price"); provided, however, that in
no event shall the number of shares for which this Option is exercisable exceed
19.9% of the issued and outstanding shares of Common Stock without giving effect
to any shares subject to or issued pursuant to the Option. The number of shares
of Common Stock that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), including, without limitation, pursuant to stock option or
other employee plans or as a result of the exercise of conversion rights, the
number of shares of Common Stock subject to the Option shall be increased so
that, after such event, such number equals 19.99% of the number of shares of
Common Stock then issued and outstanding without giving effect to any shares
subject to or issued pursuant to the Option. Nothing contained in this Section
l(b) or elsewhere in this Agreement shall be deemed to authorize Issuer to issue
shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided
<PAGE> 2
that the Holder shall have sent the written notice of the first exercise (as
provided in paragraph (e) of this Section 2) within 90 days following the first
Subsequent Triggering Event to occur (or such later period as provided in
Section 10). Each of the following shall be an Exercise Termination Event: (i)
the Effective Time (as defined in the Merger Agreement); (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event, except a
termination by Grantee pursuant to Section 7.1(b) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination was
non-volitional); or (iii) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a termination by Grantee pursuant to Section 7.1(b) of
the Merger Agreement (unless the breach by Issuer giving rise to such right of
termination is non-volitional), provided that if an Initial Triggering 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 Triggering Event but in no event more than 18 months
after such termination. The term "Last Triggering Event" shall mean the last
"Initial Triggering Event to expire, and the term "Holder" shall mean the holder
or holders of the Option pursuant to this Agreement. Notwithstanding anything to
the contrary contained herein, the Option may not be exercised at any time when
Grantee shall be in willful material breach of any of its covenants or
agreements contained in the Merger Agreement such that Issuer shall be entitled
to terminate the Merger Agreement pursuant to Section 7.1(b) thereof as a result
of such a willful material breach.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any Subsidiary of Issuer (an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered into
an agreement to engage in an Acquisition Transaction (as hereinafter defined)
with any person (the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations
thereunder), other than Grantee or any Subsidiary of Grantee (a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board") shall have
recommended that the shareholders of Issuer approve or accept any Acquisition
Transaction with any person other than Grantee or a Grantee Subsidiary. For
purposes of this Agreement, (a) "Acquisition Transaction" shall mean (w) a
merger or consolidation, or any similar transaction, involving Issuer or any
Issuer Subsidiary (other than mergers, consolidations or similar transactions
(i) involving solely Issuer and/or one or more wholly-owned Subsidiaries of
Issuer, provided any such transaction is not entered into in violation of the
terms of the Merger Agreement, or (ii) in which the shareholders of Issuer
immediately prior to the completion of such transaction own at least 50% of the
Common Stock of Issuer (or the resulting or surviving entity in such
transaction) immediately after completion of such transaction, provided any such
transaction is not entered into in violation of the terms of the Merger
Agreement), (x) a purchase, lease or other acquisition of all or
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<PAGE> 3
any substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary, (y) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of Issuer or any Issuer Subsidiary or (z) any
substantially similar transaction; and (b) "Subsidiary" shall have the meaning
set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person, other than Grantee or a Grantee Subsidiary, shall
have acquired beneficial ownership or the right to acquire beneficial ownership
of 10% or more of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned thereto in
Section 13(d) of the 1934 Act, and the rules and regulations thereunder);
(iii) Any person, other than Grantee or a Grantee Subsidiary, shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(iv) The Issuer Board, without having received Grantee's prior
written consent, shall have withdrawn or modified, or publicly announced its
interest to withdraw or modify in any manner adverse in any respect to Grantee,
its recommendation that the stockholders of Issuer approve the transactions
contemplated by the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, or Issuer or any Issuer Subsidiary shall have
authorized, recommended or proposed, or publicly announced its intention to
authorize, recommend or propose, an agreement to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or a Grantee Subsidiary shall
have filed with the Securities and Exchange Commission ("SEC") a registration
statement or tender offer materials with respect to a potential exchange or
tender offer that would constitute an Acquisition Transaction (or filed a
preliminary proxy statement with the SEC with respect to a potential vote by its
stockholders to approve the issuance of shares to be offered in such an exchange
offer);
(vi) After an overture is made by any person, other than Grantee or
a Grantee Subsidiary, to Issuer or its stockholders to engage in an Acquisition
Transaction, Issuer shall have breached any covenant or obligation contained in
the Merger Agreement and such breach (x) would entitle Grantee to terminate the
Merger Agreement (whether immediately or after the giving of notice or passage
of time or both) and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(vii) Any person other than Grantee or a Grantee Subsidiary shall
have filed an application or notice with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") or other federal or state bank
regulatory or antitrust authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition Transaction.
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<PAGE> 4
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in clause
(i) of subsection (b) of this Section 2, except that the percentage referred to
in clause (y) of the second sentence thereof shall be 25%;
provided, however, that, notwithstanding any other provision of this Agreement
to the contrary, a Subsequent Triggering Event shall be deemed to have occurred
in the event any of a Stock Acquisition Date, a Distribution Date or a
Triggering Event has occurred, as such terms are defined in the Rights
Agreement, dated as of January 22, 1997, between Issuer and ChaseMellon
Stockholders Services L.L.C., as Rights Agent.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event") of which it has notice, it being understood that the giving
of such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), 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 shares of Common Stock it will 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 of such
purchase (the "Closing"); provided that if prior notification to or approval of
the Federal Reserve Board or any other regulatory or antitrust agency is
required in connection with such purchase, the Holder shall promptly file the
required notice or application for approval, shall promptly notify Issuer of
such filing and shall expeditiously process the same 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. The term "business day" for purposes of this Agreement
means any day, excluding Saturdays, Sundays and any other day that is a legal
holiday in the Commonwealth of Massachusetts or a day on which banking
institutions in the Commonwealth of Massachusetts are authorized by law or
executive order to close.
(f) At a Closing, the Holder shall (i) pay to Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to the exercise
of the Option in immediately available funds by wire transfer to a bank account
designated by Issuer, and (ii) present and surrender this Agreement to Issuer at
its principal executive offices, provided
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<PAGE> 5
that the failure or refusal of the Issuer to designate such a bank account or
accept surrender of this Agreement shall not preclude the Holder from exercising
the Option.
(g) At a Closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a Closing hereunder may
be endorsed (in the sole discretion of Issuer) with a restrictive legend that
shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file at
the principal office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the reasonable opinion of counsel to
the Holder; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under paragraph (e) of this Section 2, the
tender of the applicable purchase price in immediately available funds and the
tender of a copy of this Agreement to Issuer, the Holder shall be deemed,
subject to the receipt of any necessary regulatory approvals, to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Common Stock shall not then be
actually delivered to the 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
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<PAGE> 6
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase 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 without limitation (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder and (y) in the event, under
the Bank Holding Company Act of 1956, as amended (the "BHCA"), or the Change in
Bank Control Act of 1978, as amended, or any state or other federal banking law,
prior approval of or notice to the Federal Reserve Board or to any state or
other federal regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in connection with the preparation
of such applications or notices and providing such information to the Federal
Reserve Board or such state or other federal regulatory authority as they may
require) in order to permit the Holder to exercise the Option and Issuer duly
and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the Holder
against dilution.
4. This Agreement and the Option granted hereby are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase
on the same terms and subject to the same conditions as are set forth herein in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
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, subject to the
aforementioned indemnification, if applicable, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of Option Shares purchasable upon the exercise of the
Option and the Option Price shall be subject to adjustment from time to time as
provided in this Section 5.
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(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividend, split-up, merger, recapitalization,
combination, subdivision, conversion, exchange of shares, distribution on or in
respect of the Common Stock or similar transaction, the type and number of
Option Shares shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that Grantee shall receive
upon exercise of the Option the number and class of Option Shares that Grantee
would have held immediately after such event if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable.
(b) Whenever the number of Option Shares is adjusted as provided in this
Section 5, the Option Price shall be adjusted by multiplying the Option Price by
a fraction, the numerator of which shall be equal to the number of Option Shares
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of Option Shares purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within six months (or such later period as provided in Section 10)
following such Subsequent Triggering Event (whether on its own behalf or on
behalf of any subsequent holder of this Option (or part thereof) or any of the
Option Shares issued pursuant hereto), promptly prepare, file and keep current,
with respect to the Option and the Option Shares, a registration statement under
the 1933 Act and qualify such Option and Option Shares for resale or other
disposition under applicable state securities laws, in each case in accordance
with any plan of disposition requested by Grantee. Issuer will use all
reasonable efforts to cause such registration statement promptly to become
effective and then to remain effective for such period not in excess of 180 days
from the day such registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such registrations. The Issuer shall
bear the costs of such registrations (including, but not limited to, Issuer's
attorneys' fees, printing costs and filing fees, except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto). The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of the Option or Option Shares
as provided above, Issuer is in registration with respect to an underwritten
public offering by Issuer of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering, the inclusion of the Option
and/or Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of shares represented by the
Option and/or the number of Option Shares otherwise to be covered in the
registration statement contemplated hereby may be reduced; provided, however,
that after any such required reduction the number of shares represented by the
Option and/or the number of Option Shares to be included in such offering for
the account of the Holder shall constitute at least 25% of the total number of
shares to be sold by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then Issuer shall file a
registration statement for the
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<PAGE> 8
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur. Each such Holder shall provide
all information reasonably requested by Issuer for inclusion in any such
registration statement to be filed hereunder. If requested by any such Holder in
connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in secondary offering
underwriting agreements. Upon receiving any request under this Section 6 from
any Holder, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 6, in each case
by promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall the number of registrations that
Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of this
Agreement.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of any Holder
delivered within 90 days following such occurrence (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price") equal to the
amount by which (A) the Market/Offer Price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which the Option may then
be exercised, and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 90 days following such occurrence (or such
later period as provided in Section 10), Issuer (or any successor thereto) shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the greater
of (A) the Market/Offer Price and (B) the average exercise price per share paid
by the Owner for the Option Shares so designated. The term "Market/Offer Price"
shall mean the highest of (i) the price per share of Common Stock at which a
tender offer or exchange offer therefor has been made, (ii) the price per share
of Common Stock to be paid by any person, other than Grantee or a Grantee
Subsidiary, pursuant to an agreement with Issuer of the kind described in
Section 2(b)(i), (iii) the highest closing price for shares of Common Stock
within the shorter of the period from the date of this Agreement up to the date
on which such required repurchase of the Option or Option Shares, as the case
may be, occurs or the six-month period immediately preceding the date of such
required repurchase of the Option or Option Shares, as the case may be, or (iv)
in the event of a sale of all or any substantial part of Issuer's assets or
deposits, the sum of the price paid in such sale for such assets or deposits and
the current market value of the remaining assets of Issuer as determined by a
nationally-recognized investment banking firm selected by a majority in interest
of the Holders or the Owners, as the case may be, and reasonably acceptable to
Issuer, divided by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally-recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to Issuer.
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(b) Each Holder and Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that such Holder or Owner, as
the case may be, elects to require Issuer to repurchase this Option and/or
Option Shares in accordance with the provisions of this Section 7. As promptly
as practicable, and in any event within five business days after the surrender
of the Option and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, or as a result of a
written agreement or other binding obligation with a governmental or regulatory
body or agency, from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify each Holder and/or each Owner and thereafter
deliver or cause to be delivered, from time to time, to such Holder and/or such
Owner, as appropriate, the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within two business days after the date on which Issuer is no longer
so prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, or as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in part or in full (and Issuer hereby undertakes
to use all reasonable efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), such Holder or Owner may revoke its notice of
repurchase of the Option and/or the Option Shares either in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price and/or the Option Share Repurchase Price that Issuer is
not prohibited from delivering with respect to Options or Option Shares as to
which the Holder or the Owner, as the case may be, has not revoked its
repurchase demand; and (ii) deliver, as appropriate, either (A) to the Holder, a
new Agreement evidencing the right of the Holder to purchase that number of
shares of Common Stock obtained by multiplying the number of shares of Common
Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, and/or
(B) to such Owner, a certificate for the Option Shares it is then so prohibited
from repurchasing.
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8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary, and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquiror in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or any Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision 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 any Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) Issuer in a merger or plan of exchange in which Issuer
is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of an Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the Market/Offer Price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger, share exchange 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, share
exchange 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 the person merging into Issuer or by any company
which controls or is controlled by such person, as the Holder may elect.
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(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, to the extent legally permissible,
be as similar as possible to, and in no event less advantageous to the Holder
than, the terms of the Option. The issuer of the Substitute Option also shall
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.99% 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
19.99% of the shares of Substitute Common Stock outstanding prior to exercise
but for this paragraph (e), the issuer of the Substitute Option (the "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
this paragraph (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this paragraph (e). This difference in value shall
be determined by a nationally-recognized investment banking firm selected by a
majority in interest of the Holders and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in paragraph
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option Issuer shall
repurchase the Substitute Option from the Substitute Option Holder at a price
(the "Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised, and at the
request of each owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares
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<PAGE> 12
at a price (the "Substitute Share Repurchase Price") equal to the greater of (A)
the Highest Closing Price and (B) the average exercise price per share paid by
the Substitute Share Owner for the Substitute Shares so designated, multiplied
by the number of Substitute Shares so designated. The term "Highest Closing
Price" shall mean the highest closing price for shares of Substitute Common
Stock within the six-month period immediately preceding the date the Substitute
Option Holder gives notice of the required repurchase of the Substitute Option
or the Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) Each Substitute Option Holder and Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within two business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor, or the
portion(s) thereof which the Substitute Option Issuer is not then prohibited
under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from repurchasing the Substitute
Option and/or the Substitute Shares in part or in full, the Substitute Option
Issuer following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Option Repurchase Price and/or the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within two business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that if the
Substitute Option Issuer is at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 9 prohibited under applicable law or
regulation, or as a consequence of administrative policy, or as a result of a
written agreement or other binding obligation with a governmental or regulatory
body or agency, from delivering to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price
and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use all reasonable efforts to obtain all required
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<PAGE> 13
regulatory and legal approvals as promptly as practicable in order to accomplish
such repurchase), the Substitute Option Holder and/or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition, whereupon, in the
latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing.
10. The 90-day or 6-month periods for exercise of certain rights under
Sections 2, 6, 7 and 12 shall be extended: (i) to the extent necessary to obtain
all regulatory approvals for the exercise of such rights (for so long as the
Holder, Owner, Substitute Option Holder or Substitute Share Owner, as the case
may be, is using its reasonable best efforts to obtain such regulatory
approvals), and for the expiration of all statutory waiting periods; (ii) during
the pendency of any temporary restraining order, injunction or other legal bar
to exercise of such rights; and (iii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
11. (a) Issuer hereby represents and warrants to Grantee as follows:
(i) Issuer has full corporate power and authority to execute and deliver
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 and validly authorized by the
Issuer Board and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Issuer and is a valid and legally binding obligation of Issuer, enforceable
against Issuer in accordance with its terms, except that enforcement thereof may
be limited by the receivership, conservatorship and supervisory powers of bank
regulatory agencies generally as well as bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors rights
generally and except that enforcement thereof may be subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and the availability of equitable remedies.
(ii) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this
-13-
<PAGE> 14
Agreement in accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Common Stock equal to the
maximum number of shares of Common Stock at any time and from time to time
issuable hereunder, and all such shares, upon issuance pursuant thereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights.
(b) Grantee hereby represents and warrants to Issuer that:
(i) Grantee has full corporate power and authority to execute and
deliver 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 no other corporate proceedings on the part of Grantee are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly executed and delivered by Grantee and
is a valid and legally binding obligation of Grantee.
(ii) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within six months
following such Subsequent Triggering Event; provided, however, that until the
date 15 days following the date on which the Federal Reserve Board approves an
application by Grantee under the BHCA to acquire the shares of 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 sole purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use all reasonable efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including, without limitation, applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder and
applying for listing or quotation of such shares on any exchange or quotation
system on which the Common Stock is then listed or quoted.
-14-
<PAGE> 15
14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in 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 Holder is not permitted to acquire, or Issuer or Substitute Option
Issuer, as the case may be, is not permitted to repurchase pursuant to Section 7
or Section 9, as the case may be, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer (which shall be binding on the
Substitute Option Issuer) to allow the Holder to acquire or to require Issuer or
Substitute Option Issuer, as the case may be, to repurchase such lesser number
of shares as may be permissible, without any amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of Maine, without regard to the conflict of law principles
thereof.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
19. Except as otherwise expressly provided herein, 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.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
21. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
-15-
<PAGE> 16
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
By: /s/ William J. Ryan
--------------------------------------------
Name: William J. Ryan
Title: Chairman, President and
Chief Executive Officer
SIS BANCORP, INC.
By: /s/ F. William Marshall, Jr.
--------------------------------------------
Name: F. William Marshall, Jr.
Title: President and Chief Executive Officer
-16-
<PAGE> 1
July 20, 1998
Peoples Heritage Financial Group, Inc.
P.O. Box 9540
One Portland Square
Portland, Maine 04112-9540
Ladies and Gentlemen:
Peoples Heritage Financial Group, Inc. ("PHFG") and SIS Bancorp, Inc.
(the "Company") desire to enter into an Agreement and Plan of Merger, dated as
of July 20, 1998 (the "Agreement"), pursuant to which, subject to the terms and
conditions set forth therein, (a) the Company will merge with and into a
wholly-owned subsidiary of PHFG (the "Merger") and (b) each share of Company
common stock outstanding immediately prior to the Merger (other than any
dissenting shares under Massachusetts law and certain other shares) will be
converted into the right to receive 2.25 shares of PHFG common stock, plus cash
in lieu of any fractional share interest.
In consideration of the foregoing, the undersigned hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all
meetings of shareholders of the Company called to vote for approval of the
Agreement and the Merger, to the extent that the undersigned is the owner of
record of shares of the Company's common stock as of the record date(s) for such
meetings, so that all shares of common stock of the Company then owned by the
undersigned will be counted for the purpose of determining the presence of a
quorum at such meetings and to vote or cause to be voted all such shares in
favor of approval and adoption of the Agreement and the transactions
contemplated thereby (including any amendments or modifications of the terms
thereof approved by the Board of Directors of the Company);
(b) Agrees not to vote or execute any written consent to
rescind or amend in any manner any prior vote or written consent, as a
shareholder of the Company, to approve or adopt the Agreement;
(c) Agrees not to offer, sell, transfer, pledge or otherwise
dispose of any shares of common stock of PHFG received in the Merger, except (i)
at such time as a registration statement under the Securities Act of 1933, as
amended ("Securities Act") covering sales of such PHFG common stock is effective
and a prospectus is made available under the Securities Act, (ii) within the
limits, and in accordance with the applicable provisions of, Rule 145(d) under
the Securities Act, or (iii) in a transaction which, in the opinion of counsel
satisfactory to PHFG or as described in a "no-action" or interpretive letter
from the staff of the Securities and Exchange Commission ("SEC"), is not
required to be registered
<PAGE> 2
Peoples Heritage Financial Group, Inc.
July 20, 1998
Page 2
under the Securities Act; and acknowledges and agrees that PHFG is under no
obligation to register the sale, transfer or other disposition of PHFG common
stock by the undersigned or on behalf of the undersigned, or to take any other
action necessary to make an exemption from registration available;
(d) Notwithstanding the foregoing, agrees not to sell, or in
any other way reduce the risk of the undersigned relative to, any shares of
common stock of the Company or of common stock of PHFG, during the period
commencing thirty days prior to the effective date of the Merger and ending on
the date on which financial results covering at least thirty days of post-Merger
combined operations of PHFG and the Company have been published within the
meaning of Topic 2-E of the Staff Accounting Bulletin Series of the SEC,
provided, however, that excluded from the foregoing undertaking shall be such
sales, pledges, transfers or other dispositions of shares of Company common
stock or shares of PHFG common stock which, in PHFG's sole judgment (after
consulting with its independent public accountants), are individually and in the
aggregate de minimis within the meaning of Topic 2-E of the Staff Accounting
Bulletin Series of the SEC;
(e) Agrees that neither the Company nor PHFG shall be bound
by any attempted sale or other transfer of any shares of Company common stock or
PHFG common stock, respectively, and the Company's and PHFG's transfer agents
shall be given appropriate stop transfer orders and shall not be required to
register any such attempted sale or other transfer, unless the sale has been
effected in compliance with the terms of this Letter Agreement; and further
agrees that the certificate representing shares of PHFG common stock owned by
the undersigned may be endorsed with a restrictive legend consistent with the
terms of this Letter Agreement;
(f) Acknowledges and agrees that the provisions of
subparagraphs (c), (d) and (e) hereof also apply to shares of PHFG common stock
and Company common stock owned by (i) his or her spouse, (ii) any of his or her
relatives or relatives of his or her spouse occupying his or her home, (iii) any
trust or estate in which he or she, his or her spouse, or any such relative owns
at least a 10% beneficial interest or of which any of them serves as trustee,
executor or in any similar capacity and (iv) any corporation or other
organization in which the undersigned, any affiliate of the undersigned, his or
her spouse, or any such relative owns at least 10% of any class of equity
securities or of the equity interest;
(g) Represents that the undersigned has no plan or intention
to sell, exchange, or otherwise dispose of any shares of common stock of PHFG
prior to expiration of the time period referred to in paragraph (d) hereof; and
<PAGE> 3
Peoples Heritage Financial Group, Inc.
July 20, 1998
Page 3
(h) Represents that the undersigned has the capacity to
enter into this Letter Agreement and that it is a valid and binding obligation
enforceable against the undersigned in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights and general
equitable principles.
-------------------------
It is understood and agreed that the provisions of subparagraphs (a) and
(b) of this Letter Agreement relate solely to the capacity of the undersigned as
a shareholder or other beneficial owner of shares of Company common stock and is
not in any way intended to affect the exercise by the undersigned of the
undersigned's responsibilities as a director or officer of the Company. It is
further understood and agreed that such subparagraphs of this Letter Agreement
are not in any way intended to affect the exercise by the undersigned of any
fiduciary responsibility which the undersigned may have in respect of any shares
of Company common stock held by the undersigned as of the date hereof.
-------------------------
This Letter Agreement may be executed in two or more counterparts, each
of which shall be deemed to constitute an original, but all of which together
shall constitute one and the same Letter Agreement.
-------------------------
This Letter Agreement shall terminate concurrently with any termination
of the Agreement in accordance with its terms.
-------------------------
The undersigned intends to be legally bound hereby.
Sincerely,
<PAGE> 1
July 20 1998
Peoples Heritage Financial Group, Inc.
P.O. Box 9540
One Portland Square
Portland, Maine 04112-9540
Ladies and Gentlemen:
Peoples Heritage Financial Group, Inc. ("PHFG") and SIS Bancorp, Inc.
(the "Company") desire to enter into an Agreement and Plan of Merger, dated as
of July 20, 1998 (the "Agreement"), pursuant to which, subject to the terms and
conditions set forth therein, (a) the Company will merge with and into a
wholly-owned subsidiary of PHFG (the "Merger") and (b) each share of Company
common stock outstanding immediately prior to the Merger (other than any
dissenting shares under Massachusetts law and certain other shares) will be
converted into the right to receive 2.25 shares of PHFG common stock, plus cash
in lieu of any fractional share interest.
In consideration of the foregoing, the undersigned hereby irrevocably:
(a) Agrees not to sell, or in any other way reduce the risk
of the undersigned relative to, any shares of common stock of the Company or of
common stock of PHFG, during the period commencing thirty days prior to the
effective date of the Merger and ending on the date on which financial results
covering at least thirty days of post-Merger combined operations of PHFG and the
Company have been published within the meaning of Topic 2-E of the Staff
Accounting Bulletin Series of the Securities and Exchange Commission ("SEC"),
provided, however, that excluded from the foregoing undertaking shall be such
sales, pledges, transfers or other dispositions of shares of Company common
stock or shares of PHFG common stock which, in PHFG's sole judgment (after
consulting with its independent public accountants), are individually and in the
aggregate de minimis within the meaning of Topic 2-E of the Staff Accounting
Bulletin Series of the SEC;
(b) Agrees that neither the Company nor PHFG shall be bound
by any attempted sale or other transfer of any shares of Company common stock or
PHFG common stock, respectively, and the Company's and PHFG's transfer agents
shall be given appropriate stop transfer orders and shall not be required to
register any such attempted sale or other transfer, unless the sale has been
effected in compliance with the terms of this Letter Agreement;
(c) Acknowledges and agrees that the provisions of
subparagraphs (a) and (b) hereof apply to shares of PHFG common stock and
Company common stock owned by
<PAGE> 2
Peoples Heritage Financial Group, Inc.
July 20, 1998
Page 2
(i) his or her spouse, (ii) any of his or her relatives or relatives of his or
her spouse occupying his or her home, (iii) any trust or estate in which he or
she, his or her spouse, or any such relative owns at least a 10% beneficial
interest or of which any of them serves as trustee, executor or in any similar
capacity and (iv) any corporation or other organization in which the
undersigned, any affiliate of the undersigned, his or her spouse, or any such
relative owns at least 10% of any class of equity securities or of the equity
interest;
(d) Represents that the undersigned has no plan or intention
to sell, exchange, or otherwise dispose of any shares of common stock of PHFG
prior to expiration of the time period referred to in paragraph (a) hereof; and
(e) Represents that the undersigned has the capacity to
enter into this Letter Agreement and that it is a valid and binding obligation
enforceable against the undersigned in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights and general
equitable principles.
-------------------------
This Letter Agreement may be executed in two or more counterparts, each
of which shall be deemed to constitute an original, but all of which together
shall constitute one and the same Letter Agreement.
-------------------------
This Letter Agreement shall terminate concurrently with any termination
of the Agreement in accordance with its terms.
-------------------------
The undersigned intends to be legally bound hereby.
Sincerely,
<PAGE> 1
Exhibit 99.4
AMENDMENT
TO
RIGHTS AGREEMENT
Amendment, dated as of July 20, 1998 (the "Amendment"), to the Rights
Agreement (the "Rights Agreement"), dated as of January 22, 1997, between SIS
Bancorp, Inc., a Massachusetts corporation (the "Company"), and ChaseMellon
Shareholder Services L.L.C., as Rights Agent (the "Rights Agent").
WITNESSETH:
WHEREAS, pursuant to Section 26 of the Rights Agreement, the Company may
prior to any Distribution Date (as defined in the Rights Agreement) supplement
or amend the Rights Agreement without the approval of any holders of
certificates representing the common stock of the Company; and
WHEREAS, the Company now desires to amend the Rights Agreement in the
manner set forth in this Amendment, and pursuant to Section 26 of the Rights
Agreement, the Company hereby directs that the Rights Agreement should be
amended as set forth in this Amendment;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
1. AMENDMENTS TO SECTION 1.
(a) Section 1 of the Rights Agreement is hereby amended by inserting
the following definitions in the appropriate alphabetical order:
"Merger" shall have the meaning set forth in the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger, dated
as of July 20, 1998, among the Company, PHFG and Peoples Heritage Merger
Corp., as may be amended from time to time.
"PHFG" shall mean Peoples Heritage Financial Group, Inc.
"Option Agreement" shall mean the Option Agreement, dated as of July
20, 1998, between the Company and PHFG, as may be amended from time to
time.
(b) The definition of "Acquiring Person" in Section 1 of the Rights
Agreement is hereby amended by inserting the following sentence at the end
thereof:
<PAGE> 2
"Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, none of PHFG, any Subsidiary of PHFG or any
other Person shall be deemed to be an Acquiring Person by virtue of
the Merger Agreement and the Option Agreement as a result of any of
(i) the execution and delivery of the Merger Agreement and the Option
Agreement, (ii) the consummation of the Merger and (iii) the
consummation of the other transactions contemplated in the Merger
Agreement and the Option Agreement.
2. AMENDMENT TO SECTION 3(a). Section 3(a) of the Rights Agreement is
hereby amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred as a result of
any of (i) the execution and delivery of the Merger Agreement and the
Option Agreement, (ii) the consummation of the Merger and (iii) the
consummation of the other transactions contemplated in the Merger
Agreement and the Option Agreement.
3. AMENDMENT TO SECTION 7(a). Section 7(a) of the Rights Agreement is
hereby amended and restated in its entirety as follows:
"(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except
as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section
11(a)(iii) and Section 23(a) hereof) in whole or in part at any time
after the Distribution Date upon surrender of the Rights Certificate,
with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the
principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with
respect to the total number of one one-hundredths of a share (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest
of (i) the Final Expiration Date, (ii) the time at which the Rights
are redeemed as provided in Section 23 hereof or exchanged as provided
in Section 29 hereof, (iii) the time at which the Rights expire
pursuant to Section 13(d) hereof or (iv) the Effective Time of the
Merger (as such terms are defined in the Merger Agreement) (the
earliest of (i), (ii), (iii) or (iv) being herein referred to as the
"EXPIRATION DATE")."
2
<PAGE> 3
4. AMENDMENT TO SECTION 13. Section 13 of the Rights Agreement is hereby
amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Agreement to the contrary, (i) the
execution and delivery of the Merger Agreement and the Option
Agreement, (ii) the consummation of the Merger and (iii) the
consummation of the other transactions contemplated in the Merger
Agreement and the Option Agreement shall not be deemed to be a Section
13 Event and shall not cause the Rights to be adjusted or exercisable
in accordance with, or any other action to be taken or obligation to
arise pursuant to, this Section 13."
5. This Amendment shall be deemed effective as of the date first above
written, as if executed on such date. Except as expressly set forth herein, this
Amendment shall not by implication or otherwise alter, modify, amend or in any
way affect any of the terms, conditions, obligations, covenants or agreements
contained in the Rights Agreement, all of which are ratified and affirmed in all
respects and shall continue in full force and effect and shall be otherwise
unaffected.
6. GOVERNING LAW. This Amendment shall be deemed to be a contract made
under the laws of the Commonwealth of Massachusetts and for all purposes shall
be governed by and construed in accordance with the laws of such Commonwealth
applicable to contracts to be made and performed entirely within such
Commonwealth.
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original, and
all of which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as a sealed instrument as of the day and year first above written.
Attest: SIS BANCORP, INC.
/s/ Michael E. Tucker By: /s/ F. William Marshall, Jr.
- ---------------------------------- ----------------------------------
Name: Michael E. Tucker Name: F. William Marshall, Jr.
Title: Clerk Title: President and Chief
Executive Officer
Attest: CHASE MELLON SHAREHOLDER
SERVICES, L.L.C.
/s/ Beverly A. Verrico By: /s/ James E. Hagen
- ---------------------------------- ----------------------------------
Name: Beverly A. Verrico Name: James E. Hagen
Title: Assistant Vice President Title: Vice President
3
