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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
June 1, 1999
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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
As previously reported, on June 2, 1999, Peoples Heritage Financial Group,
Inc. ("PHFG") announced that it and Banknorth Group, Inc. (the "Company") had
entered into an Agreement and Plan of Merger, dated as of June 1, 1999 (the
"Agreement"), which sets forth the terms and conditions pursuant to which the
Company would be merged with and into PHFG (the "Merger") and PHFG would change
its name to "Banknorth Group, Inc." 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 1.825 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 (i) the approval of the Agreement and the Merger by the shareholders
of PHFG and the Company, (ii) the receipt of requisite regulatory approvals,
(iii) receipt by the parties of an opinion of counsel as to certain tax
consequences of the Merger, (iv) receipt by the parties of letters from their
independent public accountants stating their opinion that the Merger shall
qualify for pooling-of-interests accounting treatment and (v) satisfaction of
certain other conditions.
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:
<TABLE>
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Exhibit 2.1 Agreement and Plan of Merger, dated as of
June 1, 1999, between PHFG and the Company
Exhibit 10.1 Stock Option Agreement, dated as of June 1,
1999, between PHFG (as grantee) and the
Company (as issuer)
Exhibit 10.2 Stock Option Agreement, dated as of June 1,
1999, between PHFG (as issuer) and the Company
(as grantee)
Exhibit 10.3 Form of letter agreement between affiliates of
the Company and PHFG
Exhibit 10.4 Form of letter agreement between affiliates of
PHFG and PHFG
</TABLE>
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<TABLE>
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Exhibit 99.1 Press Release, dated June 2, 1999(1)
Exhibit 99.2 Analysts Presentation(1)
Exhibit 99.3 Amendment, dated as of June 1, 1999, to the
Rights Agreement, dated as of November 27, 1990
and amended and restated as of September 4, 1998,
between the Company and Registrar and Transfer
Company, as Rights Agent.
Exhibit 99.4 Amendment, dated as of June 1, 1999, to the
Rights Agreement, dated as of September 12, 1989,
between PHFG and American Stock Transfer & Trust
Company, as Rights Agent
</TABLE>
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(1) Previously filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
By: /s/ Peter J. Verrill
-----------------------------------------
Name: Peter J. Verrill
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
Date: June 7, 1999
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
PEOPLES HERITAGE FINANCIAL GROUP, INC.
AND
BANKNORTH GROUP, INC.
DATED AS OF JUNE 1, 1999
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS.......................................................1
ARTICLE II THE MERGER.......................................................8
2.1 The Merger.......................................................8
2.2 Effective Time; Closing..........................................9
2.3 Treatment of Capital Stock......................................10
2.4 Shareholder Rights; Stock Transfers.............................10
2.5 Fractional Shares.............................................. 10
2.6 Exchange Procedures.............................................11
2.7 Anti-Dilution Provisions........................................12
2.8 Options........................................................ 12
2.9 Additional Actions............................................. 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 13
3.1 Capital Structure...............................................13
3.2 Organization, Standing and Authority of the Company............ 14
3.3 Ownership of the Company Subsidiaries.......................... 14
3.4 Organization, Standing and Authority of the Company
Subsidiaries................................................... 15
3.5 Authorized and Effective Agreement............................. 15
3.6 Securities Documents and Regulatory Reports.....................16
3.7 Financial Statements........................................... 17
3.8 Material Adverse Change........................................ 18
3.9 Environmental Matters.......................................... 18
3.10 Tax Matters.................................................... 18
3.11 Legal Proceedings.............................................. 19
3.12 Compliance with Laws........................................... 20
3.13 Certain Information............................................ 20
3.14 Employee Benefit Plans......................................... 21
3.15 Certain Contracts.............................................. 23
3.16 Brokers and Finders............................................ 23
3.17 Insurance...................................................... 23
3.18 Properties..................................................... 24
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
</TABLE>
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<TABLE>
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3.24 Required Vote; Company Rights Agreement; Antitakeover
Provisions.................................................... 26
3.25 Ownership of PHFG Common Stock................................. 26
3.26 Fairness Opinion............................................... 26
3.27 Accounting for the Merger; Reorganization...................... 27
3.28 Disclosures.................................................... 27
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............................. 28
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.................... 30
4.7 Financial Statements........................................... 30
4.8 Material Adverse Change........................................ 31
4.9 Environmental Matters.......................................... 31
4.10 Tax Matters.................................................... 32
4.11 Legal Proceedings.............................................. 32
4.12 Compliance with Laws........................................... 32
4.13 Certain Information............................................ 33
4.14 Employee Benefit Plans......................................... 33
4.15 Certain Contracts.............................................. 35
4.16 Brokers and Finders............................................ 35
4.17 Insurance...................................................... 35
4.18 Properties..................................................... 35
4.19 Labor.......................................................... 36
4.20 Loans...........................................................36
4.21 Administration of Fiduciary Accounts............................36
4.22 Derivative Transactions.........................................37
4.23 Year 2000.......................................................37
4.24 Required Vote; PHFG Rights Agreement; Antitakeover
Provisions..................................................... 37
4.25 Ownership of Company Common Stock.............................. 38
4.26 Fairness Opinion............................................... 38
4.27 Accounting for the Merger; Reorganization...................... 38
4.28 Disclosures.................................................... 38
ARTICLE V COVENANTS....................................................... 38
5.1 Reasonable Best Efforts........................................ 38
5.2 Shareholder Meetings........................................... 39
5.3 Regulatory Matters............................................. 39
</TABLE>
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<TABLE>
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5.4 Investigation and Confidentiality.............................. 40
5.5 Press Releases................................................. 40
5.6 Business of the Parties........................................ 41
5.7 Current Information............................................ 45
5.8 Indemnification; Insurance..................................... 45
5.9 Directors and Officers......................................... 47
5.10 Employee Benefit Plans and Arrangements........................ 47
5.11 Stock Exchange Listing......................................... 49
5.12 The Bank Mergers; Consolidation of Trust Operations............ 49
5.13 Affiliates; Restrictions on Resale............................. 50
5.14 Disclosure Supplements......................................... 50
5.15 Failure to Fulfill Conditions.................................. 50
ARTICLE VI CONDITIONS PRECEDENT........................................... 51
6.1 Conditions Precedent - PHFG and the Company.................... 51
6.2 Conditions Precedent - The Company............................. 52
6.3 Conditions Precedent - PHFG.................................... 53
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT............................. 54
7.1 Termination.................................................... 54
7.2 Effect of Termination.......................................... 57
7.3 Survival of Representations, Warranties and Covenants.......... 57
7.4 Waiver......................................................... 57
7.5 Amendment or Supplement........................................ 57
ARTICLE VIII MISCELLANEOUS................................................ 58
8.1 Expenses....................................................... 58
8.2 Entire Agreement............................................... 58
8.3 Assignment; Successors......................................... 58
8.4 Notices........................................................ 58
8.5 Alternative Structure.......................................... 59
8.6 Interpretation................................................. 60
8.7 Counterparts................................................... 60
8.8 Governing Law.................................................. 60
</TABLE>
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of PHFG Stock Option Agreement
Exhibit C Matters to be covered by Opinion(s) of Counsel to PHFG
Exhibit D Matters to be covered by Opinion(s) of Counsel to the Company
iii
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of June 1,
1999, between Peoples Heritage Financial Group, Inc. ("PHFG"), a Maine
corporation, and Banknorth Group, Inc. (the "Company"), a Delaware
corporation.
W I T N E S 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
shareholders to consummate the business combination transactions provided for
herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to PHFG's willingness to enter into
this Agreement, the Company is concurrently entering into a Stock Option
Agreement with PHFG (the "Company Stock Option Agreement"), in substantially the
form attached hereto as Exhibit A, pursuant to which the Company is granting to
PHFG the option to purchase shares of Company Common Stock (as defined herein)
under certain circumstances;
WHEREAS, as a condition and inducement to the Company's willingness to
enter into this Agreement, PHFG is concurrently entering into a Stock Option
Agreement with the Company (the "PHFG Stock Option Agreement"), in substantially
the form attached hereto as Exhibit B, pursuant to which PHFG is granting to the
Company the option to purchase shares of PHFG Common Stock (as defined herein)
under certain circumstances;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Bank Mergers" shall have the meaning set forth in Section 5.12 hereof.
"Bank Merger Agreements" shall have the meaning set forth in Section 5.12
hereof.
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"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"BIF" means the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Certificate of Merger" shall have the meaning set forth in Section 2.2
hereof.
"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, or any
successor thereto.
"Company Banks" shall mean the Company Massachusetts Bank, the Company
New Hampshire Bank, the Company New York Bank, the Company Vermont Banks and
the Company Trust Company.
"Company Capital Securities" shall mean the 10.52% Capital Securities
issued by Banknorth Capital Trust I.
"Company Common Stock" shall mean the common stock, par value $1.00 per
share, of the Company and, unless the context otherwise requires, related
Company Rights.
"Company Deferred Compensation Plan" means the 1994 Deferred
Compensation Plan for Directors and Selected Officers of the Company and
Participating Affiliates.
"Company Employee Plans" shall have the meaning set forth in Section
3.14(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Company as of December 31, 1998, 1997 and 1996 and the consolidated statements
of operations, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Company for each of the three years ended December 31,
1998, 1997 and 1996 as filed by the Company in its Securities Documents, and
(ii) the consolidated statements of financial condition of the Company
(including related notes and schedules, if any) and the consolidated statements
of operations, shareholders' equity and cash flows (including related notes and
schedules, if any) of the Company included in the Securities Documents filed by
the Company with respect to the quarterly and annual periods ended subsequent to
December 31, 1998.
"Company Massachusetts Bank" shall mean First Massachusetts Bank, NA, a
national bank and a wholly-owned subsidiary of the Company.
2
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"Company New Hampshire Bank" shall mean Farmington National Bank, a
national bank and a wholly-owned subsidiary of the Company.
"Company New York Bank" shall mean Evergreen Bank, N.A., a national bank
and a wholly-owned subsidiary of the Company.
"Company Options" shall mean options to purchase shares of Company Common
Stock granted pursuant to the Company Stock Option Plans.
"Company Preferred Stock" shall mean the preferred stock par value $.01
per share, of the Company.
"Company Rights" shall mean the rights attached to shares of Company
Common Stock pursuant to the Company Rights Agreement.
"Company Rights Agreement" shall mean the Rights Agreement, dated as of
November 27, 1990, and amended and restated as of September 4, 1998, between the
Company and Registrar and Transfer Company, as Rights Agent.
"Company Stock Option Agreement" shall have the meaning set forth in the
third WHEREAS clause to this Agreement.
"Company Stock Option Plans" shall mean (i) the Company's 1997 Equity
Compensation Plan and the Company's Comprehensive Long-Term Executive Incentive
Plan for Officers and Other Key Employees and (ii) stock option plans of
Evergreen Bancorp, Inc. under which the Company has assumed options that now
represent the right to purchase shares of Company Common Stock in connection
with the acquisition of such company.
"Company Trust Company" shall mean "The Stratevest Group, N.A.," a limited
charter national bank and a wholly-owned subsidiary of the Company.
"Company Vermont Banks" shall mean The Howard Bank, N.A., First Vermont
Bank and Trust Company, Franklin Lamoille Bank and Granite Savings Bank and
Trust Company, each of which is a national bank or a Vermont-chartered bank and
a wholly-owned subsidiary of the Company.
"Confidentiality Agreement" means the confidentiality agreement, dated May
21, 1999, between the Company and PHFG.
"DGCL" shall mean the Delaware General Corporate Law, as amended.
"DOJ" shall mean the United States Department of Justice.
3
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"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental
Entity or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environment Concern.
The term Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section 9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. Section
7401, et seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251, et seq; the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 9601, et seq; the Emergency Planning and Community Right to Know Act, 42
U.S.C. Section 1101, et seq; the Safe Drinking Water Act, 42 U.S.C. Section
300f, et seq; and all comparable state and local laws, and (2) any common law
(including without limitation common law that may impose strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Materials of
Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning set forth in Section 2.6(a)
hereof.
"Exchange Ratio" shall have the meaning set forth in Section 2.3(b)
hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.
"FFIEC" shall mean the Federal Financial Institutions Examination Council,
or any successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
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<PAGE> 9
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by PHFG in connection with the
issuance of shares of PHFG Common Stock pursuant to the Merger, including the
Proxy Statement which forms a part thereof, as amended and supplemented.
"FRB" means the Board of Governors of the Federal Reserve System, or
any successor thereto.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"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, provided, however, that Material Adverse Effect shall not be
deemed to include (a) the impact of changes in laws and regulations or
interpretations thereof that are generally applicable to the banking industry or
generally accepted accounting principles that are generally applicable to the
banking industry, (b) reasonable expenses incurred in connection with the
transactions contemplated hereby and (c) actions or omissions of a party (or any
of its Subsidiaries) taken with the prior 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.
"Merger" shall have the meaning set forth in Section 2.1(a) hereof.
"MBCA" shall mean the Maine Business Corporation Act, as amended.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor thereto.
5
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"New Hampshire Bank Commissioner" shall mean the Bank Commissioner of
the State of New Hampshire.
"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 Articles of Incorporation" or "Articles of Incorporation of PHFG"
shall mean the Amended and Restated Articles of Incorporation of PHFG, as
amended.
"PHFG Banks" shall mean the PHFG Maine Bank, the PHFG New Hampshire Bank,
the PHFG Massachusetts Bank and the PHFG Connecticut 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 Connecticut Bank" shall mean Glastonbury Bank and Trust Company, a
Connecticut commercial bank and trust company and a wholly-owned subsidiary of
PHFG.
"PHFG Employee Plans" shall have the meaning set forth in Section 4.14(a)
hereof.
"PHFG Employee Stock Benefit Plans" shall mean (i) 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 and (ii) stock option plans
of acquired companies under which PHFG has assumed options that now represent
the right to purchase shares of Company Common Stock in connection with the
acquisition of such companies.
"PHFG Financial Statements" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of PHFG as of December 31, 1998,
1997 and 1996 and the consolidated statements of income, shareholders' equity
and cash flows (including related notes and schedules, if any) of PHFG for each
of the three years ended December 31, 1998, 1997 and 1996 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,
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shareholders' equity and cash flows (including related notes and schedules, if
any) of PHFG included in the Securities Documents filed by PHFG with respect to
the quarterly and annual periods ended subsequent to December 31, 1998.
"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 Options" shall mean options to purchase shares of PHFG Common Stock
granted pursuant to a PHFG Employee Stock Benefit Plan.
"PHFG Preferred Stock" shall mean the shares of preferred stock, par value
$.01 per share, of PHFG.
"PHFG Rights" shall mean the rights attached to shares of PHFG Common
Stock pursuant to PHFG Rights Agreement.
"PHFG Rights Agreement" shall mean the Stockholder Rights Agreement, dated
as of September 12, 1989, between PHFG and American Stock Transfer & Trust
Company, in its capacity as Rights Agent, as in effect as of the date hereof and
as will be amended and restated prior to the expiration thereof.
"PHFG Stock Option Agreement" shall have the meaning set forth in the
second WHEREAS clause in this Agreement.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the date
hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.14 hereof.
"Proxy Statement" shall mean the prospectus/ joint proxy statement
contained in the Form S-4, as amended or supplemented, and to be delivered to
shareholders of PHFG and the Company in connection with the solicitation of
their approval of this Agreement and the transactions contemplated hereby.
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"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"SAIF" means the Savings Association Insurance Fund administered by the
FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1-02 of Regulation S-X of the Commission.
"Superintendent" shall mean the Superintendent of the Bureau of Banking
of the State of Maine.
"Surviving Corporation" shall have the meaning specified in Section
2.1(a) hereof.
"Vermont Bank Commissioner" shall mean the Vermont Commissioner of
Banking, Insurance and Securities.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into PHFG (the "Merger") in accordance with the applicable provisions
of the MBCA and the DGCL. PHFG shall be the surviving corporation of the Merger
(hereafter 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 "Banknorth Group, Inc." Upon consummation of the
Merger, the separate corporate existence of the Company shall terminate.
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(b) From and after the Effective Time, the Merger shall have the effects
set forth in Section 905 of the MBCA and Sections 259-61 of the DGCL.
(c) Upon consummation of the Merger, the Articles of Incorporation of
PHFG, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until altered, amended or
repealed in accordance with their terms and applicable law, except that Article
1 of such Articles of Incorporation shall be amended to state in its entirety as
follows:
The name of the corporation is Banknorth Group, Inc. (hereinafter
referred to as the "Corporation") and it is located at One Portland
Square, Portland, Maine 04112-9450.
Upon consummation of the Merger, the Bylaws of PHFG, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation, 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 PHFG immediately prior to the
Effective Time.
(e) Upon consummation of the Merger, (i) the directors of the Surviving
Corporation shall be up to 15 of the persons serving as director of PHFG
immediately prior to the Effective Time, Angelo P. Pizzagalli, who shall serve
as Chairman of the Executive Committee of the Board of Directors of the
Surviving Corporation, and five other persons serving as director of the Company
immediately prior to the Effective Time designated by the Company and who both
meet the director qualification requirements set forth in the Bylaws of the
Surviving Corporation and are otherwise reasonably acceptable to PHFG and (ii)
the executive officers of the Surviving Corporation shall be the persons serving
as executive officers of PHFG immediately prior to the Effective Time, as well
as Richard J. Fitzpatrick, who shall be an Executive Vice President and head of
the Surviving Corporation's Vermont and New York banking operations, and Thomas
J. Pruitt, who shall be an Executive Vice President of the Surviving
Corporation. The directors and executive officers of the Surviving Corporation
at the Effective Time shall serve for such terms as are specified in or
determined pursuant to 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 (the "Articles of Merger") with the Secretary of State of the
State of Maine pursuant to the MBCA and (ii) a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware
pursuant to the DGCL, unless a later date and time is specified as the effective
time in such Articles of Merger and Certificate of Merger (the "Effective
Time"). A closing (the "Closing") shall take place immediately prior to the
Effective Time at 10:00 a.m., Eastern Time, on the fifth business day following
the satisfaction or waiver, to the extent permitted hereunder, of the conditions
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to the consummation of the Merger specified in Article VI of this Agreement
(other than the delivery of certificates, opinions and other instruments and
documents to be delivered at the Closing), at the principal executive offices of
PHFG in Portland, Maine, or at such other place, at such other time, or on such
other date as the parties may mutually agree upon. At the Closing, there shall
be delivered to PHFG and the Company the opinions, certificates and other
documents required to be delivered under Article VI hereof.
2.3 Treatment of Capital Stock
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
(a) each share of PHFG Common Stock issued and outstanding immediately
prior to the Effective Time shall be unchanged and shall remain issued and
outstanding; and
(b) subject to Section 2.5 hereof and Section 7.1(h) 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 1.825 shares of PHFG Common
Stock (subject to possible adjustment as set forth in Sections 2.7 and 7.1(h)
hereof, the "Exchange Ratio").
2.4 Shareholder Rights; Stock Transfers
At the Effective Time, each holder of a certificate or certificates
representing outstanding shares of Company Common Stock (the "Certificates")
shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender of any such Certificates in accordance with Section
2.6 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 Section 2.6 hereof, 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 the Surviving
Corporation.
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(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 PHFG Common Stock (after taking into account all
Certificates delivered by such holder) shall, at the time of surrender of the
Certificate or Certificates representing such holder's shares of Company Common
Stock, receive an amount of cash (without interest) equal to the product arrived
at by multiplying such fraction of a share of PHFG Common Stock by the closing
price of a share of PHFG Common Stock on the Nasdaq Stock Market's National
Market on the business day preceding the Effective Time (as reported in The Wall
Street Journal, or if not reported therein, in another authoritative source),
rounded to the nearest whole cent.
2.6 Exchange Procedures
(a) At or after the Effective Time, each holder of a Certificate or
Certificates, upon surrender of the same to an agent, duly appointed by PHFG
(the "Exchange Agent"), shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of whole shares of PHFG
Common Stock into which the shares of Company Common Stock theretofore
represented by the Certificate or Certificates so surrendered shall have been
converted as provided in Section 2.3(b) hereof. As promptly as practicable after
the Effective Time, but in no event later than five business days after the
Company's transfer agent delivers a certified shareholders' list to the Exchange
Agent, 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 5.13(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 5.13(b).
(b) No holder of a Certificate shall be entitled to receive any dividends
in respect of the PHFG Common Stock into which such shares shall have been
converted by virtue of the Merger until the certificate representing such shares
is surrendered in exchange for a certificate or certificates representing shares
of PHFG Common Stock. In the event that dividends are declared and paid by PHFG
in respect of PHFG Common Stock after the Effective Time but prior to any
holder's surrender of Certificates, dividends payable to such holder in respect
of shares of PHFG Common Stock not then issued shall accrue (without interest).
Any such dividends shall be paid (without interest) upon surrender of the
Certificates. PHFG shall be entitled, after the Effective Time, to treat
Certificates as evidencing ownership of the number of whole shares of PHFG
Common Stock into which the shares of Company Common Stock represented by such
Certificates shall have been
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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 2.6, 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.
2.7 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.
2.8 Options
(a) At the Effective Time, each Company Option which is then outstanding,
whether or not exercisable, shall cease to represent a right to acquire shares
of Company Common Stock and shall be converted automatically into an option to
purchase shares of PHFG Common Stock, and PHFG shall assume each Company Option,
in accordance with the terms of the applicable Company Stock Option Plan and
stock option or other agreement by which it is evidenced, except that from and
after the Effective Time, (i) PHFG and the Human Resources Committee of its
Board of Directors shall be substituted for the Company and the committee of the
Company's Board of Directors (including, if applicable, the entire Board of
Directors of the Company) administering such Company Stock Option Plan, (ii)
each Company Option assumed by PHFG may be exercised solely for shares of PHFG
Common Stock, (iii) the number of shares of PHFG Common Stock subject to such
Company Option shall be equal to the number of shares of Company Common Stock
subject to such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, provided that any fractional shares of PHFG
Common Stock resulting from such multiplication shall be rounded down to the
nearest share, and (iv) the per share exercise price under each such Company
Option shall be adjusted by dividing the per share exercise price under each
such Company Option by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent.
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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 2.8.
(b) Within five business 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 2.8
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.
2.9 Additional Actions
If, at any time after the Effective Time, the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of the 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.
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 70,000,000 shares
of Company Common Stock and 500,000 shares of Company Preferred Stock. As of the
date hereof, there are 23,226,457 shares of Company Common Stock issued and
outstanding, 321,935 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
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<PAGE> 18
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) the Company Rights, (iii) outstanding
Rights as of the date hereof to acquire (x) an aggregate of 1,175,332 shares of
Company Common Stock upon the exercise of options granted pursuant to the
Company Stock Option Plans, as Previously Disclosed, and (y) 225,870 shares of
Company Common Stock pursuant to the Company Deferred Compensation Plan, as
Previously Disclosed, and (iv) Rights which may be granted after the date hereof
in the ordinary course pursuant to the Company Deferred Compensation Plan or
with the written consent of PHFG pursuant to Section 5.6(a) hereof, 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 State of Delaware with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The Company is
duly registered as a bank holding company under the BHCA and the regulations of
the FRB thereunder. The Company has heretofore delivered to PHFG true and
complete copies of the Certificate of Incorporation and Bylaws of the Company as
in effect as of the date hereof.
3.3 Ownership of the Company Subsidiaries
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary and identified its Significant Subsidiaries. Except for (i) capital
stock or other ownership interests in the Company Subsidiaries, (ii) stock in
the FHLB of Boston and the Federal Reserve Bank of Boston, (iii) securities and
other interests held in a fiduciary capacity and beneficially owned by third
parties or taken in consideration of debts previously contracted and (iv) the
PHFG Stock Option Agreement, the Company does not own or have the right to
acquire, directly or indirectly, any outstanding capital stock or other voting
securities or ownership interests of any corporation, bank, savings association,
partnership, joint venture or other organization. The outstanding shares of
capital stock or other ownership interests of each Company Subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable (except as
otherwise provided by the National Bank Act with respect to an entity chartered
thereunder), and, except in the case of the Company Capital Securities, are
directly or indirectly owned by the Company free and clear of all Liens or
rights of third parties of any kind
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whatsoever. No Rights are authorized, issued or outstanding with respect to the
capital stock or other ownership interests of the Company Subsidiaries and,
except for agreements entered into in connection with the issuance of the
Company Capital Securities, 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 which is authorized to accept deposits 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 Company has heretofore delivered or made
available to PHFG true and complete copies of the articles of incorporation and
bylaws or equivalent documents of each Company Subsidiary as in effect as of the
date hereof.
3.5 Authorized and Effective Agreement
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company, except for the approval of this
Agreement by the Company's shareholders. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due authorization,
execution and delivery by PHFG, constitutes a legal, valid and binding
obligation of the Company which is enforceable against the Company in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Mergers), nor compliance by the Company with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Certificate of Incorporation or Bylaws of the Company or the equivalent
documents of any Company Subsidiary, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or
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acceleration with respect to, or result in the creation of any Lien
upon any property or asset of the Company or a Company Subsidiary pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or a Company
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or a Company
Subsidiary.
(c) Except for (i) the filing of applications or notices with, and the
consents, approvals or waivers of, as applicable, the FRB, the DOJ, the
Superintendent, the Vermont Bank Commissioner and the Massachusetts Board, (ii)
the filing and effectiveness of the Form S-4 with the Commission, (iii) the
approval of this Agreement by the requisite vote of the shareholders of the
Company, (iv) the filing of Articles of Merger with the Secretary of State of
the State of Maine pursuant to the MBCA and a Certificate of Merger with the
Secretary of State of the State of Delaware pursuant to the DGCL, in each case
in connection with the Merger, and (v) such corporate approvals and such
applications or notices with, and consents, approvals or waivers of, the OCC,
the OTS, the FDIC, the New Hampshire Bank Commissioner, the Vermont Bank
Commissioner and the Massachusetts Bank Commissioner as may be applicable in
connection with a Bank Merger, no consents, approvals or waivers of or filings
or registrations with any Governmental Entity or with any third party are
necessary on the part of the Company or a Company Bank in connection with (i)
the execution and delivery by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby and (ii) the execution
and delivery by an applicable Company Bank of a Bank Merger Agreement and the
consummation by such Company Bank of the transactions contemplated thereby.
(d) As of the date hereof, the Company is not aware of any reason relating
to the Company or a Company Subsidiary (including without limitation Community
Reinvestment Act compliance) why all consents and approvals shall not be
procured from all Governmental Entities having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreements and (ii) the continuation by PHFG after the Effective Time of
the business of 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 have a
Material Adverse Effect on PHFG or the Company or materially impair the value of
the Company and the Company Subsidiaries to PHFG.
3.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1996, the Company has timely filed with the
Commission all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities Laws
and did not contain any untrue statement of a material
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fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) Since January 1, 1996, the Company and each Company Subsidiary 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, 1998, 1997 and 1996 and
the consolidated statements of operations, shareholders' equity and cash flows
for each of the three years ended December 31, 1998, 1997 and 1996, are
accompanied by the audit reports of KPMG LLP, independent public accountants
with respect to the Company. The Company Financial Statements referred to
herein, as well as the Company Financial Statements to be delivered pursuant to
Section 5.7 hereof, fairly present or will fairly present, as the case may be,
the consolidated financial condition of the Company as of the respective dates
set forth therein, and the consolidated results of operations, shareholders'
equity and cash flows of the Company for the respective periods or as of the
respective dates set forth therein.
(b) Each of the Company Financial Statements has been or will be, as the
case may be, prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as stated
therein. The audits of the Company and the Company Subsidiaries have been
conducted in all material respects in accordance with generally accepted
auditing standards. The books and records of the Company and the Company
Subsidiaries are being maintained in material compliance with applicable legal
and accounting requirements, and such books and records accurately reflect in
all material respects all dealings and transactions in respect of the business,
assets, liabilities and affairs of the Company and the Company Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Company as of March 31,
1999 (including related notes) and (ii) of liabilities incurred since March 31,
1999 in the ordinary course of business or in connection with this Agreement and
the transactions contemplated hereby, 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.
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3.8 Material Adverse Change
Since March 31, 1999, (i) the Company and the Company Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen that, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect on the Company.
3.9 Environmental Matters
(a) To the best of the Company's knowledge, the Company and the Company
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a Material Adverse Effect on the Company. Neither the Company nor a Company
Subsidiary has received any communication alleging that the Company or a Company
Subsidiary is not in such compliance and, to the best knowledge of the Company,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) To the best of the Company's knowledge, none of the properties owned,
leased or operated by the Company or a Company Subsidiary has been or is in
violation of or liable under any Environmental Law, except any such violations
or liabilities which would not singly or in the aggregate have a Material
Adverse Effect on the Company.
(c) To the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against the Company or a Company Subsidiary
or against any person or entity whose liability for any Environmental Claim the
Company or a Company Subsidiary has or may have retained or assumed either
contractually or by operation of law, except such which would not have a
Material Adverse Effect on the Company.
(d) 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
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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 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 had or
could reasonably be expected to have a Material Adverse Effect on the Company.
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3.12 Compliance with Laws
(a) The Company and each Company Subsidiary has all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor any Company Subsidiary is in violation of its
respective Certificate of Incorporation 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 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 shareholders of the Company and PHFG and up to and
including the date(s) of the meetings of shareholders to which such Proxy
Statement relates, will contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date. The Proxy Statement mailed by the Company to its shareholders in
connection with the meeting of shareholders at which this Agreement will be
considered by such shareholders
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will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder.
3.14 Employee Benefit Plans
(a) The Company has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, welfare or employee benefit plan or agreement maintained for
the benefit of employees or former employees of the Company or 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, 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.
(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).
(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,
1999 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
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would result in the imposition, directly or indirectly, of a material excise tax
under Section 4975 of the Code or otherwise have a Material Adverse Effect on
the Company.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Company Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Company
Pension Plan, and there is no "unfunded current liability" (as defined in
Section 412 of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge, the Company Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
(h) There are no pending or, to the best knowledge of the Company,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or any
fiduciary thereof relating to a Company Employee Plan.
(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.
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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 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 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 Sandler O'Neill & Partners, L.P., 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 and each Company Subsidiary are insured, and during each of
the past three calendar years have 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 have maintained all insurance required by
applicable laws and regulations.
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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,
1999 included in the Company Financial Statements or acquired after such date,
other than properties sold by the Company in the ordinary course of business,
except (i) Liens for current taxes not yet due or payable (ii) pledges to secure
deposits and other Liens incurred in the ordinary course of its banking
business, (iii) such imperfections of title, easements and encumbrances, if any,
as are not material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of the Company as of March 31,
1999 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, in each case except as such would not have a Material Adverse Effect
on the Company.
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(b) The Company has Previously Disclosed as to the Company and each
Company Subsidiary as of March 31, 1999: (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 shareholder of the Company or a Company Subsidiary, 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, 1998 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 received a current
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.
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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 necessary 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
otherwise taken all action necessary so that the 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. There is no Acquiring Person, and neither a Distribution Date nor a
Shares Acquisition Date has occurred, in each case as such terms are defined in
the Company Rights Agreement.
(c) Based on the representation and warranty of PHFG contained in Section
4.24, no "control share acquisition," business combination moratorium," "fair
price" or other form of antitakeover statute or regulation, including without
limitation Section 203 of the DGCL, is applicable to this Agreement and the
transactions contemplated hereby. The Board of Directors of the Company has
taken all necessary action so that the provisions of Article Thirteenth of the
Company's Certificate of Incorporation do not and will not apply to this
Agreement and the transactions contemplated hereby.
3.25 Ownership of PHFG Common Stock
Except for the PHFG Option Agreement, as of the date hereof, none of the
Company or any of its Subsidiaries, or to Company'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 PHFG 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 PHFG Common Stock.
3.26 Fairness Opinion
The Company has received a written opinion of Sandler O'Neill & Partners,
L.P. 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 Company Common Stock.
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3.27 Accounting for the Merger; Reorganization
As of the date hereof, the Company does not have any reason to believe
that the Merger will fail to qualify (i) for pooling-of-interests accounting
treatment under generally accepted accounting principles or (ii) as a
reorganization under Section 368(a) of the Code.
3.28 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.
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 the date
hereof, there are 104,618,066 shares of PHFG Common Stock issued and
outstanding, 2,029,417 shares of PHFG Common Stock are held as treasury stock
and not outstanding and there are 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 issuable
upon the exercise of PHFG Rights and (iii) by virtue of this Agreement and the
PHFG Stock Option 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
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and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on PHFG. PHFG is duly
registered as a bank holding company under the BHCA and the regulations of the
FRB thereunder. PHFG has heretofore delivered to the Company true and complete
copies of the Articles of Incorporation and Bylaws of PHFG as in effect as of
the date hereof.
4.3 Ownership of the PHFG Subsidiaries
PHFG has Previously Disclosed the name, jurisdiction of incorporation and
percentage ownership of each direct or indirect PHFG Subsidiary and identified
its Significant Subsidiaries as of the date hereof. The outstanding shares of
capital stock of each PHFG Subsidiary which is a Significant Subsidiary have
been duly authorized and validly issued, are fully paid and nonassessable and,
except in the case of the PHFG Capital Securities, are directly or indirectly
owned by PHFG free and clear of all liens, claims, encumbrances, charges,
pledges, restrictions or rights of third parties of any kind whatsoever. No
Rights are authorized, issued or outstanding with respect to the capital stock
or other ownership interests of any PHFG Subsidiary which is a Significant
Subsidiary and, except for agreements entered into in connection with the
issuance of the PHFG Capital Securities, there are no agreements, understandings
or commitments relating to the right of PHFG to vote or to dispose of such
capital stock or other ownership interests.
4.4 Organization, Standing and Authority of the PHFG Subsidiaries
Each PHFG Subsidiary which is a Significant Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
United States or the laws of the jurisdiction in which it is organized, as
applicable. Each of the PHFG Subsidiaries which is a Significant Subsidiary (i)
has full power and authority to own or lease all of its properties and assets
and to carry on its business as now conducted, and (ii) is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
its ownership or leasing of property or the conduct of its business requires
such qualification and where the failure to be so licensed, qualified or in good
standing would have a Material Adverse Effect on PHFG. The deposit accounts of
each PHFG Bank are insured by either the BIF or, in the case of certain deposits
of each such institution, the SAIF to the maximum extent permitted by the FDIA,
and each PHFG Bank has paid all premiums and assessments required by the FDIA
and the regulations thereunder.
4.5 Authorized and Effective Agreement
(a) PHFG has all requisite corporate power and authority to enter into
this Agreement and (subject to receipt of all necessary governmental approvals
and the approval of PHFG's shareholders of this Agreement) to perform all of its
obligations under this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action in respect thereof on
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the part of PHFG, except for the approval of this Agreement by PHFG's
shareholders. This Agreement has been duly and validly executed and delivered by
PHFG and, assuming due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of PHFG which is enforceable
against PHFG in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Mergers), nor compliance by PHFG with any of the provisions hereof (i) does or
will conflict with or result in a breach of any provisions of the Articles of
Incorporation or Bylaws of PHFG or any PHFG Subsidiary, (ii) violate, conflict
with or result in a breach of any term, condition or provision of, or constitute
a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon any property or asset of PHFG or a PHFG Subsidiary pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which PHFG or a PHFG Subsidiary
is a party, or by which any of their respective properties or assets may be
bound or affected, or (iii) subject to receipt of all required governmental and
shareholder approvals, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to PHFG or a PHFG Subsidiary.
(c) Except for (i) the filing of applications or notices with, and the
consents, approvals or waivers of, as applicable, the FRB, the DOJ, the
Superintendent, the Vermont Bank Commissioner and the Massachusetts Board, (ii)
the filing and effectiveness of the Form S-4 with the Commission, (iii)
compliance with applicable state securities or "blue sky" laws and the NASD
Bylaws in connection with the issuance of PHFG Common Stock pursuant to this
Agreement, (iv) the approval of this Agreement by the requisite vote of the
shareholders of PHFG, (v) the filing of Articles of Merger with the Secretary of
State of the State of Maine pursuant to the MBCA and a Certificate of Merger
with the Secretary of State of the State of Delaware pursuant to the DGCL, in
each case in connection with the Merger, and (vi) such corporate approvals and
such applications or notices with, and consents, approvals or waivers of, the
OCC, the OTS, the FDIC, the New Hampshire Bank Commissioner, the Vermont Bank
Commissioner and the Massachusetts Bank Commissioner as may be applicable in
connection with a Bank Merger, no consents, approvals or waivers of or filings
or registrations with any Governmental Entity or with any third party are
necessary on the part of PHFG or a PHFG Bank in connection with (i) the
execution and delivery by PHFG of this Agreement and the consummation by PHFG of
the transactions contemplated hereby and (ii) the execution and delivery by an
applicable PHFG Bank of a Bank Merger Agreement and the consummation by such
PHFG 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
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the transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreements and (ii) the continuation by PHFG after the Effective Time of
the business of each of PHFG, the Company and the Company Subsidiaries as such
business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which, in the reasonable opinion of PHFG, could 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, 1996, PHFG has timely filed with the Commission all
Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respect with the Securities Laws and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Since January 1, 1996, PHFG and each PHFG Subsidiary 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 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, 1998, 1997 and 1996 and the
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years ended December 31, 1998, 1997 and 1996, are accompanied
by the audit reports of KPMG LLP, independent public accountants with respect to
PHFG. The PHFG Financial Statements referred to herein, as well as PHFG
Financial Statements to be delivered pursuant to Section 5.7 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of PHFG as of the respective dates set forth therein, and the
consolidated results of operations, shareholders' equity and cash flows of PHFG
for the respective periods or as of the respective dates set forth therein.
(b) Each of the PHFG Financial Statements has been or will be, as the case
may be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as stated therein. The
audits of PHFG and the PHFG Subsidiaries have been conducted in all material
respects in accordance with generally accepted auditing standards.
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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 consolidated statement of financial condition of PHFG as of March 31, 1999
(including related notes) and (ii) of liabilities incurred since March 31, 1999
in the ordinary course of business or in connection with this Agreement and the
transactions contemplated hereby, 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.
4.8 Material Adverse Change
Since March 31, 1999, 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.
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4.10 Tax Matters
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. As of the
date hereof, no audit, examination or deficiency or refund litigation with
respect to any federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by PHFG and any PHFG Subsidiary is pending or, to the best of PHFG's
knowledge, threatened.
4.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of 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 had or could reasonably be expected to have a Material Adverse
Effect on PHFG.
4.12 Compliance with Laws
(a) PHFG and each PHFG Subsidiary has all permits, licenses, certificates
of authority, orders and approvals of, and has made all filings, applications
and registrations with, federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit it to carry on its
business as it is presently being conducted and the absence of which could
reasonably be expected to have a Material Adverse Effect on PHFG; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect; and to the best knowledge of PHFG, no suspension or
cancellation of any of the same is threatened.
(b) Neither PHFG nor any PHFG Subsidiary is in violation of its respective
Articles of Incorporation 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-
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discrimination, antitrust, and wage and hour laws, ordinances, orders, rules and
regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any governmental agency, any of which violations or defaults could
reasonably be expected to have a Material Adverse Effect on PHFG; and neither
PHFG nor any PHFG Subsidiary has received any notice or communication from any
federal, state or local governmental authority asserting that PHFG or a PHFG
Subsidiary is in violation of any of the foregoing which could reasonably be
expected to have a Material Adverse Effect on PHFG. Neither PHFG nor any PHFG
Subsidiary is subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written commitment
(other than those of general applicability to all banks, savings associations or
holding companies thereof, as applicable, issued by governmental authorities),
and none of them has received any written communication requesting that it enter
into any of the foregoing.
4.13 Certain Information
None of the information relating to PHFG and the PHFG Subsidiaries to be
included or incorporated by reference in (i) the Form S-4 will, at the time the
Form S-4 and any amendment thereto becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the Proxy Statement, as of the
date(s) such Proxy Statement is mailed to shareholders of PHFG and the Company
and up to and including the date(s) of the meetings of shareholders to which
such Proxy Statement relates, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to modify
information as of an earlier date. The Proxy Statement mailed by PHFG to
shareholders of the Company and PHFG in connection with the meetings of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
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 for
the benefit of employees or former employees of PHFG or any PHFG Significant
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.
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(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.
(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, 1999 included in the PHFG Financial
Statements, other than liabilities incurred in the ordinary course of business
in connection therewith subsequent to the date thereof.
(e) To the best of PHFG's knowledge, no prohibited transaction (which
shall mean any transaction prohibited by Section 406 of ERISA and not exempt
under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any PHFG Employee Plan which would result in the imposition, directly
or indirectly, of a material excise tax under Section 4975 of the Code or
otherwise have a Material Adverse Effect on PHFG.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each PHFG Employee Plan or ERISA; no
accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any PHFG Pension
Plan, and there is no "unfunded current liability" (as defined in Section 412 of
the Code) with respect to any PHFG Pension Plan.
(g) To the best of PHFG's knowledge, the PHFG Employee Plans have been
operated in compliance in all material respects with the applicable provisions
of ERISA, the Code, all regulations, rulings and announcements promulgated or
issued thereunder and all other applicable governmental laws and regulations.
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(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 and each PHFG Subsidiary are insured, and during each of the past
three calendar years have 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 have 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, 1999 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
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consolidated statement of financial condition of PHFG as of March 31, 1999
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
(a) 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, fraudulent conveyance
and other laws of general applicability relating to or affecting creditor's
rights and to general equity principles, in each case except as such would not
have a Material Adverse Effect on PHFG.
(b) PHFG has Previously Disclosed as to PHFG and each PHFG Subsidiary as
of March 31, 1999: (i) any written or, to PHFG'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 PHFG'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 PHFG, a PHFG 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 shareholder of PHFG or a PHFG
Subsidiary, or to the best knowledge of PHFG, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing.
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
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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 Derivative Transactions
Between December 31, 1998 and the date hereof, neither PHFG 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.
4.23 Year 2000
Neither PHFG nor any of its Subsidiaries has received a current 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.
4.24 Required Vote; PHFG Rights Agreement; Antitakeover Provisions
(a) The affirmative vote of the holders of a majority of the issued and
outstanding shares of PHFG Common Stock is necessary to approve this Agreement
and the transactions contemplated hereby on behalf of PHFG.
(b) The amendment to the PHFG Rights Agreement previously furnished to the
Company has been duly authorized and adopted by PHFG and PHFG has otherwise
taken all action necessary so that the entering into this Agreement and the PHFG
Option Agreement and the consummation of the transactions contemplated hereby
and thereby do not and will not enable or require the PHFG Rights to be
exercised, distributed or triggered by any person or entity. 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
PHFG Rights Agreement.
(c) Based on the representation and warranty of the Company contained in
Section 3.25, no "control share acquisition," business combination moratorium,"
"fair price" or other form of antitakeover statute or regulation, including
without limitation Sections 611-A and 910 of the MBCA, is applicable to this
Agreement and the transactions contemplated hereby.
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4.25 Ownership of Company Common Stock
Except for the Company Option Agreement, as of the date hereof, 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.
4.26 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.
4.27 Accounting for the Merger; Reorganization
As of the date hereof, PHFG does not have any reason to believe that the
Merger will fail to qualify (i) for pooling-of-interests treatment under
generally accepted accounting principles or (ii) as a reorganization under
Section 368(a) of the Code.
4.28 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 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.
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5.2 Shareholder Meetings
Each of PHFG and the Company shall take all action necessary to properly
call and convene a meeting of its shareholders as soon as practicable after the
date hereof to consider and vote upon this Agreement and the transactions
contemplated hereby. The Board of Directors of PHFG and the Board of Directors
of the Company will recommend that the shareholders of PHFG and the Company,
respectively, approve this Agreement and the transactions contemplated hereby,
provided that the Board of Directors of PHFG or the Board of Directors of the
Company may fail to make such recommendation, or withdraw, modify or change any
such recommendation, if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the parties hereto shall use its reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing, and PHFG and the Company each shall thereafter promptly mail the
Proxy Statement to its respective shareholders. PHFG shall use its reasonable
best efforts to obtain all necessary state securities law or "blue sky" permits
and approvals required to carry out the issuance of PHFG Common Stock pursuant
to the Merger and all other transactions contemplated by this Agreement, and the
Company shall furnish all information concerning the Company and the holders of
the Company Common Stock as may be reasonably requested in connection with any
such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the Bank Mergers). PHFG
and the Company shall have the right to review in advance, and to the extent
practicable each will consult with the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
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(c) PHFG and the Company shall, upon request, furnish each other with all
information concerning themselves, their respective Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, the Form S-4 or any other
statement, filing, notice or application made by or on behalf of PHFG, the
Company or any of their respective Subsidiaries to any Governmental Entity in
connection with the transactions contemplated by this Agreement and the Bank
Merger Agreements.
(d) PHFG and the Company shall promptly furnish each other with copies of
written communications received by PHFG or by the Company, as the case may be,
or any of their respective Subsidiaries from, or delivered by any of the
foregoing to, any Governmental Entity in respect of the transactions
contemplated by this Agreement and the Bank Merger Agreements.
5.4 Investigation and Confidentiality
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other party all books, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities of
it and its Subsidiaries, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of meetings of boards
of directors (and any committees thereof) and shareholders, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, loan files,
plans affecting employees, and any other business activities or prospects in
which the other party may have a reasonable interest, provided that such access
shall be reasonably related to the transactions contemplated hereby and, in the
reasonable opinion of the respective parties providing such access, not unduly
interfere with normal operations. Each party and its Subsidiaries shall make
their respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with the other party and its representatives, provided that such
access shall be reasonably related to the transactions contemplated hereby and
shall not unduly interfere with normal operations.
(b) 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 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
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contemplated by this Agreement, provided, however, that nothing contained herein
shall prohibit either party, following reasonable notification to the other
party and provision to it of the form of proposed press release, from making any
disclosure which is required by law or regulation.
5.6 Business of the Parties
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with 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 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, except for (i) regular
quarterly cash dividends at a rate per share of Company Common Stock not
in excess of $.18 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 6.1(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
(x) Company Options outstanding as of the date hereof pursuant to the
Company Stock Option Plans, as Previously Disclosed pursuant to Section
3.1 hereof, and (y) the Company Stock Option Agreement, or issue, grant,
modify or authorize any Rights, other than the Company Stock Option
Agreement; purchase any shares of Company Common Stock; or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(iii) amend its Certificate of Incorporation and 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;
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(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance to,
or provide any other new employee benefit or incentive to, any of its
directors, officers or employees, except (i) as may be required pursuant
to binding commitments existing on the date hereof and (ii) in the case of
employees who are not officers above the level of Vice President, such as
may be granted in the ordinary course of business consistent with past
practice;
(v) enter into or, except as may be required by law, modify any
pension, retirement, stock option, stock purchase, stock appreciation
right, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or
employees; or make any contributions to the Company's defined benefit
Pension Plan or any other 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, 1998, 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, 1998, 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 $250,000
individually or $1,000,000 in the aggregate, other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
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(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;
(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 practices;
(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 of the Code, provided, however, that nothing
contained herein shall limit the ability of the Company to exercise its
rights under PHFG Stock Option Agreement;
(xv) take any action that would or could reasonably be expected to
result in any of the representations and warranties of the Company
contained in this Agreement not to be true and correct in any material
respect at or prior to the Effective Time, or in any of the conditions to
the Merger set forth in Article VI hereof not being satisfied or in
violation of any provision of this Agreement, except in each case as may
be required by applicable law; or
(xvi) agree to do any of the foregoing.
(b) 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;
(ii) amend its Articles of Incorporation or Bylaws or equivalent
documents in a manner which would adversely affect in any manner the terms
of the PHFG Common Stock
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or the ability of PHFG or a PHFG Bank to consummate the transactions
contemplated hereby;
(iii) make any acquisition (including acquisitions of branch offices
and related deposit liabilities), or take any other action that
individually or in the aggregate could result in the Merger not being
consummated or otherwise materially adversely affect the ability of PHFG
to consummate the transactions contemplated hereby in a reasonably timely
manner;
(iv) 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;
(v) 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
(viii) 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 (other
than PHFG or an affiliate of PHFG) with any nonpublic information in connection
with any inquiry or proposal relating to an Acquisition Transaction. 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 (other than a transaction which is solely between Company
Subsidiaries), (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
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purchase or other acquisition (including by way of share exchange, tender offer,
exchange offer or otherwise) of an interest in any class or series of equity
securities of the Company (other than as permitted by Section 5.6(a)(ii) hereof)
or a Company Subsidiary.
5.7 Current Information
During the period from the date of this Agreement to the Effective Time,
each party shall, upon the request of the other party, cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of the other party regarding its financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more than
45 days after the end of each calendar quarter ending after the date of this
Agreement (other than the last quarter of each fiscal year ending December 31),
the Company and PHFG will deliver to the other party its quarterly report on
Form 10-Q under the Exchange Act, and, as soon as reasonably available, but in
no event more than 90 days after the end of each fiscal year, the Company and
PHFG will deliver to the other party its Annual Report on Form 10-K. Within 25
days after the end of each month, the Company and PHFG will deliver to the other
party a consolidated balance sheet and a consolidated statement of operations,
without related notes, for such month prepared in accordance with generally
accepted accounting principles.
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 Certificate of Incorporation and Bylaws of the Company 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
Certificate of Incorporation, 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 Mergers 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.
(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.
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5.9 Directors and Officers
(a) PHFG agrees to take all action necessary to appoint or elect,
effective as of the Effective Time, the affiliates of the Company identified in
or pursuant to Section 2.1(e) hereof as directors and executive officers of the
Company with the titles set forth therein. Each person who is elected as a
director of the Company pursuant to Section 2.1(e) and this Section 5.9(a) shall
serve until the first annual meeting of shareholders 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 each such person on the list of nominees for director presented by the
Board of Directors of PHFG and for which said Board shall solicit proxies at the
first annual meeting of shareholders of PHFG following the Effective Time, which
persons shall be allocated equally among the three classes of directors of PHFG
and nominated for election for three, two or one-year terms, as applicable.
(b) William H. Chadwick shall continue to serve as President and Chief
Executive Officer of the Company until the Effective Time. Prior to the
Effective Time, PHFG shall use its reasonable best efforts to enter into a
consulting agreement with William H. Chadwick which is mutually agreeable to the
parties and which provides that (i) Mr. Chadwick shall be a consultant to the
Surviving Corporation for a two-year period following the Effective Time, (ii)
in his capacity as a consultant, Mr. Chadwick shall provide such consulting
services to the Surviving Corporation as may be reasonably requested by it,
(iii) Mr. Chadwick shall receive annual compensation for services rendered by
him pursuant to the consulting agreement at a rate which is not less than the
base salary paid to him by the Company as of the date hereof and (iv) Mr.
Chadwick shall be treated as having the age and years of credited service under
the Company's noncontributory defined benefit retirement and pension plan and
the Supplemental Retirement Agreement, dated November 1, 1987, between the
Company and Mr. Chadwick as he would have had upon termination of employment as
if he terminated employment with the Company two years following the Effective
Time. Such consulting agreement shall further provide that it shall supersede
the Change-In-Control Agreement, dated as of July 17, 1998, between the Company
and Mr. Chadwick.
(c) At the Effective Time, Richard E. Johnson shall be President of the
Company Trust Company.
5.10 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
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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 as of
the date hereof. 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) For a period of six months following the Effective Time, PHFG shall
provide 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 desires job counseling and outplacement assistance
services in accordance with PHFG's employment policies and practices to assist
such employees in locating new employment and shall notify all such employees
who want 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) 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, and PHFG or a PHFG Subsidiary will use its best efforts to give
such persons (other than any such person who is party to an employment agreement
or a severance agreement) at least four weeks prior written notice of any job
elimination after the Effective Time for a period of 90 days following the
Effective Time. Subject to such four-week notice requirement, 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 a Company Subsidiary the right to continue employment with PHFG or a
PHFG Subsidiary after the Effective Time. An employee of the Company or a
Company Subsidiary (other than an employee who is party to an employment
agreement or a 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, the
applicable Company employee severance plan, copies of which PHFG acknowledges
have been provided to it by the Company.
(d) Following the Effective Time, PHFG shall, and shall cause its
appropriate Subsidiaries to, honor in accordance with their terms the
change-in-control agreements, employment agreements, severance agreements,
supplemental retirement plans and agreements and deferred compensation plans
which have been Previously Disclosed by the Company to PHFG as of the date
hereof. PHFG acknowledges that the consummation of the Merger will constitute a
"change-in-
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control" of the Company for purposes of any employee benefit plans, agreements
and arrangements of the Company.
(e) Except as otherwise provided herein, nothing in this Section 5.10
shall be interpreted as preventing PHFG or its Subsidiaries from amending,
modifying or terminating any of the Company Employee Plans, and any contracts,
arrangements, commitments or understandings of the Company or its Subsidiaries,
in accordance with their terms and applicable law.
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 Mergers; Consolidation of Trust Operations
(a) Prior to the Effective Time, PHFG and the Company shall take all
action necessary and appropriate, including causing the entering into of
appropriate merger agreements (the "Bank Merger Agreements"), to cause (i)
Granite Savings Bank and Trust Company to merge with and into the Howard Bank,
N.A., (ii) the Company Massachusetts Bank to merge with and into the PHFG
Massachusetts Bank under the name "First Massachusetts Bank" and (iii) the
Company New Hampshire Bank to merge with and into the PHFG New Hampshire Bank
(individually a "Bank Merger" and collectively the "Bank Mergers"), in each case
in accordance with applicable laws and regulations and the terms of the
applicable Bank Merger Agreement and as soon as practicable after consummation
of the Merger. The applicable Bank Merger Agreements shall provide that (i) at
the effective time of the merger of the PHFG Massachusetts Bank and the Company
Massachusetts Bank, directors of the surviving Massachusetts Bank shall include
four persons designated by the Company and who both meet the director
qualification requirements set forth in the Bylaws of the PHFG Massachusetts
Bank and are otherwise reasonably acceptable to PHFG, and (ii) at the effective
time of the merger of the PHFG New Hampshire Bank and the Company New Hampshire
Bank, the directors of the surviving New Hampshire Bank shall include two
persons designated by the Company and who both meet the director qualification
requirements set forth in the Bylaws of the PHFG New Hampshire Bank and are
otherwise reasonably acceptable to PHFG. In addition, at the Effective Time, the
Boards of Directors of the Company Vermont Banks and the Company Trust Company
shall be expanded to include, in addition to the directors thereof immediately
prior to the Effective Time, such additional person or persons as may be
designated by PHFG. The directors and executive officers of the Company Vermont
Banks and the Company Trust Company shall serve for such terms as are specified
in or determined pursuant to the articles of incorporation and bylaws or
equivalent documents of such Banks.
(b) Subject to the requirements of applicable laws and regulations, any
requirement of an applicable Governmental Entity and the fiduciary duties of the
Board of Directors of PHFG, the Surviving Corporation will use its reasonable
best efforts following the Effective Time to consolidate
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the trust operations of the PHFG Banks with and into the Company Trust Company
and will maintain the headquarters of the Company Trust Company in Vermont for
at least two years following the Effective Time.
5.13 Affiliates; Restrictions on Resale
(a) The Company has Previously Disclosed to PHFG, and PHFG has Previously
Disclosed to the Company, a schedule of each person that, to the best of its
knowledge, is deemed to be an "affiliate" of the Company and PHFG, respectively
(each an "Affiliate"), as that term is used in Rule 145 under the Securities Act
or Accounting Series Releases 130 and 135 of the Commission.
(b) Each of the Company and PHFG shall use its reasonable best efforts to
cause each person who may be deemed to be an Affiliate of the Company and PHFG,
respectively, to execute and deliver to PHFG as soon as practicable after the
date of this Agreement, and in any event prior to the date of the meetings of
shareholders of PHFG and the Company to be called pursuant to Section 5.2
hereof, a written agreement in the forms previously agreed to by PHFG and the
Company.
5.14 Disclosure Supplements
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in materials Previously Disclosed to the
other party or which is necessary to correct any information in such materials
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.
5.15 Failure to Fulfill Conditions
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated hereby
cannot be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party or parties. Each party will promptly inform the
other party or parties of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger or the Bank Mergers by any
Governmental Entity or third party or which would otherwise prevent or
materially delay completion of the Merger or the Bank Mergers.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - PHFG and the Company
The respective obligations of PHFG and the Company to effect the
transactions contemplated by this Agreement shall be subject to satisfaction of
the following conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and consummation of the Merger shall have been duly and
validly taken by PHFG and the Company, including approval by the requisite vote
of the respective shareholders of PHFG and the Company of this Agreement.
(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 shall have been received and all statutory waiting periods in respect
thereof have expired, provided, however, that no approval, consent or waiver
referred to in this Section 6.1(b) shall be deemed to have been received if it
shall include any condition or requirement that, individually or in the
aggregate, would so materially reduce the economic or business benefits of the
transactions contemplated by this Agreement to PHFG that had such condition or
requirement been known PHFG, in its reasonable judgment, would not have entered
into this Agreement.
(c) Neither PHFG nor the Company 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.
(d) The Form S-4 shall have become effective under the Securities Act, and
PHFG shall have received all state securities laws or "blue sky" permits and
other authorizations or there shall be exemptions from registration requirements
necessary to issue PHFG Common Stock in connection with the Merger, and neither
the Form S-4 nor any such permit, authorization or exemption shall be subject to
a stop order or threatened stop order by the Commission or any state securities
authority.
(e) The shares of PHFG Common Stock to be issued in connection with the
Merger shall have been approved for listing on the Nasdaq Stock Market's
National Market, subject to official notice of issuance.
(f) KPMG LLP shall have issued a letter dated the date of the Proxy
Statement and confirmed in writing as of the Effective Time to PHFG and to the
Company to the effect that, based on a review of this Agreement and related
agreements and the facts and circumstances then known to it, the Merger shall be
accounted for as a pooling-of-interests under generally accepted accounting
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principles, and PHFG and the Company shall have received from the Affiliates of
the other party the agreements referred to in Section 5.13(b) hereof to the
extent necessary to ensure in the reasonable judgment of PHFG and the Company
that the Merger shall be accounted for in such manner.
6.2 Conditions Precedent - The Company
The obligations of the Company to effect the transactions contemplated by
this Agreement shall be subject to satisfaction of the following conditions at
or prior to the Effective Time unless waived by the Company pursuant to Section
7.4 hereof.
(a) The representations and warranties of PHFG as set forth in Article IV
hereof shall be true and correct as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time (or on the date
when made in the case of any representation and warranty which specifically
relates to an earlier date), provided, however, that notwithstanding anything
herein to the contrary, this Section 6.2(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and correct
(exclusive of any exceptions in such representations and warranties relating to
materiality or Material Adverse Effect) unless the failure of any of the
representations or warranties to be so true and correct would have, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on PHFG.
(b) PHFG shall have performed in all material respects all obligations and
covenants required to be performed by it pursuant to this Agreement on or prior
to the Effective Time.
(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 opinions of Elias, Matz,
Tiernan & Herrick L.L.P. and/or Carol L. Mitchell, Esq. dated the date of the
Closing, that collectively address the matters set forth in Exhibit C hereto.
(e) PHFG and the Company shall have received the written opinion of Elias,
Matz, Tiernan & Herrick L.L.P., or such other law firm or accounting firm as may
be reasonably acceptable to PHFG and the Company (which opinion 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 adviser shall reasonably request as to
factual matters), to the effect that the Merger will constitute a reorganization
within the meaning of Section 368 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
income, 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
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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) The consent, approval or waiver of each person (other than the
Governmental Entities referred to in Section 6.1(b) hereof) whose consent,
approval or waiver shall be required in connection with the Merger under any
loan or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which PHFG or any of its Subsidiaries is a party or
is otherwise bound shall have been obtained, except those consents or approvals
for which failure to obtain would not have, or could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on PHFG
upon consummation of the Merger.
(g) There shall not be pending any proceeding initiated by any
Governmental Entity to seek an order, injunction or decree which prevents
consummation of the Merger.
(h) PHFG shall have furnished the Company with such certificates of its
respective officers or others and such other documents to evidence fulfillment
of the conditions set forth in Sections 6.1 and 6.2 as the Company may
reasonably request.
6.3 Conditions Precedent - PHFG
The obligations of PHFG to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following conditions at or
prior to the Effective Time unless waived by PHFG pursuant to Section 7.4
hereof.
(a) The representations and warranties of the Company set forth in Article
III hereof shall be true and correct as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time (or on the
date when made in the case of any representation and warranty which specifically
relates to an earlier date), provided, however, that notwithstanding anything
herein to the contrary, this Section 6.3(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and correct
(exclusive of any exceptions in such representations and warranties relating to
materiality or Material Adverse Effect) unless the failure of any of the
representations or warranties to be so true and correct would have, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to PHFG a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.
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(d) PHFG shall have received the written opinions of Nixon Peabody LLP
and/or Primmer & Piper that collectively address the matters set forth in
Exhibit D hereto.
(e) The condition set forth in Section 6.2(e) shall have been satisfied.
(f) The consent, approval or waiver of each person (other than the
Governmental Entities referred to in Section 6.1(b) hereof) whose consent,
approval or waiver shall be required in connection with the Merger under any
loan or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or is otherwise bound shall have been obtained, except those consents or
approvals for which failure to obtain would not have, or could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
PHFG upon consummation of the Merger.
(g) There shall not be pending any proceeding initiated by any
Governmental Entity to seek an order, injunction or decree which prevents
consummation of the Merger.
(h) The Company shall have furnished PHFG with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as PHFG may reasonably request.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by either PHFG or the
Company (provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained herein) in
writing if there shall have been a breach by the other party of (i) any covenant
or undertaking of it contained herein or (ii) any representation or warranty of
it contained herein, which in the case of the Company would have, or could
reasonably be expected to have, a Material Adverse Effect on the Company and in
the case of PHFG would have, or could reasonably be expected to have, a Material
Adverse Effect on PHFG, in any case if such breach has not been cured by the
earlier of 30 days after the date on which written notice of such breach is
given to the party committing such breach or the Effective Time;
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(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;
(d) at any time, by any party hereto in writing, if the shareholders of
PHFG or the Company do not approve this Agreement after a vote taken thereon at
a meeting duly called for such purpose (including any adjournment thereof);
(e) by either the Company or PHFG in writing if the Effective Time has not
occurred by the close of business on April 1, 2000, 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 either the Board of Directors of PHFG or the Board of Directors of
the Company if the Board of Directors of the other party shall have withdrawn,
modified or changed in a manner adverse to the terminating party its
recommendation of this Agreement and the transactions contemplated hereby
pursuant to Section 5.2 hereof;
(g) by either PHFG or the Company if on or before 5:00 p.m. on Monday,
June 7, 1999 it provides written notice to the other party to the effect that
additional matters disclosed by such other party, or discovered by the
terminating party, within such period and described in such notice so materially
and adversely affect the financial consequences of the transactions contemplated
hereby that in its reasonable judgment it would not have entered into this
Agreement had they been known as of the date hereof; provided, however, that, if
PHFG or the Company fails to terminate this Agreement on such basis within such
period, the matters so disclosed to it by the other party will have been deemed
to have been disclosed to it as of the date hereof; and
(h) by the Company, if its Board of Directors so determines by a vote of a
majority of the members of its entire Board, at any time during the 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 Value by the Index Value on the Starting Date and
subtracting 0.20 from the quotient in this clause (ii) (such number being
referred to herein as the "Index Ratio");
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subject, however, to the following three sentences. If the Company elects to
exercise its termination right pursuant to this Section 7.1(h), it shall give
written notice to PHFG (provided that such notice of election to terminate may
be withdrawn at any time within the aforementioned 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(h) and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified).
For purposes of this Section 7.1(h), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the closing prices
of a share of PHFG Common Stock on the Nasdaq Stock Market's National
Market (as reported in The Wall Street Journal, or if not reported
therein, in another authoritative source) during the period of 20
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,
without regard to any requisite waiting period in respect thereof.
"Final Index Value" shall mean the average of the Index Values for
the 20 consecutive trading days ending on the trading day prior to the
Determination Date.
"Index Value," on a given date, shall mean the index value on such
date of the Nasdaq Bank Index, as such index value is reported by
Bloomberg News Service 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.
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7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i)
Sections 5.4(b) and 8.1 hereof and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b), (c), (d) or (e)
shall not relieve the breaching party from liability for willful breach of any
covenant, undertaking, representation or warranty giving rise to such
termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 2.6, 2.8, 5.8, 5.9, 5.10 and 5.12
hereof), provided that no such representations, warranties or covenants shall be
deemed to be terminated or extinguished so as to deprive PHFG or the Company (or
any director, officer or controlling person thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
PHFG or the Company.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
by the shareholders of PHFG and the Company) extend the time for the performance
of any of the obligations or other acts of the other party hereto and may waive
(i) any inaccuracies of the other party in the representations or warranties
contained in this Agreement or any document delivered pursuant hereto, (ii)
compliance with any of the covenants, undertakings or agreements of the other
party, (iii) to the extent permitted by law, satisfaction of any of the
conditions precedent to its obligations contained herein or (iv) the performance
by the other party of any of its obligations set forth herein, provided that any
such waiver granted, or any amendment or supplement pursuant to Section 7.5
hereof executed, after shareholders of PHFG or the Company have approved this
Agreement shall not modify either the amount or the form of the consideration to
be provided hereby to the holders of Company Common Stock upon consummation of
the Merger or otherwise materially adversely affect such shareholders without
the approval of such shareholders.
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,
except that expenses of printing the Form S-4 and the registration fee to be
paid to the Commission in connection therewith shall be shared equally between
the Company and 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, the PHFG Stock Option
Agreement and the Confidentiality Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereby and
supersedes all prior arrangements or understandings with respect thereto,
written or oral, other than documents referred to herein and therein.
8.3 Assignment; Successors
A party hereto may not assign any of its rights or obligations under this
Agreement to any other person without the prior written consent of the other
party. 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, other than as set forth in Sections 5.8
and 5.9 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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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:
Banknorth Group, Inc.
300 Financial Plaza
P.O. Box 5420
Burlington, Vermont 05401
Attn: William H. Chadwick
President and Chief Executive Officer
Fax: 802-860-5437
With a required copy to:
Nixon Peabody LLP
101 Federal Street
Boston, Massachusetts 02110-1832
Attn: Kevin J. Handly, Esq.
Fax: 617-345-1300
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, PHFG may,
with the written consent of the Company, which shall not be unreasonably
withheld, elect, subject to the filing of all necessary applications and the
receipt of all required regulatory approvals, to modify the structure of the
acquisition of the Company set forth herein, provided that (i) the federal
income tax consequences of any transactions created by such modification shall
not be other than those set forth
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in Sections 6.2(e) and 6.3(e) hereof, (ii) any such modification will not
jeopardize pooling-of-interests accounting treatment, (iii) the consideration to
be paid to the holders of the Company Common Stock is not thereby changed in
kind or reduced in amount as a result of such modification and (iv) such
modification will not materially delay or jeopardize receipt of any required
regulatory approvals or any other condition to the obligations of PHFG set forth
in Sections 6.1 and 6.3 hereof.
8.6 Interpretation
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The phrases "the date of this Agreement," "the
date hereof" and terms of similar import herein, unless the context otherwise
requires, shall be deemed to be the date first above written.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maine applicable to agreements made and entirely to be
performed within such jurisdiction.
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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
Attest: GROUP, INC.
/s/ Peter J. Verrill By: /s/William J. Ryan
- --------------------------------- ------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Chief Title: Chairman, President and
Operating Officer, Chief Financial Chief Executive Officer
Officer and Treasurer
BANKNORTH GROUP, INC.
Attest:
/s/ Neil E. Robinson By: /s/ William H. Chadwick
- --------------------------------- ------------------------------
Name: Neil E. Robinson Name: William H. Chadwick
Title: Treasurer Title: President and Chief
Executive Officer
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EXHIBIT A
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of June 1, 1999, between Peoples
Heritage Financial Group, Inc., a Maine corporation ("Grantee"), and Banknorth
Group, Inc., a Delaware 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 Grantee (the "Merger"); and
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);
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 4,621,085 fully paid and nonassessable shares (the "Option Shares")
of common stock, par value $1.00 per share, of Issuer (the "Common Stock") at a
price per share equal to $26.80 (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 either
(i) 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, or (ii) redeemed, repurchased, retired or otherwise cease to
be outstanding after the date of this Agreement, the number of shares of Common
Stock subject to the Option shall be increased or decreased, as appropriate, so
that, after such event, such number equals 19.9% 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 or
Grantee to breach 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
<PAGE> 67
Termination Event (as hereinafter defined), provided that the Holder shall have
sent the written notice of the first exercise (as provided in paragraph (e) of
this Section 2) within six months 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, (x) a purchase, lease or other acquisition or assumption of
all or 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, provided that in no event shall any merger,
consolidation, purchase or similar transaction (I) involving only Issuer and one
or more of its Subsidiaries, or involving only any two or more of such
Subsidiaries, be deemed to be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the Merger
Agreement, or (II) permitted by Section 5.6 of the Merger Agreement be deemed
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to be an Acquisition 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 stockholders of Issuer shall have voted and failed to adopt the
Merger Agreement at a meeting which has been held for that purpose or any
adjournment or postponement thereof, or such meeting shall not have been held in
violation of the Merger Agreement or shall have been cancelled prior to
termination of the Merger Agreement if, prior to such meeting (or if such
meeting shall not have been held or shall have been cancelled, prior to such
termination), it shall have been publicly announced that any person (other than
Grantee or a Grantee Subsidiary) shall have made, or publicly disclosed an
intention to make, a proposal to engage in an Acquisition Transaction;
(v) The Issuer Board, without having received Grantee's prior written
consent, shall have withdrawn or modified, or publicly announced its intention
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;
(vi) 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);
(vii) 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
(viii) 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")
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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.
(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 that either a Shares Acquisition Date or a Distribution Date has
occurred, as such terms are defined in the Rights Agreement, dated as of
November 27, 1990, and amended and restated as of September 4, 1998, between
Issuer and Registrar and Transfer Company, 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 State of Vermont or a day on which banking institutions in the
State of Vermont 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
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to Issuer at its principal executive offices, provided 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 and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
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(j) Notwithstanding anything to the contrary contained in this Agreement,
this Agreement shall terminate and shall be of no further force and effect in
the event that the Merger Agreement is validly terminated by either Issuer or
Grantee pursuant to Section 7.1(g) thereof.
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 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
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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 six months 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
greater of (1) $20,000,000 and (2) 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, plus, to the extent not
previously reimbursed, Grantee's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by, and the enforcement of
Grantee's rights under, the Merger Agreement, including without limitation
legal, accounting and investment banking fees ("Grantee's Out-of-Pocket
Expenses"), 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 plus, to the extent not
previously reimbursed, Grantee's Out-of-Pocket Expenses. 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.
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
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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.
(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
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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 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
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 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.
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(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
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
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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 six-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.
(ii) The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and compliance by Issuer with any of the
provisions hereof will not (i) conflict with or result in a breach of any
provision of its Certificate of Incorporation or Bylaws or a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(iii) 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 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
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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.
(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 1933 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. (a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$40,000,000 and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (iii) pay cash to the Issuer or (iv) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed $40,000,000 after taking into account the foregoing actions. As used
herein, the term "Total Profit" shall mean the aggregate amount (before taxes)
of the following: (i) the amount received by Grantee pursuant to Issuer's
repurchase of the Option (or any portion thereof) pursuant to Section 7 hereof,
(ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of the
Option Shares pursuant to Section 7 hereof, less (y) the Grantee's purchase
price for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or
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exchanged) to any unaffiliated party, less (y) the Grantee's purchase price of
such Option Shares, (iv) any amounts received by Grantee on the transfer of the
Option (or any portion thereof) to any unaffiliated party and (v) any equivalent
amount with respect to the Substitute Option.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as hereinafter defined) of more
than $40,000,000, provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date. As used herein,
the term "Notional Total Profit" with respect to any number of shares as to
which Grantee may propose to exercise this Option shall be the Total Profit
determined as of the date of such proposed exercise assuming that this Option
were exercised on such date for such number of shares and assuming that such
shares, together with all other Option Shares held by Grantee and its affiliates
as of such date, were sold for cash at the closing market price for the Common
Stock as of the close of business on the preceding trading day (less customary
brokerage commissions).
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
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21. 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.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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.
BANKNORTH GROUP, INC.
By:
--------------------------------
Name: William H. Chadwick
Title: President and Chief Executive
Officer
PEOPLES HERITAGE FINANCIAL GROUP, INC.
By:
--------------------------------
Name: William J. Ryan
Title: Chairman, President and
Chief Executive Officer
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EXHIBIT B
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of June 1, 1999, between Peoples
Heritage Financial Group, Inc., a Maine corporation ("Issuer"), and Banknorth
Group, Inc., a Delaware corporation ("Grantee").
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 Grantee with and into Issuer (the "Merger"); and
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);
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 20,820,000 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 $19.20 (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 either
(i) 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, or (ii) redeemed, repurchased, retired or otherwise cease to
be outstanding after the date of this Agreement, the number of shares of Common
Stock subject to the Option shall be increased or decreased, as appropriate, so
that, after such event, such number equals 19.9% 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 or
Grantee to breach 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
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an Exercise Termination Event (as hereinafter defined), provided that the Holder
shall have sent the written notice of the first exercise (as provided in
paragraph (e) of this Section 2) within six months 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, (x) a purchase, lease or other acquisition or assumption of
all or 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, provided that in no event shall any merger,
consolidation, purchase or similar transaction (I) involving only Issuer and one
or more of its Subsidiaries, or involving only any two or more of such
Subsidiaries, be deemed to be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the Merger
Agreement, or (II) permitted by Section 5.6 of the Merger Agreement be deemed
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to be an Acquisition 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 stockholders of Issuer shall have voted and failed to adopt the
Merger Agreement at a meeting which has been held for that purpose or any
adjournment or postponement thereof, or such meeting shall not have been held in
violation of the Merger Agreement or shall have been cancelled prior to
termination of the Merger Agreement if, prior to such meeting (or if such
meeting shall not have been held or shall have been cancelled, prior to such
termination), it shall have been publicly announced that any person (other than
Grantee or a Grantee Subsidiary) shall have made, or publicly disclosed an
intention to make, a proposal to engage in an Acquisition Transaction;
(v) The Issuer Board, without having received Grantee's prior written
consent, shall have withdrawn or modified, or publicly announced its intention
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;
(vi) 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);
(vii) 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
(viii) 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")
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<PAGE> 85
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.
(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 that 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 September 12, 1989, between Issuer and American Stock
Transfer & Trust Company, as Rights Agent, as the same may be amended in
accordance with its terms after the date hereof.
(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 State of Maine or a day on which banking institutions in the
State of Maine 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
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<PAGE> 86
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
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
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<PAGE> 87
the preparation, issue and delivery of stock certificates under this Section 2
in the name of the Holder or its assignee, transferee or designee.
(j) Notwithstanding anything to the contrary contained in this Agreement,
this Agreement shall terminate and shall be of no further force and effect in
the event that the Merger Agreement is validly terminated by either Issuer or
Grantee pursuant to Section 7.1(g) thereof.
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
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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.
(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
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registration statement for the 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 six months 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
greater of (1) $20,000,000 and (2) 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, plus, to the extent not
previously reimbursed, Grantee's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by, and the enforcement of
Grantee's rights under, the Merger Agreement, including without limitation
legal, accounting and investment banking fees ("Grantee's Out-of-Pocket
Expenses"), 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 plus, to the extent not
previously reimbursed, Grantee's Out-of-Pocket Expenses. 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
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<PAGE> 90
determined by a nationally-recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(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.
(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
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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 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
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 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
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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
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
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<PAGE> 94
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 six-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.
(ii) The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and compliance by Issuer with any of the
provisions hereof will not (i) conflict with or result in a breach of any
provision of its Certificate of Incorporation or Bylaws or a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(iii) 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 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:
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<PAGE> 95
(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.
(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 1933 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. (a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$40,000,000 and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (iii) pay cash to the Issuer or (iv) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed $40,000,000 after taking into account the foregoing actions. As used
herein, the term "Total Profit" shall mean the aggregate amount (before taxes)
of the following: (i) the amount received by Grantee pursuant to Issuer's
repurchase of the Option (or any portion thereof) pursuant to Section 7 hereof,
(ii) (x) the amount received by Grantee
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<PAGE> 96
pursuant to Issuer's repurchase of the Option Shares pursuant to Section 7
hereof, less (y) the Grantee's purchase price for such Option Shares, (iii) (x)
the net cash amounts received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, less (y) the Grantee's purchase price of
such Option Shares, (iv) any amounts received by Grantee on the transfer of the
Option (or any portion thereof) to any unaffiliated party and (v) any equivalent
amount with respect to the Substitute Option.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as hereinafter defined) of more
than $40,000,000, provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date. As used herein,
the term "Notional Total Profit" with respect to any number of shares as to
which Grantee may propose to exercise this Option shall be the Total Profit
determined as of the date of such proposed exercise assuming that this Option
were exercised on such date for such number of shares and assuming that such
shares, together with all other Option Shares held by Grantee and its affiliates
as of such date, were sold for cash at the closing market price for the Common
Stock as of the close of business on the preceding trading day (less customary
brokerage commissions).
15. 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.
16. 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.
17. 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.
18. 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.
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<PAGE> 97
19. 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.
20. 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.
21. 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.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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:
--------------------------------
Name: William J. Ryan
Title: Chairman, President and
Chief Executive Officer
BANKNORTH GROUP, INC.
By:
--------------------------------
Name: William H. Chadwick
Title: President and Chief Executive
Officer
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<PAGE> 98
EXHIBIT C
[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,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and PHFG is duly registered as a bank holding company under the
BHCA.
(b) The authorized capital stock of the Acquiror consists of 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, are directly or indirectly owned by PHFG free and clear of all
Liens or rights of third parties of any kind whatsoever.
(c) The Agreement has been duly authorized, executed and delivered by
PHFG and, assuming due authorization, execution and delivery by the Company,
constitutes a valid and binding obligation of PHFG enforceable in accordance
with its terms, except that the enforceability of the obligations of PHFG may be
limited by (i) bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors, (ii) equitable principles limiting the
right to obtain specific performance or other similar equitable relief and (iii)
considerations of public policy, and except that certain remedies may not be
available in the case of a nonmaterial breach of the Agreement.
(d) All corporate and shareholder actions required to be taken by PHFG by
law and its Articles of Incorporation and Bylaws to authorize the execution and
delivery of the Agreement and consummation of the Merger have been taken.
(e) 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 PHFG to permit the execution, delivery and
performance of the Agreement and consummation of the Merger have been obtained.
(f) 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,
<PAGE> 99
when issued in accordance with the terms of the Agreement, will be validly
issued and fully paid and nonassessable.
(g) 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 it has no reason 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. 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> 100
EXHIBIT D
[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 70,000,000
shares of Company Common Stock, of which _______ shares are issued and
outstanding of record as of the date hereof, and 500,000 shares of Company
Preferred Stock, none of which are issued and outstanding as of the date hereof.
All of the outstanding shares of Company Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable and the shareholders of
the Company have no preemptive rights with respect to any shares of capital
stock of the Company. All of the outstanding shares of capital stock of each
Company Bank have been duly authorized and validly issued, are fully paid and
nonassessable (except as otherwise provided by the National Bank Act with
respect to an entity chartered thereunder), and, to the knowledge of such
counsel, are directly or indirectly owned by the Company free and clear of all
Liens or rights of third parties of any kind whatsoever. To such counsel's
knowledge, except by virtue of (i) the Company Stock Option Agreement, (ii) the
Company Rights and (iii) outstanding Rights to purchase shares of Company Common
Stock pursuant to the Company Stock Option Plans, as Previously Disclosed by the
Company to PHFG pursuant to 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,
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) All corporate and shareholder actions required to be taken by the
Company by law and the Certificate of Incorporation and Bylaws of the Company to
authorize the execution and delivery of the Agreement and consummation of the
Merger have been taken.
(e) 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 the Company to permit the execution, delivery and
performance of the Agreement and consummation of the Merger have been obtained.
<PAGE> 101
(f) To such counsel's knowledge, and except as Previously Disclosed or as
disclosed in the Company's Securities Documents, there are no material legal or
governmental proceedings pending to which the Company or a Company Subsidiary is
a party or to which any property of the Company or a Company Subsidiary is
subject and no such proceedings are threatened by governmental authorities or by
others.
Such counsel also shall state that it has no reason to believe that the
information relating to the Company and the Company Subsidiaries contained or
incorporated by reference in (i) the Form S-4, at the time the Form S-4 and any
amendment thereto became effective under the Securities Act, contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the Proxy Statement, as of the
date(s) such Proxy Statement was mailed to shareholders of the Company and PHFG
and up to and including the date(s) of the meetings of shareholders to which
such Proxy Statement relates, contained any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
In rendering their opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon (i) certificates of
governmental officials, certificates or opinions of other counsel to the Company
or a Company Subsidiary reasonably satisfactory to the Acquiror and, as to
matters of fact, certificates of officers of the Company or a Company Subsidiary
and (ii) in the case of Nixon Peabody LLP, Primmer & Piper, P.C. 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
EXHIBIT 10.1
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of June 1, 1999, between Peoples
Heritage Financial Group, Inc., a Maine corporation ("Grantee"), and Banknorth
Group, Inc., a Delaware 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 Grantee (the "Merger"); and
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);
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 4,621,085 fully paid and nonassessable shares (the "Option Shares")
of common stock, par value $1.00 per share, of Issuer (the "Common Stock") at a
price per share equal to $26.80 (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 either
(i) 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, or (ii) redeemed, repurchased, retired or otherwise cease to
be outstanding after the date of this Agreement, the number of shares of Common
Stock subject to the Option shall be increased or decreased, as appropriate, so
that, after such event, such number equals 19.9% 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 or
Grantee to breach 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
<PAGE> 2
an Exercise Termination Event (as hereinafter defined), provided that the Holder
shall have sent the written notice of the first exercise (as provided in
paragraph (e) of this Section 2) within six months 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, (x) a purchase, lease or other acquisition or assumption of
all or 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, provided that in no event shall any merger,
consolidation, purchase or similar transaction (I) involving only Issuer and one
or more of its Subsidiaries, or involving only any two or more of such
Subsidiaries, be deemed to be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the Merger
Agreement, or (II) permitted by Section 5.6 of the Merger Agreement be deemed
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<PAGE> 3
to be an Acquisition 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 stockholders of Issuer shall have voted and failed to adopt the
Merger Agreement at a meeting which has been held for that purpose or any
adjournment or postponement thereof, or such meeting shall not have been held in
violation of the Merger Agreement or shall have been cancelled prior to
termination of the Merger Agreement if, prior to such meeting (or if such
meeting shall not have been held or shall have been cancelled, prior to such
termination), it shall have been publicly announced that any person (other than
Grantee or a Grantee Subsidiary) shall have made, or publicly disclosed an
intention to make, a proposal to engage in an Acquisition Transaction;
(v) The Issuer Board, without having received Grantee's prior written
consent, shall have withdrawn or modified, or publicly announced its intention
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;
(vi) 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);
(vii) 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
(viii) 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")
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<PAGE> 4
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.
(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 that either a Shares Acquisition Date or a Distribution Date has
occurred, as such terms are defined in the Rights Agreement, dated as of
November 27, 1990, and amended and restated as of September 4, 1998, between
Issuer and Registrar and Transfer Company, 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 State of Vermont or a day on which banking institutions in the
State of Vermont 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
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<PAGE> 5
to Issuer at its principal executive offices, provided 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 and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
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<PAGE> 6
(j) Notwithstanding anything to the contrary contained in this Agreement,
this Agreement shall terminate and shall be of no further force and effect in
the event that the Merger Agreement is validly terminated by either Issuer or
Grantee pursuant to Section 7.1(g) thereof.
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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<PAGE> 7
(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 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
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<PAGE> 8
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 six months 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
greater of (1) $20,000,000 and (2) 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, plus, to the extent not
previously reimbursed, Grantee's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by, and the enforcement of
Grantee's rights under, the Merger Agreement, including without limitation
legal, accounting and investment banking fees ("Grantee's Out-of-Pocket
Expenses"), 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 plus, to the extent not
previously reimbursed, Grantee's Out-of-Pocket Expenses. 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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<PAGE> 9
(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.
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
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<PAGE> 10
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.
(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
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<PAGE> 11
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 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
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 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.
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<PAGE> 12
(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
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
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<PAGE> 13
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 six-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.
(ii) The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and compliance by Issuer with any of the
provisions hereof will not (i) conflict with or result in a breach of any
provision of its Certificate of Incorporation or Bylaws or a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(iii) 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 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
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<PAGE> 14
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.
(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 1933 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. (a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$40,000,000 and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (iii) pay cash to the Issuer or (iv) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed $40,000,000 after taking into account the foregoing actions. As used
herein, the term "Total Profit" shall mean the aggregate amount (before taxes)
of the following: (i) the amount received by Grantee pursuant to Issuer's
repurchase of the Option (or any portion thereof) pursuant to Section 7 hereof,
(ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of the
Option Shares pursuant to Section 7 hereof, less (y) the Grantee's purchase
price for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are
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<PAGE> 15
converted or exchanged) to any unaffiliated party, less (y) the Grantee's
purchase price of such Option Shares, (iv) any amounts received by Grantee on
the transfer of the Option (or any portion thereof) to any unaffiliated party
and (v) any equivalent amount with respect to the Substitute Option.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as hereinafter defined) of more
than $40,000,000, provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date. As used herein,
the term "Notional Total Profit" with respect to any number of shares as to
which Grantee may propose to exercise this Option shall be the Total Profit
determined as of the date of such proposed exercise assuming that this Option
were exercised on such date for such number of shares and assuming that such
shares, together with all other Option Shares held by Grantee and its affiliates
as of such date, were sold for cash at the closing market price for the Common
Stock as of the close of business on the preceding trading day (less customary
brokerage commissions).
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
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<PAGE> 16
20. 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.
21. 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.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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.
BANKNORTH GROUP, INC.
By: /s/ William H. Chadwick
--------------------------------
Name: William H. Chadwick
Title: President and Chief Executive
Officer
PEOPLES HERITAGE FINANCIAL GROUP, INC.
By: /s/ William J. Ryan
--------------------------------
Name: William J. Ryan
Title: Chairman, President and
Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.2
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of June 1, 1999, between Peoples
Heritage Financial Group, Inc., a Maine corporation ("Issuer"), and Banknorth
Group, Inc., a Delaware corporation ("Grantee").
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 Grantee with and into Issuer (the "Merger"); and
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);
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 20,820,000 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 $19.20 (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 either
(i) 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, or (ii) redeemed, repurchased, retired or otherwise cease to
be outstanding after the date of this Agreement, the number of shares of Common
Stock subject to the Option shall be increased or decreased, as appropriate, so
that, after such event, such number equals 19.9% 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 or
Grantee to breach 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
<PAGE> 2
an Exercise Termination Event (as hereinafter defined), provided that the Holder
shall have sent the written notice of the first exercise (as provided in
paragraph (e) of this Section 2) within six months 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, (x) a purchase, lease or other acquisition or assumption of
all or 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, provided that in no event shall any merger,
consolidation, purchase or similar transaction (I) involving only Issuer and one
or more of its Subsidiaries, or involving only any two or more of such
Subsidiaries, be deemed to be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the Merger
Agreement, or (II) permitted by Section 5.6 of the Merger Agreement be deemed
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<PAGE> 3
to be an Acquisition 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 stockholders of Issuer shall have voted and failed to adopt the
Merger Agreement at a meeting which has been held for that purpose or any
adjournment or postponement thereof, or such meeting shall not have been held in
violation of the Merger Agreement or shall have been cancelled prior to
termination of the Merger Agreement if, prior to such meeting (or if such
meeting shall not have been held or shall have been cancelled, prior to such
termination), it shall have been publicly announced that any person (other than
Grantee or a Grantee Subsidiary) shall have made, or publicly disclosed an
intention to make, a proposal to engage in an Acquisition Transaction;
(v) The Issuer Board, without having received Grantee's prior written
consent, shall have withdrawn or modified, or publicly announced its intention
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;
(vi) 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);
(vii) 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
(viii) 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")
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<PAGE> 4
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.
(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 that 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 September 12, 1989, between Issuer and American Stock
Transfer & Trust Company, as Rights Agent, as the same may be amended in
accordance with its terms after the date hereof.
(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 State of Maine or a day on which banking institutions in the
State of Maine 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
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<PAGE> 5
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
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
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the preparation, issue and delivery of stock certificates under this Section 2
in the name of the Holder or its assignee, transferee or designee.
(j) Notwithstanding anything to the contrary contained in this Agreement,
this Agreement shall terminate and shall be of no further force and effect in
the event that the Merger Agreement is validly terminated by either Issuer or
Grantee pursuant to Section 7.1(g) thereof.
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
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<PAGE> 7
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.
(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
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<PAGE> 8
registration statement for the 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 six months 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
greater of (1) $20,000,000 and (2) 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, plus, to the extent not
previously reimbursed, Grantee's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by, and the enforcement of
Grantee's rights under, the Merger Agreement, including without limitation
legal, accounting and investment banking fees ("Grantee's Out-of-Pocket
Expenses"), 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 plus, to the extent not
previously reimbursed, Grantee's Out-of-Pocket Expenses. 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
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<PAGE> 9
determined by a nationally-recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(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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<PAGE> 10
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.
(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
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<PAGE> 11
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 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
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 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
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<PAGE> 12
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
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
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<PAGE> 13
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 six-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.
(ii) The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and compliance by Issuer with any of the
provisions hereof will not (i) conflict with or result in a breach of any
provision of its Certificate of Incorporation or Bylaws or a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, debenture, mortgage,
indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets.
(iii) 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 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:
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<PAGE> 14
(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.
(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 1933 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. (a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$40,000,000 and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (iii) pay cash to the Issuer or (iv) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed $40,000,000 after taking into account the foregoing actions. As used
herein, the term "Total Profit" shall mean the aggregate amount (before taxes)
of the following: (i) the amount received by Grantee pursuant to Issuer's
repurchase of the Option (or any portion thereof) pursuant to Section 7 hereof,
(ii) (x) the amount received by Grantee
-14-
<PAGE> 15
pursuant to Issuer's repurchase of the Option Shares pursuant to Section 7
hereof, less (y) the Grantee's purchase price for such Option Shares, (iii) (x)
the net cash amounts received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, less (y) the Grantee's purchase price of
such Option Shares, (iv) any amounts received by Grantee on the transfer of the
Option (or any portion thereof) to any unaffiliated party and (v) any equivalent
amount with respect to the Substitute Option.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as hereinafter defined) of more
than $40,000,000, provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date. As used herein,
the term "Notional Total Profit" with respect to any number of shares as to
which Grantee may propose to exercise this Option shall be the Total Profit
determined as of the date of such proposed exercise assuming that this Option
were exercised on such date for such number of shares and assuming that such
shares, together with all other Option Shares held by Grantee and its affiliates
as of such date, were sold for cash at the closing market price for the Common
Stock as of the close of business on the preceding trading day (less customary
brokerage commissions).
15. 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.
16. 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.
17. 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.
18. 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.
-15-
<PAGE> 16
19. 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.
20. 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.
21. 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.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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
BANKNORTH GROUP, INC.
By: /s/ William H. Chadwick
--------------------------------
Name: William H. Chadwick
Title: President and Chief Executive
Officer
-16-
<PAGE> 1
EXHIBIT 10.3
June __, 1999
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 Banknorth Group,
Inc. (the "Company") desire to enter into an Agreement and Plan of Merger, dated
as of June 1, 1999 (the "Agreement"), pursuant to which, subject to the terms
and conditions set forth therein, (a) the Company will merge with and 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 1.825
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 under the Securities Act; and
acknowledges and agrees that PHFG is under no obligation to register the sale,
transfer or other disposition of
<PAGE> 2
Peoples Heritage Financial Group, Inc.
June __, 1999
Page 2
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.
June __, 1999
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
EXHIBIT 10.4
June __, 1999
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 Banknorth
Group, Inc. (the "Company") desire to enter into an Agreement and Plan of
Merger, dated as of June 1, 1999 (the "Agreement"), pursuant to which, subject
to the terms and conditions set forth therein, (a) the Company will merge with
and 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 1.825 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 PHFG 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 PHFG common stock as of the record date(s) for such meetings, so
that all shares of common stock of the PHFG 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 PHFG);
(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 PHFG, to approve or adopt the Agreement;
(c) 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;
<PAGE> 2
Peoples Heritage Financial Group, Inc.
June __, 1999
Page 2
(d) 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;
(e) Acknowledges and agrees that the provisions of
subparagraphs (c) and (d) 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;
(f) 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 (c)
hereof; and
(g) 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 PHFG 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 PHFG. 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 PHFG common stock held by the undersigned as of the date hereof.
-------------------------
<PAGE> 3
Peoples Heritage Financial Group, Inc.
June __, 1999
Page 3
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 99.3
AMENDMENT
TO
AMENDED AND RESTATED
RIGHTS AGREEMENT
Amendment, dated as of June 1, 1999 (the "Amendment"), to the Rights
Agreement, dated as of November 27, 1990, and amended and restated as of
September 4, 1998 (the "Rights Agreement") between Banknorth Group, Inc., a
Delaware corporation (the "Company"), and Registrar and Transfer Company, as
Rights Agent (the "Rights Agent").
WITNESSETH:
WHEREAS, pursuant to Section 28 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 right
certificates representing the common stock of the Company; and
WHEREAS, the Company now desires to amend the Rights Agreement as set
forth in this Amendment, and pursuant to Section 28 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 adding
the following definitions:
(n) "Merger" shall have the meaning set forth in the Merger
Agreement.
(o) "Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of June 1, 1999, between the Company and PHFG, as
may be amended from time to time.
(p) "PHFG" shall mean Peoples Heritage Financial Group, Inc.
(q) "Option Agreement" shall mean the Option Agreement,
dated as of June 1, 1999, between the Company (as issuer) and PHFG
(as grantee), as may be amended from time to time.
<PAGE> 2
(b) The definition of "Acquiring Person" in Section 1(a) of the Rights
Agreement is hereby amended by inserting the following sentence at the end
thereof:
"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) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein)
in whole or in part at any time after the Distribution Date upon
surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights
Agent at the principal office of the Rights Agent, together with
payment of the Purchase Price for each one one-hundredth of a
Preferred Share as to which the Rights are exercised, at or prior
to the earliest of (i) the close of business on November 27, 2005
(the "Final Expiration Date"), (ii) the time at which the Rights
are redeemed as provided in Section 23 hereof (the "Redemption
Date"), (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof or (iv) the Effective Time (as such
term is defined in the Merger Agreement)."
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
2
<PAGE> 3
consummation of the other transactions contemplated in the Merger
Agreement and the Option Agreement shall not be deemed to be an event
for purposes of this Section 13 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 State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state.
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 of the day and year first above written.
<TABLE>
<CAPTION>
BANKNORTH GROUP, INC.
Attest:
<S> <C>
/s/ Neal Robinson By: /s/ William H. Chadwick
- ---------------------------- -----------------------------
Name: Neal Robinson Name: William H. Chadwick
Title: Treasurer Title: President and Chief
Executive Officer
REGISTRAR AND TRANSFER COMPANY
Attest:
/s/ William P. Tatler By: /s/ Mary Rose Cascaes
- ---------------------------- -----------------------------
Name: William P. Tatler Name: Mary Rose Cascaes
Title: Vice President and Title: Executive Vice President and
Assistant Secretary Chief Operating Officer
</TABLE>
3
<PAGE> 1
EXHIBIT 99.4
AMENDMENT
TO
RIGHTS AGREEMENT
Amendment, dated as of June 1, 1999 (the "Amendment"), to the Rights
Agreement, dated as of September 12, 1989 (the "Rights Agreement") between
Peoples Heritage Financial Corporation, a Maine corporation (the "Company"),
and American Stock Transfer & Trust Company, as Rights Agent (the "Rights
Agent").
WITNESSETH:
WHEREAS, pursuant to Section 27 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 right
certificates representing the common stock of the Company; and
WHEREAS, the Company now desires to amend the Rights Agreement as set
forth in this Amendment, and pursuant to Section 27 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 adding
the following definitions:
(qq) "Banknorth" shall mean Banknorth Group, Inc.
(rr) "Merger" shall have the meaning set forth in the Merger
Agreement.
(ss) "Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of June 1, 1999, between the Company and
Banknorth, as may be amended from time to time.
(tt) "Option Agreement" shall mean the Option Agreement, dated
as of June 1, 1999, between the Company (as issuer) and Banknorth
(as grantee), as may be amended from time to time.
(b) The definition of "Acquiring Person" in Section 1(a) 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 Banknorth, any Subsidiary of
Banknorth 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), Section 23(a) and Section 24 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 of Preferred Stock (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
(iii) the Effective Time (as such term is defined in the Merger
Agreement) (the earliest of (i), (ii) and (iii) being herein
referred to as the "Expiration Date")."
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
2
<PAGE> 3
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 State of Maine and for all purposes shall be governed by
and construed in accordance with the laws of such state applicable to contracts
to be made and performed entirely within such state.
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 of the day and year first above written.
Attest: PEOPLES HERITAGE FINANCIAL GROUP, INC.
<TABLE>
<S> <C>
/s/ Peter J. Verrill By: /s/ William J. Ryan
- -------------------------------- ---------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Title: Chairman, President and Chief
Chief Operating Officer, Executive Officer
Chief Financial Officer and
Treasurer
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
/s/ Geraldine M. Zarbo By: /s/ Carolyn O'Neal
- -------------------------------- ---------------------------------
Name: Geraldine M. Zarbo Name: Carolyn O'Neal
Title: Vice President Title: Vice President
</TABLE>
3
