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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PEOPLES HERITAGE FINANCIAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
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MAINE 6022 01-0437984
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
incorporation or organization) Classification Code No.)
</TABLE>
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207) 761-8500
(Address, including zip code and telephone number, including
area code, of Registrant's principal executive offices)
WILLIAM J. RYAN
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
PEOPLES HERITAGE FINANCIAL GROUP, INC.
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207) 761-8500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH A COPY TO:
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GERARD L. HAWKINS, ESQ. DENISE J. DESCHENES, ESQ.
Elias, Matz, Tiernan & Herrick L.L.P. Primmer & Piper, P.C.
734 15th Street, N.W. 421 Summer Street
Suite 1200 P.O. Box 159
Washington, D.C. 20005 St. Johnsbury, Vermont 05819
(202) 347-0300 (802) 748-5061
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
OFFERING PRICE PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PER SHARE OR AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(2) REGISTRATION FEE(2)
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Common Stock, par value $.01 per share...... 46,000,000 shares $12.60 $579,600,000 $7,670.34
Preferred Stock purchase rights(3).......... 46,000,000 rights N/A N/A N/A
</TABLE>
(1) This Registration Statement covers the maximum number of shares of common
stock of the Registrant and related Preferred Stock purchase rights issuable
upon consummation of the merger of Banknorth Group, Inc. ("Banknorth") with
and into the Registrant (the "Merger").
(2) Estimated solely for the purpose of calculation of the registration fee.
Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933, the
registration fee is based on the average of the high and low prices of the
Banknorth common stock on January 21, 2000 (as reported in THE WALL STREET
JOURNAL), as adjusted by the exchange ratio, and computed based on the
estimated maximum number of shares (25,205,479) that may be exchanged for
the securities being registered. Pursuant to Rule 457(b), the required fee
is reduced by the $145,344.06 filing fee paid at the time of filing
preliminary proxy materials in connection with the Merger on December 10,
1999.
(3) Preferred Stock purchase rights will be distributed without charge with
respect to each share of common stock of the Registrant registered hereby.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PEOPLES HERITAGE FINANCIAL GROUP, INC.
P.O. BOX 9540
ONE PORTLAND SQUARE
PORTLAND, MAINE 04112-9540
(207) 761-8500
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 7, 2000
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Peoples
Heritage Financial Group, Inc. will be held at 10:30 a.m., eastern time, on
Tuesday, March 7, 2000, at the Portland Marriott Hotel, 200 Sable Oaks Drive,
South Portland, Maine 04106 for the following purposes:
1. To consider and vote upon a proposal to adopt an agreement and plan of
merger, dated as of June 1, 1999, between Peoples Heritage Financial
Group, Inc. and Banknorth Group, Inc., as amended, which provides, among
other things, for (i) the merger of Banknorth with and into Peoples
Heritage under the name "Banknorth Group, Inc." and (ii) the conversion
of each share of Banknorth common outstanding immediately prior to the
merger (other than certain shares specified in the merger agreement) into
the right to receive 1.825 shares of Peoples Heritage common stock,
subject to possible adjustment under certain circumstances, plus cash in
lieu of any fractional share interest; and
2. To transact such other business that may properly come before the
special meeting or any adjournment or adjournments thereof.
The close of business on January 14, 2000 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
special meeting. Only holders of common stock of Peoples Heritage of record at
the close of business on that date will be entitled to notice of and to vote at
the special meeting or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS OF PEOPLES HERITAGE HAS DETERMINED THE MERGER TO BE
FAIR TO AND IN THE BEST INTERESTS OF PEOPLES HERITAGE AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT.
By Order of the Board of Directors
Carol L. Mitchell
EXECUTIVE VICE PRESIDENT, GENERAL
COUNSEL,
SECRETARY AND CLERK
Portland, Maine
February 1, 2000
EVEN IF YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING, PLEASE PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE AS SOON AS POSSIBLE. FAILURE TO RETURN A PROPERLY-EXECUTED PROXY OR TO
VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER AGREEMENT.
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BANKNORTH GROUP, INC.
300 FINANCIAL PLAZA
P.O. BOX 5420
BURLINGTON, VERMONT 05401
(802) 658-9959
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 7, 2000
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Banknorth
Group, Inc. will be held at 10:30 a.m., eastern time, on Tuesday, March 7, 2000,
at the Clarion Hotel & Conference Center, 1117 Williston Road, Burlington,
Vermont 05403, for the following purposes:
1. To consider and vote upon a proposal to adopt an agreement and plan of
merger, dated as of June 1, 1999, between Peoples Heritage Financial
Group, Inc. and Banknorth Group, Inc., as amended, which provides, among
other things, for (i) the merger of Banknorth with and into Peoples
Heritage under the name "Banknorth Group, Inc." and (ii) the conversion
of each share of Banknorth common stock outstanding immediately prior to
the merger (other than certain shares specified in the merger agreement)
into the right to receive 1.825 shares of Peoples Heritage common stock,
subject to possible adjustment under certain circumstances, plus cash in
lieu of any fractional share interest; and
2. To transact such other business that may properly come before the
special meeting or any adjournment or adjournments thereof.
The close of business on January 14, 2000 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
special meeting. Only holders of Banknorth common stock of record at the close
of business on that date will be entitled to notice of and to vote at the
special meeting or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS OF BANKNORTH HAS DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF BANKNORTH AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors
Thomas M. Dowling
SECRETARY
Burlington, Vermont
February 1, 2000
EVEN IF YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING, PLEASE PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE AS SOON AS POSSIBLE. FAILURE TO RETURN A PROPERLY-EXECUTED PROXY OR TO
VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER AGREEMENT.
<PAGE>
SPECIAL MEETINGS OF SHAREHOLDERS
PEOPLES HERITAGE FINANCIAL GROUP, INC. BANKNORTH GROUP, INC.
---------------------
The boards of directors of Peoples Heritage Financial Group, Inc. and
Banknorth Group, Inc. have unanimously approved a merger between Banknorth and
Peoples Heritage under the name "Banknorth Group, Inc." The merger will enhance
our ability to offer more products and services to customers and will enable you
to participate in the enhanced prospects of the combined company.
If the merger is completed, Banknorth shareholders will receive
1.825 shares of Peoples Heritage common stock for each share of Banknorth common
stock they own just before the merger. Banknorth shareholders will own
approximately 31% of the Peoples Heritage common stock following the merger. On
June 1, 1999, the last day before public announcement of the merger agreement,
the market value of 1.825 shares of Peoples Heritage common stock was equal to
$32.85, and on January 28, 2000 this market value was equal to $ . It is
intended that the exchange of Banknorth stock for Peoples Heritage common stock
be tax-free, except for cash received in lieu of any fractional share interest.
The Peoples Heritage common stock is traded on the Nasdaq National Market under
the symbol "PHBK."
The merger cannot be completed unless the shareholders of Peoples Heritage
and Banknorth approve the merger agreement, as amended. Accordingly, special
meetings of shareholders of Peoples Heritage and Banknorth have been scheduled
to vote on the merger agreement. The date, time and place of the special
meetings are as follows:
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For Peoples Heritage shareholders: For Banknorth shareholders:
March 7, 2000 March 7, 2000
10:30 a.m., Eastern Time 10:30 a.m., Eastern Time
Portland Marriott Hotel Clarion Hotel & Conference Center
300 Sable Oaks Drive 1117 Williston Road
South Portland, Maine 04106 Burlington, Vermont 05403
</TABLE>
This document provides you with detailed information about the proposed
merger and the merger agreement. You are encouraged to read this entire document
carefully, as well as the publicly-filed documents of Peoples Heritage and
Banknorth referred to herein, which contain important business and financial
information about Peoples Heritage and Banknorth.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card. If you do not return your card or vote in person, the effect will be
a vote against the merger agreement.
We join all other members of each company's board of directors in
recommending that you vote "FOR" approval of the merger agreement.
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- ------------------------------------ ------------------------------------
William J. Ryan William H. Chadwick
CHAIRMAN, PRESIDENT AND PRESIDENT AND CHIEF EXECUTIVE OFFICER
CHIEF EXECUTIVE OFFICER
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE PEOPLES HERITAGE COMMON STOCK TO
BE ISSUED IN THE MERGER OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/JOINT PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE SHARES OF PEOPLES HERITAGE COMMON STOCK ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND
ARE NOT INSURED BY ANY FEDERAL OR STATE GOVERNMENTAL AGENCY.
This prospectus/joint proxy statement is dated February 1, 2000 and was first
mailed
to shareholders on or about February 1, 2000.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This prospectus/joint proxy statement incorporates important business and
financial information about Peoples Heritage and Banknorth from documents that
are not included in or delivered with this document. You can obtain documents
incorporated by reference in this prospectus/joint proxy statement by requesting
them in writing or by telephone from the appropriate company at the following
addresses:
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Peoples Heritage Financial Group, Banknorth Group, Inc.
Inc. P.O. Box 5420
P.O. Box 9540 100 Bank Street
One Portland Square 7th Floor
4th Floor Burlington, Vermont 05401-5420
Portland, Maine 04112-9540 Attention: Thomas J. Pruitt
Attention: Brian S. Arsenault (802) 658-9959
(207) 761-8517
</TABLE>
You will not be charged for any of these documents that you request. If you
would like to request documents, please do so by February 28, 2000 in order to
receive them before the special meetings.
See "Where You Can Find More Information" on page 100.
i
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TABLE OF CONTENTS
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PAGE
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REFERENCES TO ADDITIONAL INFORMATION........................ (i)
SUMMARY..................................................... 1
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS................................................ 17
GENERAL INFORMATION......................................... 17
THE SPECIAL MEETINGS........................................ 18
Time and Place............................................ 18
Matters to be Considered.................................. 18
Shares Outstanding and Entitled to Vote; Record Date...... 18
Votes Required............................................ 19
Voting and Revocation of Proxies.......................... 19
Solicitation of Proxies................................... 20
THE MERGER.................................................. 21
General................................................... 21
Background of the Merger.................................. 21
Reasons for the Merger; Recommendations of the Boards of
Directors............................................... 24
Opinions of Financial Advisors............................ 26
Exchange of Banknorth Common Stock Certificates........... 39
Assumption of Banknorth Stock Options..................... 40
Conditions to the Merger.................................. 41
Regulatory Approvals...................................... 43
Business Pending the Merger............................... 45
No Solicitation........................................... 47
Effective Time of the Merger.............................. 47
Termination and Amendment................................. 47
Interests of Certain Persons in the Merger................ 50
Certain Employee Matters.................................. 53
Bank Mergers and Consolidation of Trust Operations........ 54
Resale of Peoples Heritage Common Stock................... 54
Federal Income Tax Consequences........................... 55
Accounting Treatment of the Merger........................ 57
Expenses of the Merger.................................... 57
Amendment to Articles of Incorporation of Peoples
Heritage................................................ 57
Stock Option Agreements................................... 58
Termination Fee........................................... 61
Letter Agreements......................................... 61
No Dissenters' Rights..................................... 62
MANAGEMENT AND OPERATIONS OF PEOPLES HERITAGE AFTER THE
MERGER.................................................... 63
Management................................................ 63
Operations................................................ 64
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION....... 65
MARKET FOR COMMON STOCK AND DIVIDENDS....................... 73
INFORMATION ABOUT PEOPLES HERITAGE.......................... 74
General................................................... 74
Acquisitions.............................................. 75
Management and Additional Information..................... 76
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
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INFORMATION ABOUT BANKNORTH................................. 76
General................................................... 76
Acquisitions.............................................. 77
Management and Additional Information..................... 77
SUPERVISION AND REGULATION OF PEOPLES HERITAGE AND
BANKNORTH................................................. 78
General................................................... 78
Capital and Operational Requirements...................... 78
Distributions............................................. 80
"Source of Strength" Policy............................... 80
Financial Modernization................................... 80
DESCRIPTION OF PEOPLES HERITAGE CAPITAL STOCK............... 82
Peoples Heritage Common Stock............................. 82
Peoples Heritage Preferred Stock.......................... 82
Peoples Heritage Rights................................... 83
Other Provisions.......................................... 84
Transfer Agent............................................ 84
COMPARISON OF THE RIGHTS OF SHAREHOLDERS.................... 85
Authorized Capital Stock.................................. 85
Issuance of Capital Stock................................. 85
Voting Rights............................................. 86
Classification and Size of Board of Directors............. 86
Director Vacancies and Removal of Directors............... 86
Director Duties........................................... 87
Conflict of Interest Transactions......................... 87
Exculpation of Directors and Officers..................... 88
Special Meetings of Shareholders.......................... 88
Shareholder Nominations................................... 88
Shareholder Proposals..................................... 89
Shareholder Action without a Meeting...................... 89
Shareholder's Right to Examine Books and Records.......... 90
Amendment of Governing Instruments........................ 90
Mergers, Consolidations and Sales of Assets............... 91
State Anti-takeover Statutes.............................. 91
Dissenters' Rights of Appraisal........................... 93
Shareholder Rights Plans.................................. 93
CERTAIN BENEFICIAL OWNERS OF PEOPLES HERITAGE COMMON
STOCK..................................................... 95
Security Ownership of Management.......................... 95
Security Ownership of Certain Beneficial Owners........... 96
CERTAIN BENEFICIAL OWNERS OF BANKNORTH COMMON STOCK......... 97
Security Ownership of Management.......................... 97
Security Ownership of Certain Beneficial Owners........... 99
LEGAL OPINION............................................... 99
EXPERTS..................................................... 99
PROPOSALS FOR THE 2000 ANNUAL MEETINGS...................... 100
WHERE YOU CAN FIND MORE INFORMATION......................... 100
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iii
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Annexes:
Annex I Agreement and Plan of Merger, dated as of June 1, 1999,
between Peoples Heritage and Banknorth, including Amendment
No. 1 thereto.
Annex II Stock Option Agreement, dated as of June 1, 1999, between
Banknorth (as issuer) and Peoples Heritage (as grantee)
Annex III Stock Option Agreement, dated as of June 1, 1999, between
Banknorth (as grantee) as Peoples Heritage (as issuer)
Annex IV Opinion of Sandler O'Neill & Partners, L.P.
Annex V Opinion of Keefe, Bruyette & Woods, Inc.
</TABLE>
iv
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS/JOINT
PROXY STATEMENT AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. TO UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE
LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT,
INCLUDING THE MERGER AGREEMENT AND THE OTHER DOCUMENTS TO WHICH WE HAVE REFERRED
YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 100. PAGE REFERENCES ARE
INCLUDED IN THIS SUMMARY TO DIRECT YOU TO A MORE COMPLETE DESCRIPTION OF THE
TOPICS.
THE MERGER (PAGE 21)
Pursuant to the merger agreement, Banknorth will merge with and into Peoples
Heritage. The combined company will be called "Banknorth Group, Inc."
BANKNORTH SHAREHOLDERS WILL RECEIVE 1.825 SHARES OF PEOPLES HERITAGE COMMON
STOCK (PAGE 21)
Banknorth shareholders will receive 1.825 shares of Peoples Heritage common
stock for each share of Banknorth common stock that they own just before the
merger, plus cash in lieu of any fractional share interest.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 73)
Shares of Peoples Heritage and Banknorth trade on the Nasdaq Stock
Market Inc.'s National Market. On June 1, 1999, the last trading day preceding
public announcement of the merger agreement, Peoples Heritage common stock
closed at $18.00 per share and Banknorth common stock closed at $26.75 per
share. On January 28, 2000, Peoples Heritage common stock closed at $ per
share and Banknorth common stock closed at $ per share.
The market value of 1.825 shares of Peoples Heritage common stock would be
$32.85 based on Peoples Heritage's June 1, 1999 closing price and $ based
on Peoples Heritage's January 28, 2000 closing price. Of course, the market
price of Peoples Heritage common stock will fluctuate prior to and after
completion of the merger, but the exchange ratio is fixed. You should obtain
current stock quotations for Peoples Heritage common stock and Banknorth common
stock. You can get these quotes from a newspaper, on the Internet or by calling
your broker.
Peoples Heritage and Banknorth currently pay a quarterly cash dividend to
their shareholders. For the first quarter of 2000, Peoples Heritage declared a
cash dividend of $0.125 per share of Peoples Heritage common stock and Banknorth
declared a cash dividend of $0.20 per share of Banknorth common stock. Peoples
Heritage intends to continue to pay a quarterly cash dividend to its
shareholders.
THE MERGER WILL GENERALLY BE TAX-FREE FOR BANKNORTH SHAREHOLDERS (PAGE 55)
Peoples Heritage has received an opinion of counsel dated the date of this
prospectus/joint proxy statement regarding the material tax consequences of the
merger. The information below is based on that opinion.
The merger has been structured so that Peoples Heritage, Banknorth and
Banknorth's shareholders will not recognize any gain or loss for federal income
tax purposes, except in connection with any cash that Banknorth shareholders
receive instead of fractional share interests. This tax treatment may not apply
to certain shareholders, however. Determining the actual tax consequences of the
merger to you as an individual taxpayer can be complicated. The tax treatment
will depend on your specific situation and many variables not within the control
of Peoples Heritage and Banknorth. You should consult your own tax advisor for a
full understanding of the merger's tax consequences.
1
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Peoples Heritage and Banknorth will not be obligated to complete the merger
unless they receive an additional opinion, dated as of the closing date, that
the merger will be treated as a transaction of a type that is generally tax-free
for United States federal income tax purposes. If such opinion is not received,
the merger will not close or shareholders will receive new materials advising
them of the tax consequences and giving them a chance to change their vote on
the merger.
BANKNORTH SHAREHOLDERS WILL OWN APPROXIMATELY 29% OF THE PEOPLES HERITAGE COMMON
STOCK FOLLOWING THE MERGER (PAGE 18)
Peoples Heritage will issue a maximum of approximately 45.5 million shares
of Peoples Heritage common stock to Banknorth shareholders in the merger
(inclusive of shares which may be issued in exchange for Banknorth common stock
acquired prior to the merger upon exercise of outstanding Banknorth stock
options). Based on that number, following the merger, former Banknorth
shareholders will own approximately 29% of the outstanding Peoples Heritage
common stock. This information is based on the number of shares of Peoples
Heritage common stock and Banknorth common stock and Banknorth common stock
equivalents outstanding on December 31, 1999.
OUR FINANCIAL ADVISORS BELIEVE THAT THE EXCHANGE RATIO IS FAIR TO SHAREHOLDERS
(PAGE 26)
PEOPLES HERITAGE. In deciding to approve the merger, the Peoples Heritage
board of directors considered the opinion of its financial advisor, Keefe,
Bruyette & Woods, Inc., that the proposed exchange ratio was fair from a
financial point of view to Peoples Heritage shareholders. Attached as Annex V is
the written opinion of Keefe, Bruyette, dated the date of this prospectus/joint
proxy statement. You should read this opinion carefully to understand the
assumptions made, matters considered and limitations of the review undertaken by
Keefe, Bruyette in providing its opinion. Peoples Heritage has agreed to pay
Keefe, Bruyette the following fees: $20,000 upon engaging Keefe, Bruyette on
June 1, 1999; an additional cash fee of $200,000 after mailing of this
prospectus/joint proxy statement; and $780,000 upon the closing of the merger.
BANKNORTH. In deciding to approve the merger, the Banknorth board of
directors considered the opinion of its financial advisor, Sandler O'Neill &
Partners, L.P., that the proposed exchange ratio was fair from a financial point
of view to Banknorth shareholders. Attached as Annex IV is the written opinion
of Sandler O'Neill, dated the date of this prospectus/joint proxy statement. You
should read this opinion carefully to understand the assumptions made, matters
considered and limitations of the review undertaken by Sandler O'Neill in
providing its opinion. Banknorth has agreed to pay Sandler O'Neill a transaction
fee of approximately $ million (based upon the closing price of
Peoples Heritage common stock on January 28, 2000), of which approximately
$1.26 million has been paid and the balance of which will be paid upon closing
of the merger.
THE COMPANIES (PAGE 74)
PEOPLES HERITAGE. Peoples Heritage is a Maine-chartered, multi-bank holding
company which conducts business from its headquarters in Portland, Maine and, as
of September 30, 1999, 221 banking offices located in Maine, New Hampshire,
Massachusetts and Connecticut. Peoples Heritage offers a broad range of
commercial and consumer banking services and products and trust and investment
advisory services through four wholly-owned banking subsidiaries and insurance
brokerage subsidiaries. At September 30, 1999, Peoples Heritage had consolidated
assets of $13.9 billion and consolidated shareholders' equity of
$852.1 million. Peoples Heritage's executive offices are located at One Portland
Square, Portland, Maine 04112-9540, and its telephone number is (207) 761-8500.
BANKNORTH. Banknorth is a Delaware-chartered, multi-bank holding company
which conducts business from its headquarters in Burlington, Vermont and, as of
September 30, 1999, 100 banking offices in Vermont, Massachusetts, New Hampshire
and New York. Banknorth offers a broad array of
2
<PAGE>
commercial and consumer banking and fiduciary services and products to
commercial, retail, institutional and municipal customers, through seven banking
subsidiaries, a trust and investment management subsidiary, a mortgage banking
subsidiary and an insurance agency subsidiary. At September 30, 1999, Banknorth
had consolidated assets of $4.5 billion and consolidated shareholders' equity of
$337.0 million. Banknorth's executive offices are located at 100 Bank Street,
Burlington, Vermont, and its telephone number is (802) 658-9959.
REASONS FOR THE MERGER (PAGE 24)
The merger will combine the strengths of the individual companies and
substantially enhance the combined company's operations in Massachusetts and New
Hampshire. We expect that the combined company will be able to achieve strong
financial performance, with opportunities to increase revenues by providing a
broader range of products and services to Banknorth customers and to reduce
costs by eliminating overlapping functions and processes. We believe that the
combined company will not only enable Banknorth to maximize long-term
shareholder value while serving the interests of its customers, suppliers,
employees and the communities which it serves, but also will further the
interests of Peoples Heritage and its shareholders.
THE SPECIAL MEETINGS (PAGE 18)
PEOPLES HERITAGE SHAREHOLDERS. The Peoples Heritage special meeting will be
held at 10:30 a.m., eastern time, on Tuesday, March 7, 2000, at the Portland
Marriott Hotel, 200 Sable Oaks Drive, South Portland, Maine 04106. At the
special meeting, Peoples Heritage shareholders will be asked to approve the
merger agreement and to act on any other matters that may properly come before
the special meeting.
BANKNORTH SHAREHOLDERS. The Banknorth special meeting will be held at
10:30 a.m., eastern time, on Tuesday, March 7, 2000, at the Clarion Hotel &
Conference Center, 1117 Williston Road, Burlington, Vermont 05403. At the
special meeting, Banknorth shareholders will be asked to approve the merger
agreement and to act on any other matters that may properly come before the
special meeting.
BOTH COMPANY'S BOARDS OF DIRECTORS RECOMMEND APPROVAL OF THE TRANSACTION
(PAGE 24)
PEOPLES HERITAGE SHAREHOLDERS. The Peoples Heritage board of directors
believes that the merger is fair to you and in your best interests and
unanimously recommends that you vote "FOR" approval of the merger agreement.
BANKNORTH SHAREHOLDERS. The Banknorth board of directors believes that the
merger is fair to you and in your best interests and unanimously recommends that
you vote "FOR" approval of the merger agreement.
RECORD DATE; VOTING POWER (PAGE 18)
PEOPLES HERITAGE SHAREHOLDERS. You are entitled to vote at the special
meeting if you owned shares of Peoples Heritage common stock as of the close of
business on January 14, 2000. You will have one vote at the special meeting for
each share of Peoples Heritage common stock that you owned on that date.
BANKNORTH SHAREHOLDERS. You are entitled to vote at the special meeting if
you owned shares of Banknorth common stock as of the close of business on
January 14, 2000. You will have one vote at the special meeting for each share
of Banknorth common stock that you owned on that date.
3
<PAGE>
VOTES REQUIRED (PAGE 19)
PEOPLES HERITAGE SHAREHOLDERS. The affirmative vote of the holders of a
majority of the outstanding shares of Peoples Heritage common stock is necessary
to approve the merger agreement on behalf of Peoples Heritage.
All together, the directors and executive officers of Peoples Heritage can
cast less than 1% of the votes entitled to be cast at the special meeting. These
persons have agreed that they will vote all of their shares in favor of the
merger agreement.
BANKNORTH SHAREHOLDERS. The affirmative vote of the holders of a majority
of the outstanding shares of Banknorth common stock is necessary to approve the
merger agreement on behalf of Banknorth.
All together, the directors and executive officers of Banknorth can cast
less than 1.5% of the votes entitled to be cast at the special meeting. These
persons have agreed that they will vote all of their shares in favor of the
merger agreement.
EXCHANGE OF STOCK CERTIFICATES (PAGE 39)
PEOPLES HERITAGE SHAREHOLDERS. If you are a Peoples Heritage shareholder,
you do not have to exchange your stock certificates in connection with the
merger of Banknorth and Peoples Heritage. Your existing certificates will
continue to represent the same number of shares of the combined company as you
held before the merger.
BANKNORTH SHAREHOLDERS. If you are a Banknorth shareholder, you will need
to exchange your Banknorth stock certificates in the combined company. Shortly
after we complete the merger, we will send Banknorth shareholders detailed
instructions on how to exchange their shares. You should not send in your
Banknorth common stock certificates for exchange for Peoples Heritage common
stock certificates until this time.
CONDITIONS TO COMPLETING THE MERGER (PAGE 41)
Completion of the merger depends on meeting a number of conditions,
including the following:
- shareholders of Peoples Heritage and Banknorth must approve the merger
agreement;
- Peoples Heritage and Banknorth must receive all required regulatory
approvals and any waiting periods required by law must have passed;
- there must be no law or governmental order preventing completion of the
merger, and no proceedings pending by a governmental entity trying to
prevent the merger;
- Peoples Heritage and Banknorth must each receive a legal opinion
confirming the tax-free nature of the merger;
- the Peoples Heritage common stock to be issued in the merger must have
been approved for trading on the Nasdaq Stock Market's National Market;
and
- Peoples Heritage and Banknorth must receive a letter from KPMG LLP stating
that the merger will qualify for "pooling of interests" accounting
treatment.
Unless prohibited by law, either Peoples Heritage or Banknorth could elect
to waive a condition that has not been satisfied and complete the merger anyway.
The parties cannot be certain whether or when any of the conditions to the
merger will be satisfied, or waived where permissible, or that the merger will
be completed.
4
<PAGE>
TERMINATION OF THE MERGER AGREEMENT (PAGE 47)
Peoples Heritage and Banknorth can agree at any time to terminate the merger
agreement before completing the merger, even if shareholders of Peoples Heritage
and Banknorth have already voted to approve it.
Either company also can terminate the merger agreement:
- if any governmental entity whose approval is necessary to complete the
merger decides not to approve the merger;
- if the merger is not completed by May 31, 2000;
- if the shareholders of Peoples Heritage or Banknorth do not approve the
merger agreement; or
- if the other company violates, in a material way, any of its
representations, warranties or obligations under the merger agreement.
In addition, Peoples Heritage or Banknorth may terminate the merger
agreement if the board of directors of the other party does not recommend to its
shareholders that the merger be approved, or later withdraws or modifies its
recommendation in any adverse way.
Generally, the company seeking to terminate cannot itself be in material
violation of the merger agreement.
PRICE-BASED TERMINATION; POSSIBLE ADJUSTMENT TO WHAT BANKNORTH SHAREHOLDERS WILL
RECEIVE (PAGE 47)
Banknorth can terminate the merger agreement if the average price of the
Peoples Heritage common stock during a specified period after receipt of all
required regulatory approvals is below $14.40 and the percentage decline in the
value of the Peoples Heritage common stock from its level at the time of
execution of the merger agreement represents a decline that is more than
20 percentage points greater than the percentage decrease, if any, in the index
value of the Nasdaq Bank Index during the same period. If this is the case
Peoples Heritage can voluntarily elect to issue more shares of Peoples Heritage
common stock pursuant to a formula set forth in the merger agreement. Peoples
Heritage is not required to issue more shares, however, and it is possible under
these circumstances that the Banknorth board of directors could conclude that
proceeding with the merger at the lower price would still be in the best
interests of Banknorth shareholders and consistent with its fiduciary duties.
AMENDMENT AND EXTENSION OF THE MERGER AGREEMENT (PAGE 47)
The parties may amend the merger agreement at any time before the merger
actually takes place, and may agree to extend the time within which any action
required by the merger agreement is to take place. However, if an amendment
would reduce the amount or change the form of what shareholders of Banknorth
would receive in the merger, the shareholders of Peoples Heritage and Banknorth
will have to approve the amendment.
BOARD OF DIRECTORS AND MANAGEMENT OF PEOPLES HERITAGE FOLLOWING THE MERGER
(PAGE 63)
When the merger is completed the directors of Peoples Heritage will include
Angelo P. Pizzagalli, chairman of the board of Banknorth, who will serve as
chairman of the executive committee of the board of directors of Peoples
Heritage, and five other persons serving as a director of Banknorth immediately
before the merger who both meet the director qualifications in Peoples
Heritage's bylaws and are otherwise reasonably acceptable to Peoples Heritage.
The merger agreement provides that at the effective time of the merger the
executive officers of Peoples Heritage will include the following executive
officers of Banknorth: Richard J. Fitzpatrick, who
5
<PAGE>
will be an executive vice president and head of the combined company's Vermont
and New York banking operations, and Thomas J. Pruitt, who will be an executive
vice president of the combined company. The merger agreement also provides that
at the effective time of the merger the president of The Stratevest Group, N.A.,
Banknorth's trust and investment management subsidiary, will be Richard E.
Johnson, who currently serves in this capacity.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS OF BANKNORTH IN THE MERGER
(PAGE 50)
Some of Banknorth's directors and executive officers have agreements, stock
options, restricted stock and other benefit plans that provide them with
interests in the merger that are different from, or in addition to, your
interests. In connection with the merger, Banknorth's President and Chief
Executive Officer, William H. Chadwick, will enter into a consulting and
noncompetition agreement with Peoples Heritage which provides that Mr. Chadwick
will receive annual compensation at the rate of $400,000 per year and that he
will provide specified consulting services to Peoples Heritage, including
services relating to Peoples Heritage's new banking markets in Vermont and New
York, and will refrain from activities that compete with its business during the
two-year period after the merger is completed. The agreement also generally
provides Mr. Chadwick with an additional two years of benefits under the
Banknorth supplemental retirement plan for executives. Banknorth has entered
into change-in-control agreements with certain officers of Banknorth and its
subsidiaries, which provide severance benefits should the officer's employment
be terminated in connection with the merger. These agreements generally give the
officer the right to receive severance payments equal to a specified multiple of
the sum of his then-applicable annual salary, average cash bonus earned during a
specified period and the annual employer contributions and accruals made on the
officer's behalf under Banknorth's retirement plans and other employee benefit
plans. Under these agreements and Banknorth's equity compensation plans, stock
options and restricted stock will become vested in the event that the merger is
completed. Peoples Heritage also has agreed to honor indemnification obligations
of Banknorth and to continue liability insurance for Banknorth's directors and
officers for a six-year period. The board of directors of Banknorth was aware of
these factors and considered them, among other matters, in approving the merger
and the related merger agreement.
REGULATORY APPROVALS (PAGE 43)
To complete the merger we need the prior approval of the Federal Reserve
Board and Maine and Massachusetts regulatory authorities, and we must file a
merger notice with a Vermont regulatory authority. The U.S. Department of
Justice is able to provide input into the Federal Reserve Board approval process
and will have no less than 15 and up to 30 days following any approval of the
Federal Reserve Board to challenge the approval on antitrust grounds. Peoples
Heritage and Banknorth have filed all necessary applications and notices with
the applicable regulatory agencies. Peoples Heritage and Banknorth cannot
predict, however, whether the required regulatory approvals will be obtained or
whether any such approvals will have conditions which would be detrimental to
Peoples Heritage following completion of the merger.
ACCOUNTING TREATMENT (PAGE 57)
It is expected that the merger will qualify as a "pooling of interests,"
which means that, for accounting and financial reporting purposes, Peoples
Heritage and Banknorth will be treated as if they had always been one company.
Peoples Heritage and Banknorth each has the right not to complete the merger if
it does not receive confirmation from its independent public accountants of its
opinion that the merger will qualify as a "pooling of interests."
6
<PAGE>
STOCK OPTION AGREEMENTS (PAGE 58)
Peoples Heritage and Banknorth granted to each other a stock option that
allows the other company to purchase up to 19.9% of its common stock. The
exercise price of each option is based on an average of the granting company's
closing stock prices during a 10-day trading period ending shortly before the
date of the merger agreement. The exercise price for Peoples Heritage's option
to buy Banknorth common stock is $26.80 per share, and the exercise price for
Banknorth's option to buy Peoples Heritage common stock is $19.20 per share.
Either company can exercise the option only if specific events take place.
These events generally relate to a competing transaction involving a merger,
business combination or other acquisition of the other company or its stock or
assets. As of the date of this document, we do not believe any event of that
kind has occurred. The options could have the effect of discouraging other
companies that might want to combine with or acquire either of the companies. We
have attached the stock option agreements as Annexes II and III.
TERMINATION FEE (PAGE 61)
In connection with an amendment to the merger agreement to extend the
termination date from April 1, 2000 to May 31, 2000, Peoples Heritage agreed to
pay to Banknorth, within two business days of a demand therefor by Banknorth,
$5 million in immediately available funds in the event that required regulatory
approvals are not obtained or the merger is not completed by May 31, 2000, other
than due to a breach of the merger agreement by Banknorth.
DISSENTERS' RIGHTS (PAGE 62)
Neither the holders of Peoples Heritage common stock nor the holders of
Banknorth common stock have rights under applicable state law to dissent from
the merger and obtain the fair value of their shares.
UNAUDITED COMPARATIVE PER SHARE AND SELECTED FINANCIAL DATA
The following tables show summary historical financial data for each of
Peoples Heritage and Banknorth and also show similar financial information
reflecting the merger of Peoples Heritage and Banknorth (which is referred to as
"pro forma" information). All historical financial data for Peoples Heritage has
been restated to reflect its acquisition of SIS Bancorp, Inc. on January 1, 1999
and its merger with CFX Corporation on April 10, 1998 under the pooling of
interests method of accounting and, as a result, this historical financial data
reflects the combination of these companies for all periods presented.
Similarly, all historical data for Banknorth has been restated to reflect its
merger with Evergreen Bancorp on December 31, 1998 under the pooling of
interests method of accounting.
The comparative pro forma information assumes that Peoples Heritage and
Banknorth had always been combined for accounting and financial reporting
purposes under the pooling of interests method of accounting. The per share
information listed as "pro forma equivalent" for Banknorth has been computed by
multiplying the Peoples Heritage pro forma combined amounts by the exchange
ratio of 1.825. This information is presented to reflect the fact that Banknorth
shareholders will receive more than one share of common stock of Peoples
Heritage for each share of Banknorth common stock they own before the merger.
7
<PAGE>
Peoples Heritage and Banknorth expect that the merger will result in certain
one-time reorganization and restructuring expenses. The pro forma income and
dividends data do not reflect any anticipated reorganization and restructuring
expenses resulting from the merger. It is also anticipated that the merger will
provide the combined company with certain financial benefits that include
reduced operating expenses and opportunities to earn more revenue. The pro forma
information does not reflect any of these anticipated cost savings or benefits.
Therefore, the pro forma information, while helpful in illustrating the
financial characteristics of the merger under one set of assumptions, does not
attempt to predict or suggest future results. The pro forma information also
does not attempt to show how the combined company actually would have performed
had Peoples Heritage and Banknorth been combined throughout these periods.
The summary historical financial data of Peoples Heritage and Banknorth has
been derived from historical financial information that Peoples Heritage and
Banknorth have included in prior filings with the Securities and Exchange
Commission. All adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of results of the unaudited historical interim
periods have been included. Certain amounts in the historical financial data of
Banknorth have been reclassified to conform with the historical financial
statement presentation of Peoples Heritage.
When you read the summary financial information provided in the following
tables, you also should read the more detailed financial information included
elsewhere in this document under "Pro Forma Combined Consolidated Financial
Information," beginning on page 65, as well as the historical financial
information in the other documents of Peoples Heritage and Banknorth to which we
refer. See "Where You Can Find More Information" on page 100.
8
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
PEOPLES HERITAGE BANKNORTH
COMMON STOCK COMMON STOCK
-------------------------- -----------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT(1)
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Basic income per share:
Nine months ended September 30, 1999..................... $0.94(2) $0.95(3) $1.76(4) $1.73(5)
Year ended December 31, 1998............................. 1.09(2) 0.97(3) 1.24(4) 1.77(5)
Year ended December 31, 1997............................. 1.01(2) 1.00(3) 1.76 1.83
Year ended December 31, 1996............................. 0.91(2) 0.88(3) 1.51(4) 1.61(5)
Diluted income per share:
Nine months ended September 30, 1999..................... 0.93(6) 0.93(7) 1.74(8) 1.70(9)
Year ended December 31, 1998............................. 1.07(6) 0.95(7) 1.22(8) 1.73(9)
Year ended December 31, 1997............................. 0.99(6) 0.98(7) 1.74 1.79
Year ended December 31, 1996............................. 0.89(6) 0.87(7) 1.50(8) 1.59(9)
Dividends declared per share:
Nine months ended September 30, 1999..................... 0.35 0.35(10) 0.54 0.64
Year ended December 31, 1998............................. 0.44 0.44(10) 0.64 0.80
Year ended December 31, 1997............................. 0.38 0.38(10) 0.58 0.69
Year ended December 31, 1996............................. 0.34 0.34(10) 0.50 0.62
Book value per share:
September 30, 1999....................................... 8.35 8.01(11) 14.44 14.62
December 31, 1998........................................ 8.68 8.37 13.86 15.28
Tangible book value per share:
September 30, 1999....................................... 7.23 6.71(11) 11.29 12.25
December 31, 1998........................................ 7.48 6.97 10.40 12.72
</TABLE>
- ------------------------------
(1) Pro forma equivalent amounts are calculated by multiplying the pro forma
combined amounts by the exchange ratio of 1.825.
(2) Excluding merger-related and other special charges, Peoples Heritage's
basic income per share would have been $1.17, $1.37, $1.17 and $0.99 for
the nine months ended September 30, 1999 and the years ended December 31,
1998, 1997 and 1996, respectively.
(3) Excluding merger-related and other special charges, pro forma combined
basic income per share would have been $1.11, $1.28, $1.11 and $0.95 for
the nine months ended September 30, 1999 and the years ended December 31,
1998, 1997 and 1996, respectively.
(4) Excluding merger-related charges, Banknorth's basic income per share would
have been $1.73, $1.94 and $1.56 for the nine months ended September 30,
1999 and the years ended December 31, 1998 and 1996, respectively.
(5) Excluding merger-related charges, Banknorth's pro forma equivalent basic
income per share would have been $2.03, $2.34 and $1.73 for the nine months
ended September 30, 1999 and the years ended December 31, 1998 and 1996,
respectively.
(6) Excluding merger-related and other special charges, Peoples Heritage's
diluted income per share would have been $1.16, $1.34, $1.14 and $0.97 for
the nine months ended September 30, 1999 and the years ended December 31,
1998, 1997 and 1996, respectively.
(7) Excluding merger-related and other special charges, pro forma combined
diluted income per share would have been $1.09, $1.26, $1.08 and $0.93 for
the nine months ended September 30, 1999 and the years ended December 31,
1998, 1997 and 1996, respectively.
(8) Excluding merger-related charges, Banknorth's diluted income per share
would have been $1.71, $1.91 and $1.54 for the nine months ended
September 30, 1999 and the years ended December 31, 1998 and 1996,
respectively.
(9) Excluding merger-related charges, Banknorth's pro forma equivalent diluted
income per share would have been $1.99, $2.30 and $1.70 for the nine months
ended September 30, 1999 and the years ended December 31, 1998 and 1996,
respectively.
(10) The combined company will pay dividends at a rate to be determined by its
board of directors, but it is anticipated that the initial dividend rate
will be equal to the current dividend rate of Peoples Heritage.
Accordingly, pro forma combined dividends per share of Peoples Heritage
common stock represent the historical dividends per common share paid by
Peoples Heritage.
(footnotes continued on following page)
9
<PAGE>
(11) Pro forma combined book value and tangible book value per share at
September 30, 1999 reflect a one-time, after-tax charge of $31.0 million
which is estimated by Peoples Heritage to be recorded by it in connection
with the acquisition of Banknorth. See "Management and Operations of
Peoples Heritage After the Merger."
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF PEOPLES HERITAGE
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------------
1999 1998 1997 1996 1995 1994
------------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................... $13,880,864 $12,050,239 $11,401,860 $9,364,346 $7,477,894 $6,830,250
Debt and equity securities, net............ 5,978,288 3,231,364 2,600,057 2,269,365 1,792,615 1,692,162
Total loans and leases, net(1)............. 6,580,381 6,977,470 7,258,560 5,911,986 4,715,182 4,363,254
Goodwill and other intangibles............. 114,206 124,363 127,416 80,884 32,676 31,189
Deposits................................... 8,102,441 8,376,715 8,034,776 7,129,538 5,910,325 5,474,391
Borrowings................................. 4,802,776 2,554,214 2,282,102 1,311,558 775,765 686,221
Shareholders' equity....................... 852,133 901,128 846,255 795,714 692,401 570,356
Nonperforming assets....................... 59,319 67,180 77,112 72,709 82,428 120,865
Book value per share....................... 8.35 8.68 8.20 7.67 7.14 6.01
Tangible book value per share.............. 7.23 7.48 6.96 6.89 6.81 5.68
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest and dividend income.................... $667,339 $628,504 $837,459 $761,270 $611,076 $540,953 $456,582
Interest expense................................ 335,472 308,264 410,986 356,346 279,047 242,137 189,385
-------- -------- -------- -------- -------- -------- --------
Net interest income............................. 331,867 320,240 426,473 404,924 332,029 298,816 267,197
Provision for loan and lease losses............. 10,695 10,457 14,430 6,391 8,810 14,235 34,527
-------- -------- -------- -------- -------- -------- --------
Net interest income after provision for loan and
lease losses.................................. 321,172 309,783 412,043 398,533 323,219 284,581 232,670
Net securities gains............................ 281 3,509 5,904 2,571 3,495 1,613 464
Other noninterest income........................ 95,053 84,437 112,782 91,800 68,665 56,990 51,369
Noninterest expense (excluding special
charges)...................................... 236,583 242,257 321,826 308,680 254,620 231,907 239,432
Special charges(2).............................. 33,235 35,374 39,172 23,559 9,627 4,958 559
-------- -------- -------- -------- -------- -------- --------
Income before income tax expense................ 146,688 120,098 169,731 160,665 131,132 106,319 44,512
Income tax expense.............................. 49,847 39,204 56,907 56,993 43,791 36,110 10,822
-------- -------- -------- -------- -------- -------- --------
Net income...................................... $ 96,841 $ 80,894 $112,824 $103,672 $ 87,341 $ 70,209 $ 33,690
======== ======== ======== ======== ======== ======== ========
Net income per share(3):
Basic......................................... $ 0.94 $ 0.78 $ 1.09 $ 1.01 $ 0.91 $ 0.75 $ 0.36
Diluted....................................... 0.93 0.76 1.07 0.99 0.89 0.73 0.36
Dividends per share............................. 0.35 0.33 0.44 0.38 0.34 0.26 0.18
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Return on average assets....... 1.00% 0.93% 0.97% 1.02% 1.09% 0.99% 0.50%
Return on average equity(4).... 14.75 12.70 13.09 12.73 12.35 10.96 5.89
Average equity to average
assets(4).................... 6.76 7.36 7.41 8.05 8.78 9.04 8.53
Interest rate spread(4)........ 3.22 3.51 3.46 3.77 3.89 4.46 4.30
Net interest margin(4)......... 3.69 4.06 4.02 4.35 4.45 4.55 4.32
Tier 1 leverage capital ratio
at end of period............. 6.36 7.50 7.50 7.46 8.34 8.96 8.29
Dividend payout ratio.......... 37.77 38.61 37.37 42.12 34.19 30.41 40.61
Efficiency ratio(5)............ 54.21 58.19 58.00 60.46 63.54 65.18 75.16
Nonperforming assets as a
percent of total assets at
end of period................ 0.43 0.60 0.56 0.68 0.78 1.10 1.77
</TABLE>
- ------------------------------
(1) Does not include loans held for sale.
(2) Special charges consist of merger-related expenses and, in 1997, a
$7.2 million pre-tax charge relating to CFX Funding and, in the nine months
ended September 30, 1999, a $7.4 million pre-tax charge relating to Peoples
Heritage's exit from the correspondent mortgage banking business.
(footnotes continued on following page)
11
<PAGE>
(3) Excluding special charges, Peoples Heritage's basic income per share would
have been $1.17, $1.02, $1.37, $1.17, $0.99, $0.79 and $0.37 for the nine
months ended September 30, 1999 and 1998 and the years ended December 31,
1998, 1997, 1996, 1995 and 1994, respectively, and Peoples Heritage's
diluted income per share would have been $1.16, $1.00, $1.34, $1.14, $0.97,
$0.77 and $0.36 for the same respective periods.
(4) Excludes the effect of unrealized gains or losses on securities available
for sale.
(5) The efficiency ratio represents operating expenses, excluding distributions
on securities of subsidiary trust and special charges, as a percentage of
net interest income and noninterest income, excluding net securities gains.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF BANKNORTH
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------------------------------------------
1999 1998 1997 1996 1995 1994
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................. $4,482,191 $4,402,881 $3,930,961 $3,530,422 $2,782,584 $2,708,801
Debt and equity securities, net.............. 1,152,027 1,148,410 1,017,179 762,631 622,678 632,612
Total loans, net(1).......................... 2,908,607 2,792,569 2,603,543 2,466,337 1,907,691 1,831,420
Goodwill and other intangibles............... 73,369 80,224 31,119 36,142 8,553 12,599
Deposits..................................... 3,627,046 3,639,497 3,053,634 2,866,920 2,310,993 2,179,288
Borrowings................................... 437,401 355,959 492,184 336,468 255,255 291,622
Shareholders' equity......................... 336,989 321,262 318,128 292,176 242,981 209,165
Nonperforming assets......................... 13,291 21,841 21,013 24,298 22,535 46,105
Book value per share......................... 14.44 13.86 13.53 12.24 11.02 9.44
Tangible book value per share................ 11.29 10.40 12.21 10.72 10.62 9.00
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest and dividend income.................... $236,894 $230,045 $308,701 $294,757 $260,541 $219,795 $185,390
Interest expense................................ 104,393 108,552 144,658 133,335 110,489 95,552 71,282
-------- -------- -------- -------- -------- -------- --------
Net interest and dividend income................ 132,501 121,493 164,043 161,422 150,052 124,243 114,108
Provision for loan losses....................... 6,875 7,010 9,345 9,372 7,040 6,175 5,421
-------- -------- -------- -------- -------- -------- --------
Net interest income after provision for loan
losses........................................ 125,626 114,483 154,698 152,050 143,012 118,068 108,687
Net securities gains (losses)................... 374 (7) 519 266 25 (546) (2,327)
Other noninterest income........................ 41,667 29,834 40,954 37,590 31,665 27,680 29,814
Noninterest expense (excluding merger
expenses)..................................... 106,592 96,192 130,768 127,929 119,760 103,189 103,456
Merger expenses................................. 1,233 -- 21,968 -- 1,583 -- --
-------- -------- -------- -------- -------- -------- --------
Income before income tax expense and cumulative
effect of change in accounting principle...... 59,842 48,118 43,435 61,977 53,359 42,013 32,718
Income tax expense.............................. 18,560 14,836 14,515 20,161 17,656 11,260 9,550
Cumulative effect of a change in accounting
principle..................................... -- -- -- -- -- -- 138
-------- -------- -------- -------- -------- -------- --------
Net income...................................... $ 41,282 $ 33,282 $ 28,920 $ 41,816 $ 35,703 $ 30,753 $ 23,306
======== ======== ======== ======== ======== ======== ========
Net income per share(2):
Basic......................................... $ 1.76 $ 1.43 $ 1.24 $ 1.76 $ 1.51 $ 1.40 $ 1.06
Diluted....................................... 1.74 1.40 1.22 1.74 1.50 1.39 1.05
Dividends per share............................. 0.54 0.48 0.64 0.58 0.50 0.46 0.30
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED AT OR FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
---------------------- ----------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Return on average assets....... 1.26% 1.11% 0.71% 1.12% 1.08% 1.13% 0.91%
Return on average equity....... 16.96 13.99 8.95 13.78 12.97 13.67 11.47
Average equity to average
assets....................... 7.41 7.95 7.95 8.10 8.35 8.25 7.96
Interest rate spread........... 3.83 3.68 3.67 3.89 4.25 4.19 4.26
Net interest margin............ 4.42 4.35 4.34 4.58 4.89 4.87 4.80
Tier 1 leverage capital ratio
at end of period............. 6.99 8.13 6.43 8.18 7.56 8.51 7.72
Dividend payout ratio.......... 30.36 33.98 52.12 33.33 33.07 27.27 18.53
Efficiency ratio(3)............ 61.24 62.00 62.25 63.22 65.90 67.92 71.88
Nonperforming assets as a
percent of total assets at
end of period................ 0.30 0.56 0.50 0.53 0.69 0.81 1.70
</TABLE>
- ------------------------------
(1) Does not include loans held for sale.
(footnotes continued on following page)
13
<PAGE>
(2) Excluding merger expenses, Banknorth's basic income per share would have
been $1.80, $1.94 and $1.56 for the nine months ended September 30, 1999 and
the years ended December 31, 1998 and 1996, respectively, and Banknorth's
diluted income per share would have been $1.78, $1.91 and $1.54 for the same
respective periods.
(3) The efficiency ratio represents operating expenses, excluding distributions
on securities of subsidiary trust and merger expenses, as a percentage of
net interest income and noninterest income, excluding net gains/losses on
sales of securities and in the nine months ended September 30, 1999,
nonrecurring gains on bank-owned life insurance and the curtailment of a
pension plan of an acquired company.
14
<PAGE>
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------------------
1999(1) 1998 1997 1996 1995 1994
-------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................. $18,363,055 $16,453,120 $15,332,821 $12,894,768 $10,260,478 $9,539,051
Debt and equity securities, net.......... 7,130,315 4,379,774 3,617,236 3,031,996 2,415,293 2,324,774
Total loans and leases, net(2)........... 9,488,988 9,770,039 9,862,103 8,378,323 6,622,873 6,194,674
Goodwill and other intangibles........... 187,575 204,587 158,535 117,026 41,229 43,788
Deposits................................. 11,729,487 12,016,212 11,088,410 9,996,458 8,221,318 7,653,679
Borrowings............................... 5,240,177 2,910,173 2,774,286 1,648,026 1,031,020 977,843
Shareholders' equity..................... 1,158,150 1,222,390 1,164,383 1,087,890 935,382 779,521
Nonperforming assets..................... 72,610 89,021 98,125 97,007 104,963 166,970
Book value per share..................... 8.01 8.37 7.97 7.39 6.82 5.76
Tangible book value per share............ 6.71 6.97 6.88 6.59 6.52 5.43
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- --------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Interest and dividend income................. $904,233 $858,549 $1,146,160 $1,056,027 $871,617 $760,748 $641,972
Interest expense............................. 439,865 416,816 555,644 489,681 389,536 337,689 260,667
-------- -------- ---------- ---------- -------- -------- --------
Net interest income.......................... 464,368 441,733 590,516 566,346 482,081 423,059 381,305
Provision for loan and lease losses.......... 17,570 17,467 23,775 15,763 15,850 20,410 39,948
-------- -------- ---------- ---------- -------- -------- --------
Net interest income after provision for loan
and lease losses........................... 446,798 424,266 566,741 550,583 466,231 402,649 341,357
Net securities gains......................... 655 3,502 6,423 2,837 3,520 1,067 (1,863)
Other noninterest income..................... 136,720 114,271 153,736 129,390 100,330 84,670 81,183
Noninterest expense (excluding special
charges)................................... 343,175 338,449 452,594 436,609 374,380 335,096 342,888
Special charges(3)........................... 34,468 35,374 61,140 23,559 11,210 4,958 559
-------- -------- ---------- ---------- -------- -------- --------
Income before income tax expense and
cumulative effect of change in accounting
principle.................................. 206,530 168,216 213,166 222,642 184,491 148,332 77,230
Income tax expense........................... 68,407 54,040 71,422 77,154 61,447 47,370 20,372
Cumulative effect of a change in accounting
principle.................................. -- -- -- -- -- -- 138
-------- -------- ---------- ---------- -------- -------- --------
Net income................................... $138,123 $114,176 $ 141,744 $ 145,488 $123,044 $100,962 $ 56,996
======== ======== ========== ========== ======== ======== ========
Net income per share(4):
Basic...................................... $ 0.95 $ 0.78 $ 0.97 $ 1.00 $ 0.88 $ 0.75 $ 0.43
Diluted.................................... 0.93 0.77 0.95 0.98 0.87 0.74 0.42
Dividends per share(5)....................... 0.35 0.33 0.44 0.38 0.34 0.26 0.18
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS
ENDED AT OR FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
---------------------- ----------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Return on average assets....... 1.06% 0.98% 0.90% 1.05% 1.08% 1.03% 0.62%
Return on average equity(6).... 15.35 13.05 11.96 13.01 12.53 11.66 7.35
Average equity to average
assets(6).................... 6.92 7.51 7.55 8.07 8.66 8.82 8.37
Interest rate spread(6)........ 3.38 3.55 3.51 3.80 4.00 4.40 4.30
Net interest margin(6)......... 3.88 4.14 4.10 4.42 4.58 4.64 4.46
Tier 1 leverage capital ratio
at end of period............. 6.52 7.67 7.22 7.65 8.11 8.83 8.13
Dividend payout ratio(5)....... 37.77 38.61 37.37 42.12 34.19 30.41 40.61
Efficiency ratio(7)............ 56.22 59.22 59.17 61.25 64.28 66.00 74.14
Nonperforming assets as a
percent of total assets at
end of period................ 0.40 0.59 0.54 0.64 0.75 1.02 1.75
</TABLE>
- ------------------------------
(1) The consolidated balance sheet data at September 30, 1999 reflects an
estimated $31.0 million after-tax charge for one-time reorganization and
restructuring costs related to the merger. The effect of the one-time charge
has been reflected in the
(footnotes continued on following page)
15
<PAGE>
consolidated balance sheet data but not in the consolidated operations and
other financial data because it is nonrecurring. See "Management and
Operations of Peoples Heritage After the Merger."
(2) Does not include loans held for sale.
(3) Special charges consist of merger-related expenses and, in 1997, a
$7.2 million pre-tax charge relating to CFX Funding and, in the nine months
ended September 30, 1999, a $7.4 million pre-tax charge relating to Peoples
Heritage's exit from the correspondent mortgage banking business and a
$1.5 million gain in connection with the curtailment of a pension plan of an
acquired company.
(4) Excluding special charges, basic income per share would have been $1.11,
$0.95, $1.28, $1.11, $0.95, $0.78 and $0.43 for the nine months ended
September 30, 1999 and 1998 and the years ended December 31, 1998, 1997,
1996, 1995 and 1994, respectively, and diluted income per share would have
been $1.09, $0.93, $1.26, $1.08, $0.93, $0.77 and $0.43 for the same
respective periods.
(5) Represents Peoples Heritage's historical dividends per share and dividend
payout ratio.
(6) Excludes the effect of unrealized gains or losses on securities available
for sale.
(7) The efficiency ratio represents operating expenses, excluding distributions
on securities of subsidiary trust, special charges and a gain on the
curtailment of a pension plan of an acquired company, as a percentage of net
interest income and noninterest income, excluding net securities gains and
nonrecurring gains on bank-owned life insurance and the curtailment of a
pension plan of an acquired company.
16
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This document and the documents incorporated herein by reference contain
forward-looking statements by Peoples Heritage and Banknorth. These
forward-looking statements include information about the financial condition,
results of operations and business of Peoples Heritage upon completion of the
merger, including statements relating to: (a) the estimated cost savings that
will be realized from the merger; (b) the estimated impact on earnings per share
of the merger; and (c) the restructuring charges expected to be incurred in
connection with the merger. In addition, any of the words "believes," "expects,"
"anticipates" or similar expressions indicate forward-looking statements. Many
possible events or factors could affect the future financial results and
performance of Peoples Heritage after the merger and could cause such results or
performance to differ materially from those expressed in forward-looking
statements. These possible events or factors include the following:
- estimated cost savings from the merger or other previously-announced
mergers may not be fully realized within the expected time frame;
- deposit attrition, customer loss or revenue loss following the merger or
other previously-announced mergers may be greater than expected;
- competitive pressure among depository and other financial institutions may
increase significantly;
- costs or difficulties related to the integration of the businesses of
Peoples Heritage and its merger partners, including Banknorth, may be
greater than expected;
- changes in the interest rate environment may reduce interest margins;
- general economic or business conditions, either nationally or in the
states or regions in which Peoples Heritage does business, may be less
favorable than expected, resulting in, among other things, a deterioration
in credit quality or a reduced demand for credit;
- legislation or changes in regulatory requirements, including changes in
accounting standards, may adversely affect the businesses in which Peoples
Heritage is engaged;
- adverse changes may occur in the securities markets;
- competitors of Peoples Heritage may have greater financial resources and
develop products and technology that enable those competitors to compete
more successfully than Peoples Heritage; and
- Peoples Heritage's business activities could be adversely affected by
data-sensitive software which recognizes a date using "00" as the year
1900 rather than the year 2000.
Management of Peoples Heritage and Banknorth each believes that the
forward-looking statements about their respective company are reasonable;
however, you should not place undue reliance on them. Forward-looking statements
are not guarantees of performance. They involve risks, uncertainties and
assumptions. The future results and shareholder values of Peoples Heritage
following completion of the merger may differ materially from those expressed in
these forward-looking statements. Many of the factors that will determine these
results and values are beyond Peoples Heritage's and Banknorth's ability to
control or predict.
GENERAL INFORMATION
This document constitutes a proxy statement and is being furnished in
connection with the solicitation of proxies by the boards of directors of
Peoples Heritage Financial Group, Inc. and Banknorth Group, Inc. to be used at
special meetings of shareholders of Peoples Heritage and Banknorth, to be held
on Tuesday, March 7, 2000. The purpose of the special meetings is to consider
and vote upon the merger agreement, as amended, between Peoples Heritage and
Banknorth, which
17
<PAGE>
provides, among other things, for the merger of Banknorth with and into Peoples
Heritage and for the name of the combined company to be "Banknorth Group, Inc."
This document also constitutes a prospectus of Peoples Heritage relating to
the Peoples Heritage common stock issuable to holders of Banknorth common stock
upon completion of the merger. Based on (i) the 23,451,731 shares of Banknorth
common stock outstanding on the record date for the Peoples Heritage and
Banknorth special meetings, (ii) the 1,484,826 shares of Banknorth common stock
issuable upon the exercise of employee stock options or pursuant to other
Banknorth common stock equivalents outstanding on such date and (iii) a 1.825
exchange ratio, an estimated maximum of approximately 45.5 million shares of
Peoples Heritage common stock will be issuable upon completion of the merger,
which will represent approximately 29% of the outstanding Peoples Heritage
common stock. The actual number of shares of Peoples Heritage common stock to be
issued in the merger will depend on the number of shares of Banknorth common
stock outstanding when the merger is completed, the number of shares of
Banknorth common stock issuable upon the exercise of outstanding employee stock
options at such time and the actual exchange ratio.
Peoples Heritage has supplied all information contained or incorporated by
reference herein relating to Peoples Heritage, and Banknorth has supplied all
such information relating to Banknorth.
THE SPECIAL MEETINGS
TIME AND PLACE
PEOPLES HERITAGE. A special meeting of shareholders of Peoples Heritage
will be held at 10:30 a.m., eastern time, on Tuesday, March 7, 2000, at the
Portland Marriott Hotel, 200 Sable Oaks Drive, South Portland, Maine 04106.
BANKNORTH. A special meeting of shareholders of Banknorth will be held at
10:30 a.m., eastern time, on Tuesday, March 7, 2000, at the Clarion Hotel &
Conference Center, 1117 Williston Road, Burlington, Vermont 05403.
MATTERS TO BE CONSIDERED
At the applicable special meeting, you will be asked to consider and vote
upon a proposal to approve the merger agreement. You also may be asked to vote
upon such other matters as may properly come before the special meeting, which
may include a proposal to adjourn the special meeting. Any such adjournment or
adjournments could be used for the purpose of allowing additional time for the
managements of Peoples Heritage and Banknorth to solicit additional votes to
approve the merger agreement.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
PEOPLES HERITAGE. The close of business on January 14, 2000 has been fixed
by Peoples Heritage as the record date for the determination of holders of
Peoples Heritage common stock entitled to notice of and to vote at the Peoples
Heritage special meeting and any adjournment or adjournments. At the close of
business on the record date, there were 101,959,636 shares of Peoples Heritage
common stock outstanding and entitled to vote. Each share of Peoples Heritage
common stock entitles the holder to one vote at the Peoples Heritage special
meeting on all matters properly presented at the meeting.
BANKNORTH. The close of business on January 14, 2000 has been fixed by
Banknorth as the record date for the determination of holders of Banknorth
common stock entitled to notice of and to vote at the Banknorth special meeting
and any adjournment or adjournments. At the close of business on the record
date, there were 23,451,731 shares of Banknorth common stock outstanding and
entitled to vote. Each share of Banknorth common stock entitles the holder to
one vote at the Banknorth special meeting on all matters properly presented at
the meeting.
18
<PAGE>
VOTES REQUIRED
A quorum, consisting of the holders of a majority of the issued and
outstanding shares of Peoples Heritage common stock or Banknorth common stock,
as the case may be, must be present in person or by proxy before any action may
be taken at the special meetings. The affirmative vote of the holders of a
majority of the outstanding shares of Peoples Heritage common stock and
Banknorth common stock, voting in person or by proxy, is necessary to approve
the merger agreement on behalf of Peoples Heritage and Banknorth, respectively.
The proposal to adopt the merger agreement is considered a
"non-discretionary item" whereby brokerage firms may not vote in their
discretion on behalf of their clients if such clients have not furnished voting
instructions. Abstentions and such broker "non-votes" at the special meetings
will be considered in determining the presence of a quorum at the special
meetings but will not be counted as a vote cast for the merger agreement.
Because the proposal to adopt the merger agreement is required to be approved by
the holders of a majority of the outstanding shares of each of the Peoples
Heritage common stock and the Banknorth common stock, abstentions and broker
"non-votes" will have the same effect as a vote against this proposal at the
special meetings.
In connection with the execution of the merger agreement, Peoples Heritage
and the directors and executive officers of Banknorth entered into an agreement
pursuant to which, among other things, such persons agreed to vote their shares
of Banknorth common stock (which amount to less than 1% of the shares of such
stock outstanding, excluding shares subject to options) in favor of the merger
agreement at the Banknorth special meeting. Peoples Heritage and the directors
and executive officers of Peoples Heritage also have entered into an agreement
pursuant to which, among other things, such persons agreed to vote their shares
of Peoples Heritage common stock (which amount to less than 1.5% of the shares
of such stock outstanding, excluding shares subject to options) in favor of the
merger agreement at the Peoples Heritage special meeting. See "Certain
Beneficial Owners of Peoples Heritage Common Stock," "Certain Beneficial Owners
of Banknorth Common Stock" and "The Merger--Letter Agreements."
VOTING AND REVOCATION OF PROXIES
Each copy of this document mailed to holders of Peoples Heritage common
stock and Banknorth common stock is accompanied by a form of proxy for use at
the Peoples Heritage special meeting or the Banknorth special meeting, as the
case may be. Any shareholder executing a proxy may revoke it at any time before
it is voted by:
- filing written notice of revocation with the Secretary of Peoples Heritage
(in the case of a Peoples Heritage shareholder) or the secretary of
Banknorth (in the case of a Banknorth shareholder) at the address of
Peoples Heritage or Banknorth set forth on its respective notice of
special meeting of shareholders;
- executing a later-dated proxy; or
- attending the Peoples Heritage special meeting or the Banknorth special
meeting, as applicable, and giving notice of such revocation in person.
Attendance at the applicable special meeting will not, in and of itself,
constitute revocation of a proxy.
Each proxy returned to Peoples Heritage or Banknorth (and not revoked) by a
holder of Peoples Heritage common stock and Banknorth common stock,
respectively, will be voted in accordance with the instructions indicated
thereon. If no instructions are indicated, the proxy will be voted "FOR"
approval of the merger agreement. Proxies marked "FOR" approval of the merger
agreement and executed but unmarked proxies will be voted in the discretion of
the persons named in the accompanying proxies as to any proposed adjournment of
the special meetings. Proxies that are voted
19
<PAGE>
against approval of the merger agreement will not be voted in favor of any
motion to adjourn the special meetings to solicit more votes in favor of
approval of the merger agreement.
It is not expected that any matter other than those referred to herein will
be brought before either of the special meetings. If other matters are properly
presented, however, the persons named as proxies will vote in accordance with
their judgment with respect to such matters.
SOLICITATION OF PROXIES
Each of Peoples Heritage and Banknorth will bear its costs of mailing this
document to its shareholders, as well as all other costs incurred by it in
connection with the solicitation of proxies from its shareholders on behalf of
its board of directors, except that each company will share equally the cost of
printing this document. In addition to solicitation by mail, the directors,
officers and employees of each company and its subsidiaries may solicit proxies
from shareholders of such company by telephone, telegram or in person without
compensation other than reimbursement for their actual expenses. Arrangements
also will be made with brokerage firms and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial owners
of stock held of record by such persons, and each company will reimburse such
custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses
in connection therewith.
Peoples Heritage has retained Morrow & Co. and Banknorth has retained D.F.
King, each a professional proxy solicitation firm, to assist them in the
solicitation of proxies. The fee payable to such firms in connection with the
merger is $7,500 for Morrow and $6,000 for D.F. King, plus reimbursement for
reasonable out-of-pocket expenses.
20
<PAGE>
THE MERGER
The following information relating to the merger does not purport to be
complete and is qualified in its entirety by reference to the merger agreement,
a copy of which is attached hereto as Annex I. All shareholders are urged to
read the merger agreement carefully.
GENERAL
Under the terms and conditions set forth in the merger agreement, Banknorth
will be merged with and into Peoples Heritage, which will assume the name
"Banknorth Group, Inc." upon completion of the merger. At the effective time of
the merger each share of common stock of Banknorth, par value $1.00 per share
(together with the accompanying rights under the Banknorth shareholder rights
plan), outstanding immediately before the effective time of the merger (except
for any shares held by Peoples Heritage or Banknorth, other than in a fiduciary
capacity or in satisfaction of a debt previously contracted) will, by virtue of
the merger and without any action on the part of the shareholder, be converted
into the right to receive 1.825 shares of common stock of Peoples Heritage, par
value $0.01 per share (together with accompanying rights under the Peoples
Heritage shareholder rights plan), subject to possible adjustment under certain
circumstances, plus cash in lieu of any fractional share interest.
If, between the date of the merger agreement and the effective time of the
merger, the shares of Peoples Heritage common stock are changed into a different
number or class of shares by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or a stock dividend
thereon is declared with a record date within said period, the 1.825 exchange
ratio will be adjusted accordingly. The exchange ratio also could be subject to
possible adjustment under the termination provisions of the merger agreement, as
discussed under "--Termination and Amendment" below.
BACKGROUND OF THE MERGER
As part of its continuing efforts to enhance Banknorth's community banking
franchise and maximize shareholder value, Banknorth's management and board of
directors have regularly considered various strategic alternatives, including
continuing as an independent institution, growing internally and through
acquisitions of branches and of other community banks and entering into a
strategic merger with a similarly sized or larger institution. Since its
formation in 1989 from the merger of two Vermont-based bank holding companies,
Banknorth has experienced significant growth, primarily through branch office
and whole-bank acquisitions in markets contiguous to Vermont. See "Information
about Banknorth--Acquisitions." These acquisitions have furthered Banknorth's
goal of expanding its banking franchise into similar markets contiguous to its
existing markets, while maintaining its strong community banking focus and local
orientation.
The respective managements of Banknorth and Peoples Heritage have for some
time recognized the complimentary company profiles of Peoples Heritage and
Banknorth, including the geographic proximity and economic and demographic
similarities of their markets, and their similar community banking focus and
corporate cultures. In mid-1997, representatives of the managements of Banknorth
and Peoples Heritage entered into preliminary discussions about a possible
business combination. Those discussions were general in nature and did not
result in any agreement in principle on the form or amount of consideration or
other material terms. Discussions were terminated when it became apparent, due
to unusual trading activity in the Banknorth and Peoples Heritage common stock,
that word of the discussions had leaked to the market.
On March 25, 1999, Banknorth's president and chief executive officer,
William H. Chadwick, announced his intention to retire at the end of 1999.
Mr. Chadwick's announcement, made during the first quarter, was timed to provide
to the Banknorth board of directors a sufficient opportunity to
21
<PAGE>
engage in a considered and thorough search process for Mr. Chadwick's
replacement. At its regular meeting in March, the Banknorth board of directors
appointed a search committee, consisting of Banknorth vice chairman George W.
Dougan and three outside directors, including chairman of the board Angelo P.
Pizzagalli. All members of the search committee, except Mr. Dougan, are also
members of the executive committee.
Following his retirement announcement, Mr. Chadwick received a telephone
call from a representative of Keefe Bruyette & Woods who suggested indirectly
that Peoples Heritage might be interested in entering into discussions with
Banknorth about a possible business combination. In early April, Mr. Chadwick
received a telephone call from Peoples Heritage's chairman, president and chief
executive officer, William J. Ryan. The two men discussed preliminarily the
possibility of a business combination between Peoples Heritage and Banknorth,
and the potential benefits to the shareholders and customers of both
institutions that could result from the merger of their banking franchises.
Consistent with Banknorth's continuing policy of exploring various strategic
alternatives, Messrs. Chadwick and Pizzagalli met in mid-April with the chief
executive officer of a community bank located in upstate New York to discuss a
possible acquisition by Banknorth. This initial meeting did not result in any
offer or negotiations.
In light of Mr. Chadwick's recent discussions with Mr. Ryan,
Messrs. Chadwick and Pizzagalli concluded that it would be desirable for
Mr. Pizzagalli and Mr. Ryan to meet each other. On April 21, Messrs. Chadwick
and Pizzagalli flew to Portland to meet with Mr. Ryan and to discuss the two
companies' business and management philosophies and corporate cultures, and the
substantial competitive advantages that might result from a consolidation of the
two companies.
On April 22, the Banknorth search committee met to discuss the status of the
search for Mr. Chadwick's replacement. At this meeting, Messrs. Chadwick and
Pizzagalli reported to the committee on their preliminary discussions with
Mr. Ryan. The members of the committee indicated their support for continued
discussions with Peoples Heritage, although the committee did not take any
formal action.
On May 6, 1999, Messrs. Chadwick and Ryan met in Boston to continue their
discussions. On May 12, the executive committee of Banknorth's board of
directors, consisting of Mr. Chadwick and six outside directors, including
Mr. Pizzagalli, met jointly with the search committee to discuss the status of
the discussions with Peoples Heritage. Representatives of Banknorth's financial
advisor, Sandler O'Neill, were also present at the meeting and reviewed, among
other things, historical information about the assets, liabilities, financial
and market performance of Banknorth and Peoples Heritage, as well as pro forma
information for the combined entity under various exchange ratio scenarios.
Sandler O'Neill also presented a financial analysis of other strategic
alternatives. Following a discussion of a possible business combination with
Peoples Heritage and other strategic alternatives, the executive committee
authorized Mr. Chadwick to continue his exploratory discussions with Mr. Ryan.
On May 21, Messrs. Chadwick and Ryan met again in Boston. The topics
discussed included the companies' shared strategic objectives, the composition
of the board of directors and senior management of Peoples Heritage following
the merger, future plans for the merger of certain of the subsidiary banks,
retention of jobs in Vermont, consolidation of trust operations through The
Stratevest Group, N.A. and retention of Stratevest's Vermont headquarters, and
potential cost savings through consolidation of functions and systems. Also on
May 21, representatives of Banknorth and Peoples Heritage executed a customary
confidentiality agreement in anticipation of beginning the due diligence
investigation process.
Mr. Chadwick reported to the board of directors of Banknorth on the status
of his discussions with Mr. Ryan at the Board's regularly scheduled meeting on
May 25, 1999. Representatives of Sandler O'Neill were present at the meeting to
discuss the financial terms of the proposed transaction. Among
22
<PAGE>
the matters included in Sandler O'Neill's presentation was comparative
information for both companies on stock price, earnings, price/earnings
multiples, dividend payout rates, tangible earning assets, net interest margin
and efficiency ratios. Sandler O'Neill also discussed current market trends for
large cap and small cap stocks and for bank stocks generally, and analyzed
several possible stock-for-stock exchange ratios. Following discussion, the
board of directors of Banknorth authorized management to continue discussions
with Peoples Heritage, including negotiation of an acceptable exchange ratio,
and to present the matter to the board of directors for further consideration
after more definitive terms had been negotiated. The board of directors also
requested that management and Sandler O'Neill present to it an analysis of the
Peoples Heritage proposal in comparison to other strategic alternatives for
maximizing shareholder value.
Following the May 25 meeting of the Banknorth board of directors, senior
management and financial and legal representatives of each of Banknorth and
Peoples Heritage continued to discuss the financial and other terms of the
proposed merger, including the exchange ratio, as well as each company's
respective business and operations. Banknorth and Peoples Heritage also
exchanged financial and other information with respect to their respective
business and operations.
On June 1, 1999, the Peoples Heritage board of directors held a special
meeting to consider the merger agreement and the terms of the proposed merger.
The Peoples Heritage board of directors previously had considered the proposed
merger at meetings held on May 25 and May 27, 1999. At the meeting on July 1,
Messrs. Ryan and Peter J. Verrill, executive vice president and chief financial
officer of Peoples Heritage, reviewed the reasons for and potential benefits of
the merger and discussed management's due diligence investigation of Banknorth;
Carol L. Mitchell, executive vice president and general counsel of Peoples
Heritage, reviewed the terms of the merger agreement and related documents,
including the reciprocal stock option agreements; and representatives of Keefe,
Bruyette & Woods made a presentation regarding the financial terms of the merger
and the fairness, from a financial point of view, of the proposed exchange ratio
to the shareholders of Peoples Heritage. Following a thorough discussion and
consideration of the factors discussed below under "--Reasons for the Merger;
Recommendations of the Boards of Directors--Peoples Heritage," the Peoples
Heritage directors present at the meeting unanimously approved the merger
agreement and the merger and authorized the execution of the merger agreement
and the reciprocal stock option agreements.
On the evening of June 1, 1999, the Banknorth board of directors held a
special meeting to consider the merger agreement and the terms of the proposed
merger. At this meeting, outside counsel for Banknorth reviewed the fiduciary
obligations of the board of directors to the shareholders of Banknorth, and
reviewed in detail the terms and conditions of the draft merger agreement and
its exhibits, including the reciprocal stock option agreements. Representatives
of Banknorth's independent public accountants also were present and discussed
the proposed accounting treatment for the merger. At this meeting Banknorth
management reported in detail on the results of its due diligence investigation
of Peoples Heritage. In addition, representatives of Sandler O'Neill made a
detailed presentation of the financial terms of the merger and the fairness,
from a financial point of view, of the proposed exchange ratio to the
shareholders of Banknorth, as well as analyzed other potential strategic
alternatives. Following a thorough discussion and consideration of the factors
discussed below under "--Reasons for the Merger; Recommendations of the Boards
of Directors--Banknorth," the Banknorth directors present at the meeting
unanimously approved the merger agreement and the merger and authorized the
execution of the merger agreement and the reciprocal stock option agreements.
Agreement was reached on final terms and the merger agreement and exhibits
were executed late in the evening on June 1. The companies made a joint public
announcement of the proposed merger before the start of trading on the morning
of June 2.
23
<PAGE>
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
BANKNORTH. In reaching its decision to approve the merger agreement and the
transactions contemplated thereby, the Banknorth board of directors considered a
number of factors, including:
- the respective business, operations, asset quality, financial condition,
earnings, strategic business plans, histories of successful acquisitions,
competitive positions and stock price performance of Banknorth and Peoples
Heritage (see "--Background of the Merger," "Summary--Selected
Consolidated Financial Data of Peoples Heritage" and "Summary--Selected
Consolidated Financial Data of Banknorth");
- the similar community banking cultures and business philosophies of the
two companies, particularly with respect to customer satisfaction,
efficiency, credit quality, product diversification and serving the
banking needs of small towns and semi-rural communities, and the
companies' compatible management teams;
- the projected market capitalization and market position of the combined
entity, the diversification of the companies' asset and deposit bases, and
the ability of the combined company to compete more effectively in New
England and elsewhere (see "Summary--Selected Pro Forma Consolidated
Financial Data" and "Pro Forma Combined Consolidated Financial
Information");
- the pro forma financial effects of the proposed transactions, including
the cost savings (resulting from back office efficiencies, layoffs,
consolidations and other cost savings) and enhanced revenue anticipated to
result from the merger, and the effects of the merger on the risk-based
and leverage capital ratios of the combined company and its subsidiary
banks (see "Summary--Selected Pro Forma Consolidated Financial Data" and
"Pro Forma Combined Consolidated Financial Information");
- the likely impact of the proposed merger on the employees and customers of
Banknorth and its subsidiaries, on the communities in which Banknorth
presently conducts its business and on Banknorth's other constituencies;
- the current and prospective economic, regulatory and competitive climate
facing independent community banking organizations, including the
consolidation currently underway in the banking industry and competition
from larger institutions and from nonbank providers of financial services;
- the exchange ratio in the merger from a number of valuation perspectives,
as presented by Sandler O'Neill, and the current market value of the
merger to Banknorth's shareholders (see "--Opinions of Financial
Advisors--Banknorth");
- the June 1, 1999 opinion of Sandler O'Neill that the exchange ratio is
fair to Banknorth's shareholders from a financial point of view (see
"--Opinions of Financial Advisors--Banknorth");
- the terms of the merger agreement, including the proposed board
representation and management structure of the combined company, and the
termination provisions applicable in the event of a significant decline in
the price of Peoples Heritage common stock relative to a market index
prior to the consummation of the merger (see "--Termination and Amendment"
and "Management and Operations of Peoples Heritage After the Merger");
- the terms of the stock option agreements (see "--Stock Option
Agreements");
- the nature of, and likelihood of obtaining, the regulatory and shareholder
approvals that would be required in order to consummate the merger (see
"--Regulatory Approvals");
24
<PAGE>
- the treatment of the merger as a pooling of interests for financial
accounting purposes and as a tax-free reorganization for federal income
tax purposes (see "--Certain Federal Income Tax Consequences" and
"--Accounting Treatment of the Merger");
- the restructuring charge of approximately $31.0 million on an after-tax
basis that the combined company is expected to take in connection with the
merger and the impact of this charge on the combined company's earnings
(see "Management and Operations of Peoples Heritage After the Merger");
and
- the consolidation, following the merger, of Peoples Heritage's trust
operations into The Stratevest Group, N.A. and the retention of
Stratevest's headquarters in Vermont for at least two years, and the
resulting positive impact on employment in Vermont.
The foregoing discussion of the information and factors considered by the
Banknorth board of directors is not intended to be exhaustive but includes all
material factors considered by the Banknorth board of directors. In reaching its
determination to approve and recommend the merger, the Banknorth board of
directors did not assign relative or specific weights to the foregoing factors,
and individual directors may have given differing weights to different factors.
FOR THE REASONS DESCRIBED ABOVE, THE BANKNORTH BOARD OF DIRECTORS HAS
DETERMINED THE MERGER TO BE FAIR TO AND IN THE BEST INTERESTS OF BANKNORTH AND
ITS SHAREHOLDERS, CUSTOMERS AND COMMUNITIES SERVED. ACCORDINGLY, THE BANKNORTH
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
PEOPLES HERITAGE. Peoples Heritage's acquisition strategy consists of
identifying financial institutions which have business philosophies which are
similar to those of Peoples Heritage, operate in strong markets that are
geographically compatible with the markets in which Peoples Heritage operates,
are financially sound and can be acquired for reasonable cost. Acquisitions also
are evaluated in terms of asset quality, interest rate risk, potential operating
efficiencies and revenue enhancements and management capabilities.
In reaching its determination to approve the merger agreement and the
transactions contemplated thereby, the Peoples Heritage board of directors
considered a number of factors, including:
- the Peoples Heritage board's review, with the assistance of management and
of Keefe, Bruyette & Woods, of the financial condition, results of
operations, business and overall prospects of Banknorth;
- the fact that Banknorth's strong banking franchises in Vermont and upstate
New York are contiguous to Peoples Heritage's existing banking franchises
in New Hampshire and Massachusetts and that Banknorth's franchises in
Massachusetts and New Hampshire significantly enhance Peoples Heritage's
franchises in these states with little overlap;
- the enhanced ability of the combined entity to compete against larger
competitors;
- the financial presentations of senior management and Keefe, Bruyette &
Woods and the opinion of Keefe, Bruyette as to the fairness of the
exchange ratio from a financial point of view to the Peoples Heritage
shareholders (see "--Opinions of Financial Advisors--Peoples Heritage");
- the terms of the merger agreement and the stock option agreements (see
"--Stock Option Agreements");
- the anticipated cost savings and operating synergies available to the
combined company subsequent to consummation of the merger, as well as the
restructuring charge of approximately $31.0 million on an after-tax basis
that the combined company is expected to take in connection
25
<PAGE>
with the merger and the impact of this charge on the combined company's
earnings (see "Management and Operations of Peoples Heritage After the
Merger");
- the expectation that the merger will be a tax-free transaction to Peoples
Heritage (see "--Certain Federal Income Tax Consequences");
- the expectation that the merger will qualify for pooling of interests
accounting treatment (see "--Accounting Treatment of the Merger"); and
- the nature of, and likelihood of obtaining, the regulatory and shareholder
approvals that would be required in order to consummate the merger (see
"--Regulatory Approvals").
The foregoing discussion of the information and factors discussed by the
Peoples Heritage board of directors is not meant to be exhaustive but includes
all material factors considered by the Peoples Heritage board of directors. In
reaching its determination to approve and recommend the merger, the Peoples
Heritage board of directors did not assign relative or specific weights to the
foregoing factors and individual directors may have given differing weights to
different factors.
FOR THE REASONS DESCRIBED ABOVE, THE PEOPLES HERITAGE BOARD OF DIRECTORS HAS
DETERMINED THE MERGER TO BE FAIR TO AND IN THE BEST INTERESTS OF PEOPLES
HERITAGE AND ITS SHAREHOLDERS. THE PEOPLES HERITAGE BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
BANKNORTH. By letter agreement dated as of May 26, 1999, Banknorth retained
Sandler O'Neill as an independent financial advisor in connection with
Banknorth's consideration of a possible business combination with Peoples
Heritage. Sandler O'Neill is a nationally-recognized investment banking firm
whose principal business specialty is financial institutions. In the ordinary
course of its investment banking business, Sandler O'Neill is regularly engaged
in the valuation of financial institutions and their securities in connection
with mergers and acquisitions and other corporate transactions.
Sandler O'Neill acted as financial advisor to Banknorth in connection with
the merger and participated in certain of the negotiations leading to the merger
agreement. At the request of the Banknorth board of directors, representatives
of Sandler O'Neill attended an executive committee meeting on May 12, 1999 and
the regular meeting of the Banknorth board of directors on May 25, 1999, at
which a possible business combination with Peoples Heritage was discussed.
Representatives of Sandler O'Neill also attended the June 1, 1999 meeting of the
Banknorth board of directors at which the board considered and approved the
merger agreement. At the June 1 meeting, Sandler O'Neill delivered to the
Banknorth board of directors its oral opinion, subsequently confirmed in
writing, that as of such date, the exchange ratio was fair to the Banknorth
shareholders from a financial point of view. Sandler O'Neill also has delivered
to the Banknorth board of directors a written opinion dated the date of this
prospectus/joint proxy statement which is substantially identical to the
June 1, 1999 opinion.
The full text of the Sandler O'Neill opinion is attached as Annex IV to this
prospectus/joint proxy statement. The Sandler O'Neill opinion outlines the
procedures followed, assumptions made, matters considered and qualifications and
limitations on the review undertaken by Sandler O'Neill in rendering the
opinion. The Sandler O'Neill opinion is incorporated by reference into this
description of the opinion and this description is qualified in its entirety by
reference to the Sandler O'Neill opinion. Banknorth shareholders are urged to
carefully read the Sandler O'Neill opinion in connection with their
consideration of the proposed merger.
26
<PAGE>
THE SANDLER O'NEILL OPINION WAS DIRECTED TO THE BANKNORTH BOARD OF DIRECTORS
AND WAS PROVIDED TO THE BANKNORTH BOARD FOR ITS INFORMATION IN CONSIDERING THE
MERGER. THE SANDLER O'NEILL OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE
EXCHANGE RATIO TO BANKNORTH SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW. IT DOES
NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF BANKNORTH TO ENGAGE IN THE
MERGER OR ANY OTHER ASPECT OF THE MERGER AND IS NOT A RECOMMENDATION TO ANY
BANKNORTH SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL
MEETING WITH RESPECT TO THE MERGER OR ANY OTHER RELATED MATTER.
In rendering its June 1, 1999 opinion, Sandler O'Neill performed a variety
of financial analyses. The following is a summary of the material analyses
performed by Sandler O'Neill, but is not a complete description of all the
analyses underlying Sandler O'Neill's opinion. The preparation of a fairness
opinion is a complex process involving subjective judgments as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances. The process, therefore, is not
necessarily susceptible to a partial analysis or summary description. Sandler
O'Neill believes that its analyses must be considered as a whole and that
selecting portions of the factors and analyses considered without considering
all factors and analyses, or attempting to ascribe relative weights to some or
all such factors and analyses, could create an incomplete view of the evaluation
process underlying its opinion. Also, no company included in Sandler O'Neill's
comparative analyses described below is identical to Peoples Heritage or
Banknorth and no transaction is identical to the merger. Accordingly, an
analysis of comparable companies or transactions involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other factors that could affect the public trading values
or merger transaction values, as the case may be, of Peoples Heritage and
Banknorth and the companies to which they are being compared.
The earnings projections for Banknorth and Peoples Heritage relied upon by
Sandler O'Neill in its analyses were reviewed with management and were based
upon 1999 internal projections of Banknorth and Peoples Heritage provided to
Sandler O'Neill and on published IBES consensus earnings estimates for 2000. For
periods after 2000, Sandler O'Neill assumed an annual growth rate on earning
assets of 5% in the case of Banknorth and 8% in the case of Peoples Heritage.
The 1999 earnings projections furnished to Sandler O'Neill were prepared by the
senior managements of Banknorth and Peoples Heritage for internal purposes only
and not with a view towards public disclosure. Those projections, as well as the
other earnings estimates relied upon by Sandler O'Neill in its analyses, were
based on numerous variables and assumptions which are inherently uncertain and
accordingly, actual results could vary materially from those set forth in such
projections.
In performing its analyses, Sandler O'Neill also made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which cannot be predicted and are beyond the
control of Banknorth, Peoples Heritage and Sandler O'Neill. The analyses
performed by Sandler O'Neill are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Sandler O'Neill prepared its analyses for purposes of
rendering its opinion and provided such analyses to the Banknorth Board at the
June 1st meeting. Estimates on the values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Such estimates are inherently subject to
uncertainty and actual values may be materially different. Accordingly, Sandler
O'Neill's analyses do not necessarily reflect the value of Banknorth common
stock or Peoples Heritage common stock or the prices at which Banknorth common
stock or Peoples Heritage common stock may be sold at any time.
27
<PAGE>
SUMMARY OF PROPOSAL. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based on the closing price of Peoples Heritage common
stock on May 28, 1999 of $18.75 and an exchange ratio of 1.825, Sandler O'Neill
calculated an implied transaction value per share of Banknorth common stock of
$34.22. The implied aggregate transaction value was approximately $811 million,
based upon 23,699,591 diluted shares of Banknorth common stock outstanding,
which was determined using the treasury stock method at the implied value of
$34.22.
Based upon Banknorth's March 31, 1999 financial information, Sandler O'Neill
calculated the following ratios:
<TABLE>
<S> <C>
Implied value/Tangible book value........................... 3.19x
Implied value/Actual last twelve months' earnings per
share..................................................... 24.44x
Implied value/Normalized last twelve months' earnings per
share(1).................................................. 17.11x
</TABLE>
- ------------------------
(1) Reflects management's estimate of last twelve months normalized earnings per
share of $2.00, which excludes one-time merger related charges.
For purposes of Sandler O'Neill's analyses, earnings per share were based on
diluted earnings per share. Sandler O'Neill noted that the implied transaction
value represented a 28% premium over the May 28, 1999 closing price of the
Banknorth common stock of $26.69.
STOCK TRADING HISTORY. Sandler O'Neill reviewed the history of the reported
trading prices and volume of Banknorth common stock and Peoples Heritage common
stock, and the relationship between the movements in the prices of Banknorth
common stock and Peoples Heritage common stock, respectively, to movements in
certain stock indices, including the Standard & Poor's 500 Index, the NASDAQ
Bank Index and, in the case of Banknorth, the median performance of a composite
group of publicly-traded regional commercial banks selected by Sandler O'Neill
and, in the case of Peoples Heritage, the median performance of a composite
group of regional savings institutions selected by Sandler O'Neill. During the
one year period ended May 28, 1999, the Banknorth common stock underperformed
each of the indices to which it was compared, and the Peoples Heritage common
stock outperformed its composite group index, matched the NASDAQ Bank Index and
underperformed the S&P Index.
COMPARABLE COMPANY ANALYSIS. Sandler O'Neill used publicly available
information to compare selected financial and market trading information for
Banknorth with that of Peoples Heritage and the following three groups of
commercial banks:
- The Regional Group, consisting of Banknorth and the following 12
publicly-traded regional commercial banks: BSB Bancorp, Inc., Chittenden
Corporation, Commerce Bancorp, Inc., Community Bank Systems, Inc., Fulton
Financial Corp., Hudson United Bancorp, Independent Bank Corp., Keystone
Financial, Inc., TrustCo Bank Corp NY, United National Bancorp, UST Corp.
and Valley National Bancorp.
- The New England Group, consisting of Banknorth and the following 10
publicly-traded New England commercial banks: Camden National Corp., CCBT
Bancorp, Inc., Century Bancorp, Inc., Chittenden Corporation, Granite
State Bankshares, Inc., Independent Bank Corp., Merchants
Bancshares, Inc., New England Community Bancorp, UST Corp. and Washington
Trust Bancorp, Inc.
- The Highly Valued Group, consisting of the following 16 publicly-traded
commercial banks that had a return on average equity (based on last twelve
months' earnings) of greater than 16% and a price to tangible book value
of greater than 178%: BOK Financial Corp., CCB Financial Corp., City
National Corp., Commerce Bancorp, Inc., Cullen/Frost Bankers Inc., Greater
Bay Bancorp, Hamilton Bancorp, Inc., Irwin Financial Corp., National
Commerce Bancorp, National
28
<PAGE>
Penn Bancshares, Park National Corp., Republic Bancorp, Inc., TrustCo Bank
Corp NY, Valley National Bancorp, Westamerica Bancorp and Wilmington Trust
Corp.
The analysis compared publicly available financial information for Banknorth
and Peoples Heritage and the median data for each of the Regional Group, New
England Group and Highly Valued Group as of and for each of the years ended
December 31, 1994 through 1998 and as of and for the twelve months ended
March 31, 1999. The table below shows the comparative data as of and for the
twelve months ended March 31, 1999.
<TABLE>
<CAPTION>
REGIONAL NEW ENGLAND HIGHLY PEOPLES
BANKNORTH GROUP GROUP VALUED GROUP HERITAGE
---------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Total assets..................... $4,338,522 $4,338,522 $9,972,761 $4,730,452 $12,594,324
Annual growth rate of total
assets......................... 8.42% 8.39% 10.12% 8.24% 6.51%
Total equity/total assets........ 7.48% 7.61% 8.47% 7.71% 7.19%
Intangible assets/total equity... 23.18% 5.56% 5.98% 3.14% 13.41%
Net loans/total assets........... 65.01% 63.74% 64.26% 66.19% 57.59%
Cash and securities/total
assets......................... 29.45% 29.85% 31.87% 28.91% 36.60%
Gross loans/total deposits....... 80.21% 80.02% 82.78% 83.01% 89.62%
Total borrowings/total assets.... 8.35% 11.51% 12.03% 11.55% 26.03%
Non-performing assets/total
assets......................... .43% .38% .42% .29% .43%
Loan loss reserve/gross loans.... 1.59% 1.48% 1.58% 1.60% 1.50%
Net interest margin.............. 4.35% 4.34% 4.52% 4.51% 4.00%
Loan loss provision/average
assets......................... .22% .21% .12% .21% .13%
Non-interest income/average
assets......................... 1.11% .91% 1.02% .91% 1.33%
Non-interest expense/average
assets......................... 3.26% 3.10% 3.12% 3.08% 2.65%
Efficiency ratio................. 59.31% 56.85% 59.32% 52.01% 53.96
Return on average assets......... 1.17% 1.12% 1.17% 1.57% 1.28%
Return on average equity......... 15.82% 15.02% 15.23% 18.51% 17.28%
Price/tangible book value per
share.......................... 248% 249% 213% 332% 248%
Price/earnings per share......... 13.35x 14.8x 13.35x 18.17x 13.09x
Dividend yield................... 2.70% 3.26% 2.69% 2.01% 2.45%
Dividend payout ratio............ 24.8% 45.26% 36.55% 36.52% 30.24%
</TABLE>
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Sandler O'Neill reviewed certain
other transactions involving publicly traded commercial banks as acquired
institutions with transaction values greater than $15 million. Sandler O'Neill
reviewed 49 transactions announced nationwide from January 1, 1999 to May 25,
1999 (the "Nationwide Transactions") and seven transactions announced from
May 30, 1998 to May 25, 1999 in the New England region, comprising Connecticut,
Massachusetts, Rhode Island, Maine, New Hampshire and Vermont (the "New England
Transactions"). Sandler O'Neill reviewed the ratios of transaction value to last
four quarters' earnings, transaction value to book value, transaction value to
tangible book value, tangible book premium to core deposits, transaction value
to total assets and computed high, low, mean, and median ratios and premiums to
market for the respective groups of transactions. These multiples were applied
to Banknorth's financial information as of and for the twelve months ended
March 31, 1999. As illustrated in the following table, Sandler O'Neill derived
an imputed range of values per share of Banknorth common stock of $30.89 to
$44.79 based upon the median multiples for Nationwide Transactions and $28.72 to
$45.97 based upon the median multiples for New
29
<PAGE>
England Transactions. As calculated by Sandler O'Neill, the implied transaction
value per share of Banknorth common stock in the merger was $34.22.
<TABLE>
<CAPTION>
NATIONWIDE NEW ENGLAND
TRANSACTIONS TRANSACTIONS
------------------- -------------------
MEDIAN IMPLIED MEDIAN IMPLIED
MULTIPLE VALUE MULTIPLE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Deal price/Last twelve months earnings per share(1)........ 21.92x $43.83 23.00x $45.97
Deal price/Book value...................................... 2.74x 38.02 2.60x 36.17
Deal price/Tangible book value............................. 2.89x 30.89 2.69x 28.72
Tangible book premium/Core deposits........................ 21.92% 41.98 16.81% 34.65
Deal price/Total assets.................................... 24.43% 44.79 22.04% 40.40
Premium to market.......................................... 37.95% 36.82 44.85% 38.66
</TABLE>
- ------------------------
(1) Based on a normalized earnings per share of $2.00.
DISCOUNTED DIVIDEND STREAM AND TERMINAL VALUE ANALYSIS. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of Banknorth through December 31, 2004 under various
circumstances, assuming Banknorth's current dividend payout ratio and that
Banknorth performed in accordance with the earnings forecasts reviewed with
management. To approximate the terminal value of Banknorth common stock at
December 31, 2004, Sandler O'Neill applied price/earnings multiples ranging from
7x to 24x and applied multiples of tangible book value ranging from 100% to
475%. The dividend income streams and terminal values were then discounted to
present values using different discount rates ranging from 9% to 15% chosen to
reflect different assumptions regarding required rates of return of holders or
prospective buyers of Banknorth common stock. As illustrated in the following
table, this analysis indicated an imputed range of values per share of Banknorth
common stock of $14.47 to $54.19 when applying the price/earnings multiples and
$14.51 to $70.53 when applying multiples of tangible book value. As calculated
by Sandler O'Neill, the implied transaction value per share of Banknorth common
stock in the merger was $34.22.
<TABLE>
<CAPTION>
PRICE/EARNINGS TANGIBLE BOOK
MULTIPLES VALUE MULTIPLES
------------------- -------------------
DISCOUNT RATE 7X 24X 1.0X 4.75X
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
9%......................................... $19.42 $54.19 $19.46 $70.53
11.......................................... 17.58 48.51 17.62 63.05
13.......................................... 15.94 43.47 15.98 56.41
15.......................................... 14.47 38.99 14.51 50.52
</TABLE>
Sandler O'Neill discussed the above ranges of multiples with the Banknorth
board of directors, with special focus on transactions having price/earnings
multiples of between 11x and 21x, and on transactions having tangible book value
multiples of between 1.75x and 3.25x. In connection with its analysis, Sandler
O'Neill also considered and discussed with the Banknorth board of directors how
the present value analysis would be affected by changes in the underlying
assumptions, including variations with respect to the growth rate of assets, net
interest spread, non-interest income, non-interest expenses and dividend payout
ratio. Sandler O'Neill noted that the discounted dividend stream and terminal
value analysis is a widely used valuation methodology, but the results of such
methodology are highly dependent upon the numerous assumptions that must be
made, and the results thereof are not necessarily indicative of actual values or
future results.
PRO FORMA MERGER ANALYSIS. Sandler O'Neill analyzed certain potential pro
forma effects of the merger, based upon the exchange ratio of 1.825, Peoples
Heritage's and Banknorth's current and projected income statements and balance
sheets, and assumptions regarding the economic environment, accounting and tax
treatment of the merger, charges associated with the merger, operating
efficiencies
30
<PAGE>
and other adjustments discussed with the senior managements of Banknorth and
Peoples Heritage. As illustrated in the following table, this analysis indicated
that the merger would be accretive to Banknorth's projected earnings per share,
tangible book value per share and dividend as of December 31, 2000. Also, the
analysis indicated that the merger would be dilutive to Peoples Heritage's
earnings and tangible book value per share for the year ended December 31, 2000.
The actual results achieved by Peoples Heritage and Banknorth may vary from
projected results and the variations may be material.
<TABLE>
<CAPTION>
PEOPLES HERITAGE BANKNORTH
----------------------- -----------------------
YEAR ENDING DECEMBER 31, 2000 STAND ALONE PRO FORMA STAND ALONE PRO FORMA
- ----------------------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Projected earnings per share...................... $1.81 $1.76 $ 2.47 $ 3.22
Projected tangible book value..................... 9.80 8.93 $14.18 $16.30
Projected dividend................................ .61 .61 .88 1.10
Projected leverage capital ratio.................. 8.17% 6.67% NM NM
</TABLE>
- ------------------------
(1) Determined by multiplying the Peoples Heritage values by the exchange ratio.
CONTRIBUTION ANALYSIS. Sandler O'Neill reviewed the relative contributions
to be made by Banknorth and Peoples Heritage to the combined institution based
on data at and for the twelve months ended March 31, 1999. This analysis
indicated that the implied contributions to the combined entity were as follows:
<TABLE>
<CAPTION>
BANKNORTH PEOPLES HERITAGE
--------- ----------------
<S> <C> <C>
Total assets........................................ 25.6% 74.4%
Total net loans..................................... 28.0 72.0
Goodwill............................................ 38.3 61.7
Total deposits...................................... 30.3 69.7
Total borrowings.................................... 9.8 90.2
Tangible equity..................................... 24.1 75.9
Total equity........................................ 26.4 73.6
LTM net income...................................... 26.6 73.4
LQA net income...................................... 25.0 75.0
Percentage of pro forma shares owned................ 27.7 72.3
</TABLE>
In connection with rendering its June 1, 1999 opinion, Sandler O'Neill
reviewed, among other things:
- the merger agreement and exhibits thereto;
- the stock option agreements between Banknorth and Peoples Heritage;
- certain publicly-available financial statements of Banknorth and other
historical financial information provided by Banknorth that they deemed
relevant;
- certain publicly-available financial statements of Peoples Heritage and
other historical financial information provided by Peoples Heritage that
they deemed relevant;
- certain internal financial analyses and forecasts of Banknorth prepared by
and reviewed with management of Banknorth and the views of senior
management of Banknorth, based on certain limited discussions with certain
members of senior management, regarding Banknorth's past and current
business, financial condition, results of operations and future prospects;
- certain internal financial analyses and forecasts of Peoples Heritage
prepared by and reviewed with management of Peoples Heritage and the views
of senior management of Peoples Heritage, based on certain limited
discussions with certain members of senior management, regarding
31
<PAGE>
Peoples Heritage's past and current business, financial condition, results
of operations and future prospects;
- the pro forma impact of the merger;
- the publicly-reported historical price and trading activity for
Banknorth's and Peoples Heritage's common stock, including a comparison of
certain financial and stock market information for Banknorth and Peoples
Heritage with similar publicly available information for certain other
companies the securities of which are publicly traded;
- the financial terms of recent business combinations in the commercial
banking industry, to the extent publicly available;
- the current market environment generally and the banking environment in
particular; and
- such other information, financial studies, analyses and investigations and
financial, economic and market criteria as they considered relevant.
In connection with rendering the updated Sandler opinion, included as Annex
IV to this document, Sandler O'Neill confirmed the appropriateness of its
reliance on the analyses used to render its June 1, 1999 opinion by performing
procedures to update certain of such analyses and by reviewing the assumptions
upon which such analyses were based and the other factors considered in
rendering its opinion.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon the accuracy and completeness of all the financial information, analyses
and other information that was publicly available or otherwise furnished to,
reviewed by or discussed with it, and Sandler O'Neill did not assume any
responsibility or liability for independently verifying the accuracy or
completeness of any of such information. Sandler O'Neill did not make an
independent evaluation or appraisal of the assets, the collateral securing
assets or the liabilities, contingent or otherwise, of Banknorth or Peoples
Heritage or any of their respective subsidiaries, or the collectibility of any
such assets, nor was it furnished with any such evaluations or appraisals.
Sandler O'Neill is not an expert in the evaluation of allowances for loan losses
and it has not made an independent evaluation of the adequacy of the allowance
for loan losses of Banknorth or Peoples Heritage, nor has it reviewed any
individual credit files relating to Banknorth or Peoples Heritage. With
Banknorth's consent, Sandler O'Neill has assumed that the respective allowances
for loan losses for both Banknorth and Peoples Heritage are adequate given the
inherent risk of loss in the respective loan portfolios and will be adequate on
a pro forma basis for the combined entity. In addition, Sandler O'Neill has not
conducted any physical inspection of the properties or facilities of Banknorth
or Peoples Heritage. With respect to all financial projections reviewed with
each company's management and used by Sandler O'Neill in its analyses, Sandler
O'Neill assumed that they reflected the best currently available estimates and
judgments of the respective managements of the respective future financial
performances of Banknorth and Peoples Heritage and that such performances will
be achieved. Sandler O'Neill expressed no opinion as to such financial
projections or the assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
its opinion. Sandler O'Neill assumed, in all respects material to its analysis,
that all of the representations and warranties contained in the merger agreement
and all related agreements are true and correct, that each party to such
agreements will perform all of the covenants required to be performed by such
party under such agreements and that the conditions precedent in the merger
agreement are not waived. Sandler O'Neill also assumed, with Banknorth's
consent, that there has been no material change in Banknorth's and Peoples
Heritage's assets, financial condition, results of operations, business or
prospects since the date of the last publicly filed financial statements
available to them, that Banknorth and Peoples Heritage will remain as going
concerns for all periods relevant to its analyses, and that the merger will be
accounted for as a pooling of interests and will qualify as a tax-free
reorganization for federal income tax purposes.
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Banknorth has agreed to pay Sandler O'Neill a transaction fee in connection
with the merger, a substantial portion of which is contingent upon the closing
of the merger. Based on the closing price of Peoples Heritage common stock on
January 28, 2000 (the latest practicable date prior to the date of this
document), Banknorth would pay Sandler O'Neill a transaction fee of
approximately $ million, of which approximately $1.26 million has been paid and
the balance will be paid when the merger is closed. Banknorth has also paid
Sandler O'Neill a fee of $250,000 for rendering its fairness opinion, which will
be credited against that portion of the transaction fee due upon closing of the
merger. Banknorth has also agreed to reimburse Sandler O'Neill for its
reasonable out-of-pocket expenses incurred in connection with its engagement and
to indemnify Sandler O'Neill and its affiliates and their respective partners,
directors, officers, employees, agents, and controlling persons against certain
expenses and liabilities, including liabilities under securities laws.
Sandler O'Neill has in the past provided certain other investment banking
services to Banknorth and has received compensation for such services. In the
ordinary course of its business as a broker-dealer, Sandler O'Neill may also
purchase securities from and sell securities to Banknorth and Peoples Heritage
and may actively trade the equity or debt securities of Banknorth and Peoples
Heritage and their respective affiliates for its own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
PEOPLES HERITAGE. On June 1, 1999, Peoples Heritage formally engaged Keefe,
Bruyette & Woods, Inc. ("KBW") to provide a fairness opinion in connection with
the merger with Banknorth. Pursuant to the terms of its engagement, KBW agreed
to assist Peoples Heritage in analyzing, structuring, negotiating and effecting
a transaction with Banknorth. Peoples Heritage selected KBW because KBW is a
nationally-recognized investment banking firm with substantial experience in
transactions similar to the merger and is familiar with Peoples Heritage and its
business. As part of its investment banking business, KBW is continually engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions.
As part of its engagement, representatives of KBW attended the meeting, held
on June 1, 1999, at which the Peoples Heritage board of directors considered and
approved the merger agreement. At the June 1, 1999 meeting, KBW rendered an oral
opinion (subsequently confirmed in writing) that, as of such date, the exchange
ratio was fair to the holders of shares of Peoples Heritage common stock from a
financial point of view. Such opinion was reconfirmed in writing as of the date
of this prospectus/joint proxy statement.
The full text of KBW's updated written opinion dated as of the date of this
prospectus/joint proxy statement is attached as Annex V hereto and is
incorporated herein by reference. The description of the opinion set forth
herein is qualified in its entirety by reference to Annex V. Peoples Heritage
shareholders are urged to read the opinion in its entirety for a description of
the procedures followed, assumptions made, matters considered and qualifications
and limitations on the review undertaken by KBW in connection therewith.
KBW'S OPINION IS DIRECTED TO THE PEOPLES HERITAGE BOARD OF DIRECTORS AND
ADDRESSES ONLY THE EXCHANGE RATIO. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS
DECISION TO PROCEED WITH THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY PEOPLES HERITAGE SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
PEOPLES HERITAGE SPECIAL MEETING WITH RESPECT TO THE MERGER OR ANY OTHER MATTER
RELATED THERETO.
KBW has informed Peoples Heritage that in arriving at its written opinion,
KBW, among other things:
- reviewed Peoples Heritage's annual reports on Form 10-K and related
audited financial information for the three fiscal years ended
December 31, 1998 and Peoples Heritage's quarterly
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reports on Form 10-Q and related unaudited financial information for the
quarterly periods ended March 31, 1999 and September 30, 1998;
- reviewed Banknorth's annual reports on Form 10-K and related audited
financial information for the three fiscal years ended December 31, 1998
and Banknorth's quarterly reports on Form 10-Q and related unaudited
financial information for the quarterly periods ended March 31, 1999 and
September 30, 1998;
- reviewed certain limited financial information, including financial
forecasts, relating to the respective businesses, earnings, assets and
prospects of Peoples Heritage and Banknorth furnished to KBW by senior
management of Peoples Heritage and Banknorth, as well as projected cost
savings estimates and transaction related expenses expected to result from
the merger furnished to it by senior management of Peoples Heritage;
- conducted certain limited discussions with members of senior management of
Peoples Heritage and Banknorth concerning the respective businesses,
financial condition, earnings, assets, liabilities, operations, regulatory
condition, financial forecasts, contingencies and prospects of Peoples
Heritage and Banknorth and their respective views as to the future
financial performance of Peoples Heritage, Banknorth, and the combined
entity, as the case may be, following the merger;
- reviewed the historical market prices and trading activity for the Peoples
Heritage common stock and the Banknorth common stock and compared them
with that of certain publicly traded companies which KBW deemed to be
relevant;
- compared the respective results of operations of Peoples Heritage and
Banknorth with those of certain companies which KBW deemed to be relevant;
- compared the proposed financial terms of the merger contemplated by the
merger agreement with the financial terms of certain other mergers and
acquisitions which KBW deemed to be relevant;
- reviewed the amount and timing of the expected savings to result from the
merger, as prepared by, and discussed with, senior management of Peoples
Heritage;
- considered, based upon information provided by Peoples Heritage's senior
management, the pro forma impact of the merger on the earnings and book
value per share, consolidated capitalization and certain balance sheet and
profitability ratios of Peoples Heritage;
- reviewed the merger agreement; and
- reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as KBW
deemed necessary.
In preparing its opinion, KBW, with Peoples Heritage's consent, assumed and
relied on the accuracy and completeness of all financial and other information
supplied or otherwise made available to it by Peoples Heritage and Banknorth,
including the information set forth above, and KBW has not assumed
responsibility for independently verifying such information or undertaken an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of Peoples Heritage or Banknorth or any of their subsidiaries, nor
has it been furnished any such evaluation or appraisal. KBW is not an expert in
the evaluation of allowances for loan losses, and, with Peoples Heritage's
consent, it has not made an independent evaluation of the adequacy of the
allowance for loan losses of Peoples Heritage or Banknorth, nor has it reviewed
any individual credit files relating to Peoples Heritage or Banknorth, and, with
Peoples Heritage's consent, it assumed that the respective aggregate allowances
for loan losses for both Peoples Heritage and Banknorth are adequate to cover
such losses and will be adequate on a pro forma basis for the combined entity.
In addition, it has not conducted
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any physical inspection of the properties or facilities of Peoples Heritage or
Banknorth. With Peoples Heritage's consent, KBW also assumed and relied upon the
senior management of Peoples Heritage and Banknorth as to the reasonableness and
achievability of the financial forecasts (and the assumptions and bases
therefor) provided to, and discussed with, KBW. In that regard, KBW assumed with
Peoples Heritage's consent that such forecasts, including without limitation,
financial forecasts, evaluations of contingencies, expected savings and
operating synergies which are expected to result from the merger and projections
regarding underperforming and non-performing assets, net charge-offs, adequacy
of reserves, future economic conditions and results of operations, reflect the
best currently available estimates and judgments of the senior managements of
Peoples Heritage and Banknorth. KBW's opinion is predicated on the merger
receiving the tax and accounting treatment contemplated in the merger agreement.
KBW's opinion was necessarily based on economic, market and other conditions as
in effect on, and the information made available to it as of, the date of its
opinion.
KBW's opinion was rendered without regard to the necessity for, or level of,
any restrictions, obligations, undertakings or divestitures which may be imposed
or required in the course of obtaining regulatory approval for the merger.
In connection with rendering its opinion dated June 1, 1999, KBW performed a
variety of financial analyses, consisting of those summarized below. The summary
set forth below does not purport to be a complete description of the analyses
performed by KBW in this regard, although it describes all material analyses
performed by KBW. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to a partial analysis
or summary description. Accordingly, notwithstanding the separate factors
summarized below, KBW believes that its analyses must be considered as a whole
and that selecting portions of its analyses and factors considered by it,
without considering all analyses and factors, or attempting to ascribe relative
weights to some or all such analyses and factors, could create an incomplete
view of the evaluation process underlying KBW's opinion.
In performing its analyses, KBW made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Peoples Heritage, Banknorth and
KBW. The analyses performed by KBW are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of KBW's
analysis of the fairness to the shareholders of Peoples Heritage of the 1.825
exchange ratio and were provided to the Peoples Heritage board of directors in
connection with the delivery of KBW's opinion. KBW gave the various analyses
described below approximately similar weight and did not draw any specific
conclusions from or with regard to any one method of analysis. With respect to
the comparison of selected companies analysis and the analysis of selected
merger transactions summarized below, no company utilized as a comparison is
identical to Peoples Heritage or Banknorth. Accordingly, an analysis of
comparable companies and comparable business combinations is not mathematical;
rather it involves complex considerations and judgments concerning the
differences in financial and operating characteristics of the companies and
other factors that could affect the public trading values or announced merger
transaction values, as the case may be, of the companies concerned. The analyses
do not purport to be appraisals or to reflect the process at which Peoples
Heritage and Banknorth might actually be sold or the prices at which any
securities may trade at the present time or at any time in the future. In
addition, as described above, KBW's opinion is just one of many factors taken
into consideration by the Peoples Heritage board of directors.
The projections furnished to KBW and used by it in certain of its analyses
were prepared by the senior management of Peoples Heritage and Banknorth.
Peoples Heritage and Banknorth do not publicly disclose internal management
projections of the type provided to KBW in connection with its review of the
merger, and as a result, such projections were not prepared with a view towards
public
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disclosure. The projections were based on numerous variables and assumptions
which are inherently uncertain, including, without limitation, factors related
to general economic and competitive conditions, and accordingly, actual results
could vary significantly from those set forth in such projections.
The following is a summary of the material analyses presented by KBW to the
Peoples Heritage board of directors on June 1, 1999 in connection with its
June 1, 1999 opinion.
SUMMARY OF PROPOSAL. KBW calculated multiples which were based on the
assumed per share purchase price of $34.22 (derived by multiplying the exchange
ratio of 1.825 by $18.75, the last reported sale price for the Peoples Heritage
common stock before the meeting of the Peoples Heritage board of directors on
June 1, 1999). Banknorth's March 31, 1999 stated book value was $13.98, stated
tangible book value was $10.63, and 1999 and 2000 earnings per share estimates
(provided by First Call Corporation, a nationally-recognized earnings
consolidator) were $2.25 and $2.47, respectively. Based on this data, the price
to stated book value multiple was 2.45 x, the price to stated tangible book
value multiple was 3.22x, and the price to the 1999 and 2000 earnings estimates
per share was 15.21x and 13.85x, respectively.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. KBW reviewed certain financial
data related to comparable nationwide pooling acquisitions of bank holding
companies announced between May 28, 1998 and May 28, 1999 with announced deal
values from $200 million to $3 billion. Comparisons were based on both announced
transaction values and adjusted values, calculated by adjusting the announced
value proportionately with the interim change in the buyer's stock price. The
transactions included in the comparable transactions group were: U.S.
Bancorp/Western Bancorp, Zions Bancorp/Pioneer Bancorp, Citizens Banking
Corp./F&M Bancorp Inc., Old Kent Financial Corp./Pinnacle Banc Group, U.S.
Bancorp/Bank of Commerce, Summit Bancorp/Prime Bancorp Inc., BB&T
Corp./Mason-Dixon Bankshares, Chittenden Corp./Vermont Financial, Sky Financial
Group/First Western Bancorp, BB&T Corp./MainStreet Financial, City Holding
Company/Horizon Bancorp Inc., Banknorth Group Inc./ Evergreen Bancorp, Santa
Barbara Bancorp/Pacific Capital Bancorp, First Commonwealth/Southwest National
Corp., First American Corp./Pioneer Bankshares, and First Hawaiian Inc./Bank of
the West. The results of KBW's review are set forth in the following table.
<TABLE>
<CAPTION>
ANNOUNCED ANNOUNCED ADJUSTED ADJUSTED
COMPARABLE COMPARABLE COMPARABLE COMPARABLE
TRANSACTION GROUP GROUP GROUP GROUP
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Deal Price/Book Value................... 245% 317% 323% 289% 252%
Deal Price/Tangible Book Value.......... 322% 357% 344% 327% 293%
Deal Price/Trailing 12 Months Earnings
per Share............................. 18.88x 24.68x 24.20x 22.32x 22.46x
Deal Price/Forward Earnings per Share... 13.85x 21.46x 21.50x 19.41x 19.48x
Deal Price/Total Assets................. 18.56% 29.95% 29.90% 27.03% 26.06%
Core Deposit Premium.................... 17.01% 30.68% 31.17% 27.99% 25.14%
Premium to Seller's Prior Closing
Price................................. 28.22% 32.67% 27.60% 24.16% 22.74%
Premium of Deal Price/Fwd. EPS to
Peoples Heritage's Trading Price/Fwd.
EPS................................... 33.00% 33.15% 25.81% 33.15% 25.81%
</TABLE>
No company or transaction used as a comparison in the above analysis is
identical to Peoples Heritage, Banknorth or the merger. Accordingly, an analysis
of the results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared.
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<PAGE>
SELECTED PEER GROUPS ANALYSES. KBW compared the financial performance and
market performance of Peoples Heritage, Banknorth and the pro forma company
based on various financial measures of earnings performance, operating
efficiency, capital adequacy and asset quality and various measures of market
performance, including market/book values, price to earnings and dividend yields
to those of a group of comparable Northeastern bank and thrift holding
companies. For purposes of such analysis, the financial information used by KBW
was as of and for the quarter ended March 31, 1999, and data for Peoples
Heritage was normalized for the acquisition of SIS Bancorp, Inc., which closed
on January 1, 1999. Stock price information was as of May 28, 1999. The
companies in the peer group were Sovereign Bancorp, Inc., M&T Bank Corporation,
North Fork Bancorporation, Inc., Webster Financial Corporation, Hudson United
Bancorp, Keystone Financial, Inc., Valley National Bancorp and Commerce
Bancorp, Inc. The results of these comparisons are set forth in the following
table.
<TABLE>
<CAPTION>
PEOPLES PEER GROUP PEER GROUP
HERITAGE BANKNORTH PRO FORMA AVERAGE MEDIAN
-------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Return on Average Assets................... 1.24% 1.17% 1.23% 1.31% 1.27%
Return on Average Equity................... 17.01% 15.82% 16.87% 17.79% 16.83%
Net Interest Margin........................ 3.86% 4.39% 4.03% 3.93% 4.14%
Efficiency Ratio........................... 54.46% 59.15% 55.81% 51.58% 50.80%
Equity/Assets.............................. 7.19% 7.48% 7.04% 7.16% 6.81%
Tangible Equity/Tangible Assets............ 6.28% 5.85% 5.89% 6.19% 5.81%
Loan Loss Reserves/Non-performing Loans.... 229% 227% 229% 338% 329%
Net Charge Offs/Average Loans.............. 0.19% 0.32% 0.23% 0.22% 0.23%
Non-performing Assets/Loans + Other Real
Estate Owned............................. 0.85% 0.77% 0.83% 0.59% 0.59%
Stock Price/Book Value..................... 2.16x 1.91x 2.31x 2.66x 2.71x
Stock Price/Tangible Book Value............ 2.49x 2.51x 2.77x 3.15x 3.16x
Stock Price/1999 Earnings per Share........ 11.65x 11.86x NA 14.31x 14.50x
Stock Price/2000 Earnings per Share........ 10.42x 10.80x 10.65x 12.87x 13.15x
Dividend Yield............................. 2.45% 2.70% 2.45% 2.30% 2.45%
</TABLE>
For purposes of the above calculations, all earnings estimates are from First
Call Corporation, a nationally-recognized earnings consolidator.
CONTRIBUTION ANALYSIS. KBW analyzed the relative contribution of each of
Peoples Heritage and Banknorth to the pro forma balance sheet and income
statement items of the combined entity, including assets, common equity,
tangible equity, deposits, market capitalization, estimated 2000 and 2001 net
income and estimated 2000 and 2001 cash net income. The relative contribution of
Banknorth inclusive of estimated cost savings resulting from the merger also was
analyzed. In all analyses, 2001 net income and cash net income estimates were
calculated by applying the growth rates in First Call Corporation estimates from
1999 to 2000 to the 2000 estimates. KBW compared the relative contribution of
such balance sheet and income statement items with the estimated pro forma
ownership
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for Banknorth based on the exchange ratio of 1.825. The results of KBW's
analysis are set forth in the following table.
<TABLE>
<CAPTION>
PEOPLES HERITAGE BANKNORTH
---------------- ---------
<S> <C> <C>
2000 Net Income..................................... 76.6% 23.4%
With Cost Saves................................... 72.7 27.3
2000 Cash Net Income................................ 76.0 24.0
With Cost Saves................................... 72.4 27.6
2001 Net Income..................................... 76.9 23.1
With Cost Saves................................... 69.8 30.2
2001 Cash Net Income................................ 76.4 23.6
With Cost Saves................................... 69.7 30.3
Common Equity....................................... 73.6 26.4
Tangible Equity..................................... 76.1 23.9
Assets.............................................. 74.4 25.6
Deposits............................................ 69.7 30.3
Market Capitalization............................... 75.9 24.1
Ownership........................................... 71.1 28.9
</TABLE>
FINANCIAL IMPACT ANALYSIS. KBW performed pro forma merger analysis that
combined projected income statement and balance sheet information. Assumptions
regarding the accounting treatment, acquisition adjustments and cost savings
were used to calculate the financial impact that the merger would have on
certain projected financial results of Peoples Heritage. This analysis indicated
that the merger is expected to be dilutive to estimated earnings per share and
cash earnings per share in 2000 and be accretive thereafter, and decrease book
value and tangible book value per share based on quarter ended March 31, 1999
financial data. This analysis was based on First Call Corporation estimates of
Peoples Heritage and Banknorth's 2000 and 2001 earnings per share (with 2001
estimates calculated by applying the growth rates in First Call Corporation
estimates from 1999 to 2000 to the 2000 estimates), and on Peoples Heritage
management's estimates of the expected savings resulting from the merger and a
non-recurring merger and restructuring charge to be realized or incurred by
Peoples Heritage in connection with the merger. These projections were discussed
with the management of each of Peoples Heritage and Banknorth. The actual
results achieved by Peoples Heritage following the merger will vary from the
projected results, and the variations may be material.
DISCOUNTED CASH FLOW ANALYSIS. KBW estimated the present value of the
future cash flows that would accrue to a holder of a share of Peoples Heritage
common stock assuming the stockholder held the stock from the year 2000 through
the year 2004 and then sold it at the end of year 2004. This stand-alone
analysis was based on several assumptions, including earnings per share of $1.80
in 2000 and an 11.8% earnings per share growth rate thereafter. The earnings
growth rate was derived from the growth rate in First Call Corporation estimates
from 1999 to 2000. The current 29% annual dividend payout ratio was assumed for
Peoples Heritage. A terminal valuation for Peoples Heritage was calculated by
multiplying projected 2004 earnings per share by a price to trailing earnings
multiple. A discount rate was applied to the terminal valuation and the
estimated dividends. KBW presented a table showing the analysis with a range of
terminal multiples from 10.0 times to 20.0 times and a range of discount rates
from 11.0% to 15.0%, resulting in a range of present values for a share of
Peoples Heritage common stock of $16.10 to $35.73. These values were determined
by adding (i) the present value of the estimated future dividend stream that
Peoples Heritage could generate over the period beginning January 2000 and
ending in December 2004, and (ii) the present value of the "terminal value" of
the Peoples Heritage common stock.
KBW also estimated the present value of future cash flows that would accrue
to a holder of a share of Peoples Heritage pro forma for the merger, assuming
the shareholder held the stock from the
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year 2000 through the year 2004 and then sold it for a multiple to that year's
earnings equivalent. This analysis was based on several assumptions, including
pro forma earnings per share estimates of $1.76 in 2000, $2.05 in 2001 and an
earnings growth rate of 11.8% thereafter. The stand-alone analysis was repeated
with an identical range of assumptions, resulting in a range of present values
for a share of Peoples Heritage common stock of $16.38 to $36.38.
KBW stated that the discounted cash flow analysis is a widely-used valuation
methodology but noted that it relies on numerous assumptions, including asset
and earnings growth rates, dividend payout rates, terminal values and discount
rates. The analysis did not purport to be indicative of the actual values or
expected values of Peoples Heritage common stock.
In connection with its opinion dated as of the date of this prospectus/joint
proxy statement, KBW performed procedures to update, as necessary, certain of
the analyses described above and reviewed the assumptions on which such analyses
described above were based and the factors considered in connection therewith.
KBW did not perform any analyses in addition to those described above in
updating its June 1, 1999 opinion.
KBW has been retained by the board of directors of Peoples Heritage as an
independent contractor to act as financial adviser to Peoples Heritage with
respect to the merger. KBW as part of its investment banking business, is
continually engaged in the valuation of banking businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. As
specialists in the securities of banking companies, KBW has experience in, and
knowledge of, the valuation of banking enterprises. In the ordinary course of
its business as a broker-dealer, KBW may, from time to time, purchase securities
from, and sell securities to, Peoples Heritage and Banknorth and as a market
maker in securities KBW may from time to time have a long or short position in,
and buy or sell, debt or equity securities of Peoples Heritage and Banknorth for
KBW's own account and for the accounts of its customers.
Peoples Heritage and KBW have entered into a letter agreement, dated
June 1, 1999, relating to the services to be provided by KBW in connection with
the merger. Peoples Heritage has agreed to pay KBW fees as follows: a cash fee
of $20,000 following the signing of the letter agreement and an additional cash
fee of $200,000 after the mailing of the proxy materials to shareholders of
Peoples Heritage in connection with the Peoples Heritage special meeting. In
addition, Peoples Heritage will pay to KBW at the time of closing a cash fee of
$780,000. Pursuant to the KBW engagement agreement, Peoples Heritage also agreed
to reimburse KBW for reasonable out-of-pocket expenses and disbursements
incurred in connection with its retention and to indemnify against certain
liabilities, including liabilities under the federal securities laws.
EXCHANGE OF BANKNORTH COMMON STOCK CERTIFICATES
At the effective time of the merger, each holder of a certificate or
certificates which previously evidenced issued and outstanding shares of
Banknorth common stock, upon surrender of the same to an exchange agent
appointed by Peoples Heritage, will be entitled to receive in exchange therefor
a certificate or certificates representing the number of full shares of Peoples
Heritage common stock into which the shares of Banknorth common stock were
converted by virtue of the merger. As promptly as practicable after the
effective time of the merger, the exchange agent will mail to each Banknorth
shareholder of record 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 Banknorth stock certificates in
exchange for a certificate or certificates evidencing Peoples Heritage common
stock. Upon surrender to the exchange agent of one or more certificates
evidencing shares of Banknorth common stock, together with a
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<PAGE>
properly completed and executed letter of transmittal, the exchange agent will
mail to the holder thereof after the effective time of the merger a certificate
or certificates representing the number of full shares of Peoples Heritage
common stock into which the aggregate number of shares of Banknorth common stock
previously represented by such certificate or certificates surrendered shall
have been converted pursuant to the merger agreement. Peoples Heritage will be
entitled, after the effective time of the merger, to treat certificates
representing shares of Banknorth common stock as evidencing ownership of the
number of full shares of Peoples Heritage common stock into which the shares of
Banknorth common stock represented by such certificates shall have been
converted pursuant to the merger agreement, notwithstanding the failure on the
part of the holder thereof to surrender such certificates.
After the effective time of the merger, there will be no further transfer on
the records of Banknorth of certificates representing shares of Banknorth common
stock. If any such certificates are presented to Banknorth or the transfer agent
for the Banknorth common stock for transfer after the effective time of the
merger, they will be cancelled against delivery of certificates for Peoples
Heritage common stock in accordance with the merger agreement.
No dividends which have been declared on the Peoples Heritage common stock
will be remitted to any person entitled to receive shares of Peoples Heritage
common stock under the merger agreement until such person surrenders his or her
certificate or certificates representing shares of Banknorth common stock in
exchange for a certificate or certificates evidencing shares of Peoples Heritage
common stock, at which time such dividends shall be remitted to such person,
without interest.
No fractional shares of Peoples Heritage common stock will be issued in the
merger. Banknorth shareholders who otherwise would have been entitled to a
fraction of a share of Peoples Heritage common stock will instead receive, upon
surrender of their Banknorth stock certificates, an amount of cash (without
interest) determined by multiplying the fractional share interest to which such
holder would otherwise be entitled by the closing price per share of the Peoples
Heritage common stock on the Nasdaq Stock Market's National Market on the last
business day before the merger is completed.
Holders of Peoples Heritage common stock do not have to exchange their
certificates for new certificates representing shares of common stock in the
combined company. Rather, after the effective time of the merger existing
certificates representing Peoples Heritage common stock will continue to
represent the same number of shares of common stock in the combined company as
they did prior to the merger.
ASSUMPTION OF BANKNORTH STOCK OPTIONS
At the effective time of the merger, each option to purchase Banknorth
common stock granted under Banknorth's stock option plans (including acquired
and predecessor plans), whether or not exercisable, will cease to represent a
right to acquire shares of Banknorth common stock and will be converted
automatically into an option to purchase shares of Peoples Heritage common
stock, and Peoples Heritage will assume each Banknorth stock option, in
accordance with the terms of the Banknorth stock option plan and stock option
agreement by which it is evidenced, including without limitation all terms
pertaining to the acceleration and vesting of the holder's option exercise
rights, except that from and after the effective time of the merger,
(i) Peoples Heritage and the board of directors of Peoples Heritage or a duly
authorized board committee shall be substituted for Banknorth and the Banknorth
board of directors or duly authorized board committee administering the
Banknorth stock option plans, (ii) each Banknorth stock option assumed by
Peoples Heritage may be exercised solely for shares of Peoples Heritage common
stock, (iii) the number of shares of Peoples Heritage common stock subject to
such Banknorth stock option will be equal to the number of shares of Banknorth
common stock subject to such Banknorth stock option immediately before the
effective time of the merger multiplied by the exchange ratio, provided that any
fractional shares of Peoples Heritage
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common stock resulting from such multiplication will be rounded down to the
nearest share, and (iv) the per share exercise price under each such Banknorth
stock option will be adjusted by dividing the per share exercise price under
each such Banknorth stock option by the exchange ratio, provided that such
exercise price will be rounded up to the nearest cent. Notwithstanding clauses
(iii) and (iv) of the preceding sentence, each Banknorth stock option which is
an "incentive stock option" will be adjusted as required by Section 424 of the
Internal Revenue Code. Peoples Heritage also has agreed to register the shares
of Peoples Heritage common stock issuable upon exercise of the options under the
Securities Act of 1933.
CONDITIONS TO THE MERGER
Completion of the merger is subject to the satisfaction of certain
conditions, or the waiver of such conditions by the party or parties entitled to
do so, at or before the effective time of the merger. Each of the parties'
obligations under the merger agreement is subject to the following conditions:
- all corporate action (including without limitation approval by the
requisite vote of the shareholders of Peoples Heritage and Banknorth)
necessary to authorize the execution and delivery of the merger agreement
and consummation of the merger shall have been duly and validly taken;
- the receipt of all necessary regulatory approvals and consents required to
consummate the merger by any governmental authority, and the expiration of
all notice periods and waiting periods with respect thereto, provided,
however, that no required approval or consent will be deemed to have been
received if it includes any condition or requirement that, individually or
in the aggregate, would so materially reduce the economic or business
benefits of the transactions contemplated by the merger agreement to
Peoples Heritage that had such condition or requirement been known Peoples
Heritage, in its reasonable judgment, would not have entered into the
merger agreement;
- neither Peoples Heritage nor Banknorth shall be subject to any statute,
rule, regulation, order or decree which prohibits, restricts or makes
illegal the consummation of the merger;
- the registration statement of which this prospectus/joint proxy statement
is a part shall have become effective under the Securities Act of 1933,
and Peoples Heritage shall have received all permits, authorizations or
exemptions necessary under all state securities laws to issue Peoples
Heritage common stock in connection with the merger, and neither such
registration statement nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by any
governmental authority;
- the shares of Peoples Heritage common stock to be issued in connection
with the merger shall have been approved for listing on the Nasdaq Stock
Market's National Market; and
- KPMG LLP shall have issued a letter dated the date of this document and
confirmed in writing at the effective time of the merger that the merger
shall be accounted for as a pooling of interests under generally accepted
accounting principles.
In addition to the foregoing conditions, the obligations of Peoples Heritage
under the merger agreement are conditioned upon the following conditions:
- the accuracy in all material respects as of the date of the merger
agreement and as of the effective time of the merger of the
representations and warranties of Banknorth set forth in the merger
agreement, except as to any representation or warranty which specifically
relates to an earlier date and except as otherwise contemplated by the
merger agreement;
- the performance in all material respects of all covenants and obligations
required to be complied with and satisfied by Banknorth;
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- the receipt of a certificate from specified officers of Banknorth with
respect to compliance with the conditions relating to (i) and
(ii) immediately above as set forth in the merger agreement;
- the receipt of certain legal opinions from Banknorth's legal counsel;
- the receipt of an opinion of counsel to Peoples Heritage to the effect
that the merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and with respect to certain
related federal income tax considerations;
- the receipt of the approval or consent of each person (other than a
regulatory authority) whose approval or consent is required in connection
with the merger under any agreement to which Banknorth or any of its
subsidiaries is bound, except as otherwise contemplated by the merger
agreement;
- the absence of any pending proceeding by a regulatory authority to seek an
order, injunction or decree which prevents consummation of the merger; and
- the receipt by Peoples Heritage of such certificates of Banknorth's
officers or others and such other documents to evidence fulfillment of the
conditions relating to Banknorth as Peoples Heritage may reasonably
request. Any of the foregoing conditions may be waived by Peoples
Heritage.
In addition to the other conditions set forth above, Banknorth's obligations
under the merger agreement are conditioned upon the following conditions:
- the accuracy in all material respects as of the date of the merger
agreement and as of the effective time of the merger of the
representations and warranties of Peoples Heritage set forth in the merger
agreement, except as to any representation or warranty which specifically
relates to an earlier date and except as otherwise contemplated by the
merger agreement;
- the performance in all material respects of all covenants and obligations
required to be complied with and satisfied by Peoples Heritage;
- the receipt of a certificate from specified officers of Peoples Heritage
with respect to compliance with the conditions relating to (i) and
(ii) immediately above as set forth in the merger agreement;
- the receipt of certain legal opinions from legal counsel to Peoples
Heritage;
- the receipt of an opinion of counsel to Peoples Heritage to the effect
that the merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and with respect to certain related federal
income tax considerations (see "--Certain Federal Income Tax
Consequences");
- the receipt of the approval or consent of each person (other than a
regulatory authority) whose approval or consent is required in connection
with the merger under any agreement to which Peoples Heritage or any of
its subsidiaries is bound, except as otherwise contemplated by the merger
agreement;
- the absence of any pending proceeding by a regulatory authority to seek an
order, injunction or decree which prevents consummation of the merger, and
- the receipt by Banknorth of such certificates of Peoples Heritage's
officers or others and such other documents to evidence fulfillment of the
conditions relating to them as Banknorth may reasonably request. Any of
the foregoing conditions may be waived by Banknorth.
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REGULATORY APPROVALS
GENERAL. Consummation of the merger is subject to prior receipt of all
required approvals and consents of the merger by all applicable federal and
state regulatory authorities. In order to consummate the Merger, Peoples
Heritage must obtain the prior approval of the Federal Reserve Board, the
Superintendent of the Bureau of Banking of the State of Maine (the "Maine
Superintendent") and the Massachusetts Board of Bank Incorporation (the
"Massachusetts Board"), the approval of which may not be granted until it has
received notice from the Massachusetts Housing Partnership Fund ("MHPF") that
Peoples Heritage and the MHPF have made the arrangements required by
Massachusetts law. In addition, notice of the merger must be provided by Peoples
Heritage to the Vermont Commissioner of Banking, Insurance and Securities (the
"Vermont Commissioner").
FEDERAL APPROVALS AND NOTICES. The merger is subject to the prior approval
of the Federal Reserve Board under Sections 3 and 4 of the Bank Holding Company
Act of 1956, as amended. Pursuant to the Bank Holding Company Act, the Federal
Reserve Board may not approve the merger if (i) such transaction would result in
a monopoly or would be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in any part of the
United States; or (ii) the effect of such transaction, in any section of the
country, may be to substantially lessen competition, or tend to create a
monopoly, or in any other manner to restrain trade, in each case unless the
Federal Reserve Board finds that the anticompetitive effects of the proposed
transaction are clearly outweighed in the public interests by the probable
effect of the transaction in meeting the convenience and needs of the community
to be served. In every case, the Federal Reserve Board is required to consider
the financial and managerial resources and future prospects of the bank holding
company or companies and the banks concerned. Consideration of the managerial
resources of a company or a bank for this purpose includes consideration by a
variety of means of the competence, experience and integrity of the directors,
officers and principal stockholders of the company or bank. As part of, or in
addition to, consideration of these factors, the parties anticipate that the
Federal Reserve Board will consider the regulatory status of Peoples Heritage
and Banknorth, the current and projected economic conditions in the areas in
which Peoples Heritage and Banknorth operate and these entities' compliance with
the capital and safety and soundness standards set forth in applicable laws and
regulations.
The Federal Reserve Board also will assess the degree to which Peoples
Heritage and Banknorth and their subsidiaries have taken appropriate steps to
ensure that electronic data processing systems and those of their vendors are
year 2000 compliant, as well as their plans for ensuring year 2000 readiness of
the combined company. Information about the year 2000 compliance efforts to date
of Peoples Heritage and Banknorth may be found in each company's most recent
quarterly report under the Securities Exchange Act of 1934. See "Where You Can
Find More Information."
Under the Community Reinvestment Act of 1977, the Federal Reserve Board also
must take into account the record of performance of each of Peoples Heritage and
Banknorth in meeting the credit needs of the entire community, including low and
moderate-income neighborhoods, served by each company and their subsidiaries.
Each of the banking subsidiaries of Peoples Heritage and Banknorth that has been
examined for Community Reinvestment Act compliance has received either an
outstanding or satisfactory rating from the appropriate federal regulator.
The Federal Reserve Board also will review considerations relating to a
regulatory examination of processes at Peoples Heritage for managing credit,
market/liquidity and operational risks which was completed by the Federal
Reserve Bank of Boston and the Maine Bureau of Banking in September 1999. In
late December 1999, the staff of the Federal Reserve Bank of Boston indicated to
Peoples Heritage that it desired, in connection with the determination of its
recommendation regarding the merger to the Federal Reserve Board, to conduct a
follow-up evaluation of the actions taken by Peoples Heritage in response to the
recommendations of the staff contained in the recent examination.
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Areas which will be evaluated in the follow-up evaluation, which is anticipated
to occur in March 2000, include risk management policies and procedures,
staffing adequacy and management oversight and reporting. In order to permit the
follow-up evaluation, which does not reflect any year 2000 concerns, on
December 22, 1999, Peoples Heritage and Banknorth amended the merger agreement
to extend the deadline for completing the proposed merger from April 1, 2000 to
May 31, 2000. Although the Maine Bureau of Banking has not made a similar
request for additional information in connection with its evaluation of the
merger, there can be no assurances that it, or other regulatory agencies with
jurisdiction over the merger, will not do so. See "--State Approvals and
Notices" below. Based on information available to it at this time, management of
Peoples Heritage does not believe that the recent regulatory examination of its
risk management processes will adversely affect its proposed acquisition of
Banknorth, although there can be no assurances that this will be the case.
Pursuant to Section 3 of the Bank Holding Company Act, the Federal Reserve
Board will furnish notice and a copy of the application for approval of the
merger to the Office of the Comptroller of the Currency (the "OCC") and the
Vermont Commissioner. Each of the OCC and the Vermont Commissioner will have
30 days to submit its views and recommendations to the Federal Reserve Board.
The Federal Reserve Board is required to hold a public hearing in the event it
receives a written recommendation of disapproval of the application from the OCC
or the Vermont Commissioner within that 30-day period. Furthermore, the Bank
Holding Company Act and Federal Reserve Board regulations require publication of
notice of, and the opportunity for public comment on, the application submitted
by Peoples Heritage for approval of the merger, and authorize the Federal
Reserve Board to hold a public meeting in connection with the application if the
Federal Reserve Board determines that a meeting would be appropriate. Any
meeting or comments provided by third parties could prolong the period during
which the application is subject to review by the Federal Reserve Board.
The merger may not be consummated by Peoples Heritage and Banknorth until
30 days after approval by the Federal Reserve Board. If the U.S. Department of
Justice and the Federal Reserve Board otherwise agree, this 30-day period may be
reduced to as few as 15 days. During such period, the U.S. Department of Justice
may commence a legal action challenging the transaction under the antitrust
laws. The commencement of an action would stay the effectiveness of the approval
of the Federal Reserve Board unless a court specifically orders otherwise.
STATE APPROVALS AND NOTICES. The approval of the Maine Superintendent is
required for consummation of the merger under Part 10 of Title 9-B of the Maine
Revised Statutes Annotated. The Maine Superintendent shall not approve an
application for such a transaction unless he determines, after a consideration
of all relevant evidence, that it would contribute to the financial strength and
success of the applicant and promote the convenience and advantage of the
public. The factors to be considered by the Maine Superintendent in this regard
are substantially similar to those to be considered by federal banking agencies,
as discussed above.
The merger is subject to approval of the Massachusetts Board under
Sections 2 and 4 of Chapter 167A of the Massachusetts General Laws Annotated.
Massachusetts law requires that the Massachusetts Board find that the merger
would not unreasonably affect competition among banking institutions and that it
would promote public convenience and advantage. In making such a determination,
the Massachusetts Board must consider, among other things, a showing of net new
benefits, including initial capital investments, job creation plans, consumer
and business services, commitments to maintain and open branch offices within
the statutorily delineated local community of Peoples Heritage in Massachusetts,
and such other matters as the Massachusetts Board may deem necessary or
advisable.
In addition, Massachusetts law provides that the Massachusetts Board cannot
approve the Merger until it has received notice from the MHPF that arrangements
satisfactory to the MHPF have been made for the proposed acquiror to make
0.9 percent of its assets located in Massachusetts available for
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call by the MHPF for a period of ten years for purposes of funding various
affordable housing programs. Massachusetts law provides that such funds shall
bear interest at rates approved by the Massachusetts Commissioner of Banks,
which shall be based upon the cost (not to include lost opportunity costs)
incurred in making funds available to the MHPF.
Pursuant to Title 8, Chapter 55, Section 1016 of the Vermont Statutes
Annotated, Peoples Heritage also is required to provide the Vermont Commissioner
with notice of the merger in the prescribed manner.
STATUS OF APPLICATIONS AND NOTICES. All required applications and notices
have been filed with applicable regulatory authorities in connection with the
merger. There can be no assurance that all requisite approvals will be obtained,
that such approvals will be received on a timely basis or that such approvals
will not impose conditions or requirements which, individually or in the
aggregate, would so materially reduce the economic or business benefits of the
transactions contemplated by the merger agreement to Peoples Heritage that had
such condition or requirement been known Peoples Heritage, in its reasonable
judgment, would not have entered into the merger agreement. If any such
condition or requirement is imposed, the merger agreement permits Peoples
Heritage to terminate the merger agreement.
BUSINESS PENDING THE MERGER
The merger agreement contains certain covenants of the parties regarding the
conduct of their respective businesses pending consummation of the merger.
Pending consummation of the merger, Banknorth and its subsidiaries generally are
required to conduct their respective businesses in the ordinary course
consistent with past practice and to use all reasonable efforts to preserve
their respective business organizations intact. In addition, Banknorth shall
not, and shall cause each Banknorth subsidiary not to, among other things, take
the following actions:
- declare any dividend on its capital stock, except for quarterly cash
dividends on the Banknorth common stock which are not in excess of $.18
per share, provided that the declaration of the last quarterly dividend by
Banknorth prior to the effective time of the merger and the payment
thereof shall be coordinated with, and subject to the approval of, Peoples
Heritage so as to preclude any duplication of dividend benefit and be
consistent with pooling of interests accounting treatment of the merger;
issue any shares of its capital stock or rights to acquire the same, other
than upon exercise of options to purchase Banknorth common stock which
were outstanding at the time of execution of the merger agreement or
granted in the ordinary course of business thereafter and pursuant to the
Banknorth stock option agreement (See "--Stock Option Agreements");
- effect any recapitalization, reclassification, stock dividend, stock split
or like change in capitalization;
- take specified actions with respect to its business, including without
limitation increase the rate of compensation of its directors, officers or
employees, enter into or modify any employee benefit plan, change its
methods of accounting or tax reporting, purchase or sell assets, make
capital expenditures, enter into contracts with respect to branch offices,
acquire any business or entity, enter into any new line of business and
enter into futures, options and similar contracts, except in the case of
each of the foregoing as permitted by the merger agreement;
- amend its articles and bylaws;
- take any action that would prevent or impede the merger from qualifying
for pooling of interests accounting or as a reorganization under the
Internal Revenue Code;
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- take any action that would result in any of the representations and
warranties of Banknorth not being true and correct in any material respect
at or prior to the effective time of the merger or in any of the
conditions to the merger set forth in the merger agreement not being
satisfied; or
- agree to do any of the foregoing.
The merger agreement also provides that pending consummation of the merger
Peoples Heritage shall not, and shall cause each subsidiary which is a
"significant subsidiary" (as defined in the merger agreement) not to, take the
following actions:
- declare any dividend on its capital stock, except for regular quarterly
cash dividends on the Peoples Heritage common stock which are not in
excess of $.15 per share of Peoples Heritage common stock;
- amend its articles and bylaws in a manner which would adversely affect the
Peoples Heritage common stock or its ability to consummate the
transactions contemplated by the merger agreement;
- make any acquisition 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 Peoples Heritage to consummate
the transactions contemplated by the merger agreement in a reasonably
timely manner;
- take any action that would prevent or impede the merger from qualifying
for pooling of interests accounting or as a reorganization under the
Internal Revenue Code;
- take any action that would result in any of the representations and
warranties of Peoples Heritage not being true and correct in any material
respect at or prior to the effective time of the merger or in any of the
conditions to the merger set forth in the merger agreement not being
satisfied; or
- agree to do any of the foregoing.
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NO SOLICITATION
The merger agreement provides that Banknorth shall not solicit or encourage
any inquiries relating to, or the making of any proposal which constitutes, an
"acquisition transaction" (as defined in the merger agreement) or, except to the
extent legally required for the discharge of the fiduciary duties of the
Banknorth board of directors, as advised by counsel, (i) recommend or endorse an
acquisition transaction, (ii) participate in any discussions or negotiations
regarding an acquisition transaction or (iii) provide any third party with any
nonpublic information in connection with any inquiry or proposal relating to an
acquisition transaction (other than in each case with or to Peoples Heritage or
an affiliate of Peoples Heritage). The term "acquisition transaction" generally
is defined in the merger agreement to mean any merger or consolidation involving
Banknorth or a subsidiary of Banknorth, a purchase, lease or other acquisition
of all or a substantial portion of the assets and liabilities of Banknorth or a
subsidiary of Banknorth or a purchase or other acquisition of an interest in any
class or series of equity securities of Banknorth or a subsidiary of Banknorth.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of (i) articles of merger
with the Secretary of State of the State of Maine pursuant to the Maine Business
Corporation Act and (ii) articles of merger with the Secretary of State of the
State of Delaware pursuant to the Delaware General Corporation Law, unless a
different date and time is specified as the effective time in such articles of
merger. Articles of merger will be filed only after the receipt of all requisite
regulatory approvals of the merger, approval of the merger agreement by the
requisite vote of the shareholders of Peoples Heritage and Banknorth and the
satisfaction or waiver of all other conditions to the merger set forth in the
merger agreement.
A closing will take place immediately prior to the effective time of the
merger on the fifth business day following the satisfaction or waiver (to the
extent permitted) of all the conditions to consummation of the merger specified
in the merger agreement (other than the delivery of certificates, opinions and
other instruments and documents to be delivered at the closing), or on such
other date as the parties may mutually agree upon.
TERMINATION AND AMENDMENT
The merger agreement may be terminated:
- by mutual consent of the parties;
- by a non-breaching party if the other party (a) breaches any material
covenants or undertakings contained in the merger agreement or
(b) materially breaches any representations or warranties contained in the
merger agreement, in each case if such breach has not been cured within
thirty days after notice thereof from the terminating party;
- by either party if certain required regulatory approvals or consents for
consummation of the merger are not obtained;
- by either party if the shareholders of Peoples Heritage or Banknorth do
not approve the merger agreement after a vote taken thereon at a meeting
duly called for such purpose;
- by either Peoples Heritage or Banknorth if the merger is not consummated
by May 31, 2000, unless the failure to consummate the merger is due to a
breach by the party seeking such termination of its obligations under the
merger agreement; and
- by Peoples Heritage if the Banknorth board of directors has withdrawn,
modified or changed in a manner adverse to Peoples Heritage its
recommendation to its shareholders to approve the merger agreement.
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Banknorth also may terminate the merger agreement if during the five-day
period commencing on the date on which the last required governmental approval
of the merger is received (without regard to any waiting period in respect
thereof) (the "determination date") it so notifies Peoples Heritage and both of
the following conditions are applicable:
- the number (the "Peoples Heritage ratio") obtained by dividing the average
daily per share closing prices of the Peoples Heritage common stock during
the 20 trading days preceding the determination date (the "average closing
price") by $18.00 (the "starting price"), the per share closing price of
the Peoples Heritage common stock on June 1, 1999 (the "starting date"),
the last trading day immediately preceding the date of the first public
announcement of the merger agreement, is less than .80; and
- the Peoples Heritage ratio is less than (x) the number obtained by
dividing the average of the closing index values of the Nasdaq Bank Index
(the "index value") during the 20 trading days preceding the determination
date (the "final index value") by 1829, the index value on the starting
date, less (y) 0.20 (the "index ratio").
If both of the foregoing conditions are applicable, Banknorth has the right
to terminate the merger agreement, which would not require any action of
Banknorth shareholders. The Banknorth board of directors has made no decision as
to whether it would exercise its right to terminate the merger agreement under
such circumstances. Any such decision would be made by the Banknorth board of
directors in light of the circumstances existing at the time that the Banknorth
board of directors has the opportunity to make such an election, if any. Before
making any determination to terminate the merger agreement, the Banknorth board
of directors would consult with its financial and other advisers and would
consider all financial and other information it deemed relevant to its decision.
In this regard, the Banknorth board of directors would consider many of the same
factors that it considered in determining whether to approve and adopt the
merger agreement, including the principal factors discussed under "The
Merger--Reasons for the Merger; Recommendations of the Boards of Directors." In
particular, the Banknorth board of directors would analyze, among other factors,
whether the then current consideration to be received in the merger would
deliver more value to Banknorth shareholders than the value that could be
expected in the event Banknorth were to continue as an independent company
(which would occur if the Banknorth board of directors were to exercise
Banknorth's right to abandon the merger and Peoples Heritage determined not to
increase the exchange ratio). In addition, the Banknorth board of directors
would consider whether, in light of market and other industry conditions at the
time of such decision, the exchange ratio remains fair from a financial point of
view to the holders of shares of Banknorth common stock. There can be no
assurance that the Banknorth board of directors would exercise its right to
terminate the merger agreement if each of the conditions set forth above were
applicable. If Banknorth elected not to exercise its right to terminate the
merger agreement, which it could do without any action on the part of Banknorth
shareholders, the exchange ratio would remain 1.825 and the dollar value of the
consideration which the shareholders of Banknorth would receive for each share
of Banknorth common stock would be the value of 1.825 shares of Peoples Heritage
common stock at the effective time of the merger.
If Banknorth elects to exercise its right to terminate the merger agreement,
it must give notice to Peoples Heritage during the five-day period commencing
with the determination date. During the five-day period after receipt of such
notice, Peoples Heritage has the option to increase the consideration payable to
Banknorth shareholders by adjusting the exchange ratio in the manner described
below. Peoples Heritage is under no obligation to adjust the exchange ratio and
there can be no assurance that Peoples Heritage would elect to adjust the
exchange ratio if Banknorth were to exercise its option to terminate the merger
agreement. Any such decision would be made by Peoples Heritage in light of the
circumstances existing at the time Peoples Heritage has the opportunity to make
such an election. If Peoples Heritage elects to adjust the exchange ratio, it
must give Banknorth
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prompt notice of that election and the adjusted exchange ratio, in which case
Banknorth will not have any right to terminate the merger agreement as a result
of the above-described circumstances.
The operation of the conditions permitting Banknorth to terminate the merger
agreement based on a decrease in the market price of the Peoples Heritage common
stock reflects the parties' agreement that shareholders of Banknorth would
assume the risk of a modest decline in value of the Peoples Heritage common
stock (equal to up to a 20% decline from the starting price) under any
circumstances and that such shareholders would assume the risk of a more
significant decline in value of the Peoples Heritage common stock unless the
percentage decline in the value of the Peoples Heritage common stock from the
starting date to the determination date represents a decline that is more than
20 percentage points greater than the percentage decrease, if any, in the index
value during such period. The premise of this agreement is that declines in
value of the Peoples Heritage common stock which are in accordance with an index
of publicly-traded banking stocks is indicative of a broad-based change in
market and economic conditions affecting Peoples Heritage (as well as Banknorth)
rather than factors which are specifically attributable to the value of the
Peoples Heritage common stock.
The operation and effect of the provisions of the merger agreement dealing
with a decline in the market price of the Peoples Heritage common stock may be
illustrated by the following three scenarios:
(1) One scenario is that the average closing price is below the starting
price of $18.00 but is not less than $14.40. Under such circumstances the
decline in the starting price would be 20% or less and the Peoples
Heritage ratio would not be less than .80. As a result, there would be no
adjustment to the 1.825 exchange ratio and Banknorth would be obligated
to consummate the merger regardless of the change in the index value
(assuming all other conditions to Banknorth's obligations were satisfied
or waived).
(2) A second scenario is that the average closing price declines to less
than $14.40 and the index value also declines but the percentage decline
in the price of the Peoples Heritage common stock is not more than
20 percentage points greater than the percentage decline in the index
value. Under such circumstances there would be no adjustment to the 1.825
exchange ratio and Banknorth would be obligated to consummate the merger
(assuming all other conditions to Banknorth's obligations were satisfied
or waived).
For example, if the average closing price was $13.50 and the final
index value was 1700, the Peoples Heritage ratio
($13.50 DIVIDED BY $18.00, or .75) would be less than .80 but would not
be less than the index ratio (1700 DIVIDED BY 1829, less .20, or .73).
The exchange ratio would remain 1.825 and Banknorth would be obligated to
consummate the merger (assuming all other conditions to Banknorth's
obligations were satisfied or waived).
(3) A third scenario is that the average closing price declines to less than
$14.40 and the percentage decline in the price of the Peoples Heritage
common stock is more than 20 percentage points greater than any decline
in the index value. Under such circumstances, Banknorth would have the
right but not the obligation to terminate the merger agreement unless
Peoples Heritage elected to increase the exchange ratio to the lesser of
(x) a number (rounded to the nearest one one-thousandth) obtained by
dividing (A) the product of the starting price, .80 and the exchange
ratio by (B) the average closing price and (y) a number (rounded to the
nearest one one-thousandth) obtained by dividing (A) the product of the
index ratio and the exchange ratio by (B) the Peoples Heritage ratio.
For example, if the average closing price was $13.50 and the final
index value was 1750, the Peoples Heritage ratio
($13.50 DIVIDED BY $18.00, or .75) would be less than .80 and would be
less than the index ratio (1750 DIVIDED BY 1829, less .20, or .76). If
Banknorth exercised its right to terminate the merger agreement under
such circumstances, Peoples Heritage would have the
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option to increase the exchange ratio to the lesser of (x) 1.946 (the
number determined by dividing $26.28 (the product of the $18.00 starting
price, .80 and the 1.825 exchange ratio) by the $13.50 average closing
price) and (y) 1.849 (the number determined by dividing 1.39 (the product
of the .76 index ratio and the 1.825 exchange ratio) by .75 (the Peoples
Heritage ratio)). If Peoples Heritage exercised such option, the exchange
ratio would be 1.849 and Banknorth would be obligated to consummate the
merger (assuming all other conditions to Banknorth's obligations were
satisfied or waived).
Although the price of the Peoples Heritage common stock regularly traded
below $14.40 during the several weeks preceding the date of this
prospectus/joint proxy statement, at no time has the decline in the market price
of the Peoples Heritage common stock represented a decline that is more than
20 percentage points greater than the percentage decline in the index value
during any 20 trading-day period subsequent to the date of execution of the
merger agreement and prior to the date of this prospectus/joint proxy statement.
There can be no assurance, however, that the foregoing will be the case when the
price of the Peoples Heritage common stock and the index value are evaluated for
purposes of determining Banknorth's ability to terminate the merger agreement on
this basis.
Banknorth shareholders should be aware that the average closing price on
which the occurrence of a termination of the merger agreement by Banknorth may
be based, and the subsequent increase, if any, in the exchange ratio by Peoples
Heritage, will be based on the average of the closing sale prices of the Peoples
Heritage common stock during a 20 trading-day period preceding the determination
date, the date on which the last required governmental approval of the merger is
received. Accordingly, because the market price of the Peoples Heritage common
stock between the determination date and the effective time of the merger, as
well as on the date certificates representing shares of Peoples Heritage common
stock are delivered in exchange for shares of Banknorth common stock following
consummation of the merger, will fluctuate and possibly decline, the value of
the Peoples Heritage common stock actually received by holders of Banknorth
common stock may be more or less than (i) the average closing price and
(ii) the value of the Peoples Heritage common stock at the effective time of the
merger resulting from the exchange ratio or any possible adjustment to the
exchange ratio as illustrated above.
In the event of termination, the merger agreement shall become null and
void, except that certain provisions thereof relating to expenses and
confidentiality shall survive any such termination and any such termination
shall not relieve any breaching party from liability for any willful breach of
any covenant, undertaking, representation or warranty giving rise to such
termination.
For information regarding a $5 million termination fee which would be
payable by Peoples Heritage to Banknorth under certain circumstances, see
"--Termination Fee."
To the extent permitted under applicable law, the merger agreement may be
amended or supplemented at any time by written agreement of the parties whether
before or after the approval of the shareholders of Peoples Heritage and
Banknorth, provided that any amendment or supplement executed after shareholders
of Peoples Heritage or Banknorth have approved the merger agreement shall not
modify either the amount or the form of the consideration to be provided to the
holders of Banknorth common stock upon consummation of the merger or otherwise
materially adversely affect such shareholders without the approval of such
shareholders.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of Banknorth may be deemed to have
interests in the merger in addition to their interests as shareholders
generally. The Banknorth board of directors was aware of these factors and
considered them, among other matters, in approving the merger agreement and the
transactions contemplated thereby.
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DIRECTORS AND OFFICERS OF PEOPLES HERITAGE. Pursuant to the merger
agreement, Peoples Heritage agreed to take all action necessary to appoint or
elect as directors of Peoples Heritage upon completion of the merger, Angelo P.
Pizzagalli, chairman of the board of Banknorth, and five other persons serving
as a director of Banknorth immediately prior to the merger who both meet the
director qualifications set forth in Peoples Heritage's bylaws and are otherwise
reasonably acceptable to Peoples Heritage. In addition, Mr. Pizzagalli will be
appointed chairman of the Peoples Heritage board's executive committee. See
"Management and Operations of Peoples Heritage After the Merger."
The merger agreement also provides that at the effective time of the merger
two of Banknorth's executive officers will become executive officers of Peoples
Heritage. Richard J. Fitzpatrick will serve as an executive vice president and
head of the combined company's Vermont and New York banking operations, and
Thomas J. Pruitt will serve as an executive vice president of the combined
company. The merger agreement also provides that at the effective time of the
merger the president of The Stratevest Group, N.A., Banknorth's trust and
investment management subsidiary, will be Richard E. Johnson, who currently
serves in this capacity.
STOCK OPTIONS AND RESTRICTED STOCK. Pursuant to the Banknorth stock option
and restricted stock plans, officers of Banknorth have been granted restricted
stock which includes performance conditions and vests over a five-year period.
All outstanding shares of restricted stock granted to officers of Banknorth
under the Banknorth stock option and restricted stock plans will become
immediately fully vested upon consummation of the merger. At the record date for
the special meetings, the executive officers of Banknorth held an aggregate of
52,100 shares of restricted Banknorth common stock which will become vested upon
consummation of the merger, including 24,200, 1,000, 9,400, 6,500 and 6,500
shares held by William H. Chadwick, George W. Dougan, Thomas J. Pruitt,
Richard J. Fitzpatrick and Owen H. Becker, respectively.
The merger agreement provides that at the effective time of the merger each
outstanding and unexercised option to purchase shares of Banknorth common stock
granted pursuant to the Banknorth stock option plans will cease to represent the
right to acquire shares of Banknorth common stock and will be converted into and
become a right to acquire shares of Peoples Heritage common stock, with the same
terms as previously in effect, except that the number of shares subject to such
converted options and the exercise price will be adjusted to reflect the
exchange ratio. See "--Assumption of Banknorth Stock Options." All such
currently outstanding options that are presently unvested shall become
immediately fully vested upon consummation of the merger. At the record date,
the executive officers of Banknorth held Banknorth stock options, including both
presently vested and unvested options, to purchase an aggregate of 334,047
shares of Banknorth common stock, including options to purchase 56,200, 136,000,
56,000, 32,000 and 18,847 shares held by William H. Chadwick, George W. Dougan,
Thomas J. Pruitt, Richard J. Fitzpatrick and Owen H. Becker, respectively.
CONSULTING AND NONCOMPETITION AGREEMENT. Peoples Heritage and William H.
Chadwick will enter into a consulting and noncompetition agreement with
William H. Chadwick which will provide that:
- Mr. Chadwick will be a consultant to Peoples Heritage for a two-year
period following the effective time of the merger and during that period
will refrain from any activities that compete with the business of Peoples
Heritage;
- in his capacity as a consultant, Mr. Chadwick will provide specified
consulting services to Peoples Heritage, including assisting Peoples
Heritage in the states of Vermont and New York, which are new banking
markets for Peoples Heritage;
- Mr. Chadwick will receive aggregate annual compensation of $400,000;
- Mr. Chadwick will be entitled to receive an enhanced benefit under the
Banknorth supplemental retirement plan for executives equal to the
difference between (a) the sum of the benefit Mr. Chadwick will actually
receive under the Banknorth noncontributory defined benefit pension
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plan plus the amount he would otherwise receive under the Banknorth
supplemental retirement plan for executives, and (b) the amount
Mr. Chadwick would receive under such plans if two years were added to his
age and credited years of service and his compensation during the
additional two year period were at the rate in effect immediately before
termination of his employment, plus the average of the cash bonuses paid
to him for the three calendar years immediately before termination of his
employment; and
- Peoples Heritage will treat Mr. Chadwick as fully vested in his additional
supplement retirement benefit under a supplemental retirement agreement
between him and Banknorth and will begin his monthly benefit payments
under that agreement upon termination of his employment rather than on his
normal retirement date (December 1, 2001).
Mr. Chadwick currently intends to remain in the employ of Banknorth through
the effective time of the merger.
CHANGE-IN-CONTROL AND EMPLOYMENT AGREEMENTS. Pursuant to the merger
agreement, Peoples Heritage agreed to honor, and to cause its appropriate
subsidiaries to honor, various employment and/or change-in-control agreements
which have been entered into by Banknorth and its subsidiaries, which include
change-in-control agreements which have been entered into by Banknorth and
certain of its executive officers, including George W. Dougan, Thomas J. Pruitt,
Richard J. Fitzpatrick and Owen H. Becker. The change-in-control agreements
generally provide for a lump sum payment to the executive officer in the event
that his employment with Banknorth is terminated (including a voluntary
termination under certain circumstances, such as due to a material reduction in
his duties) within two years following a change in control of Banknorth. The
lump sum payment generally would be equal to the value of vested and unvested
benefits and accruals under the company's qualified and non-qualified plans,
plus two times the sum of (1) the aggregate of the officer's base salary then in
effect plus the average annual cash bonus earned by the officer during the
two-year period, (2) the value of the annual employer contributions made by
Banknorth for the officer's account under Banknorth's qualified and
non-qualified retirement plans and (3) the annual employer contributions made by
Banknorth to any qualified or non-qualified employee welfare benefit plan in
which the officer was a participant at the time of the change-in-control
(including without limitation plans for hospital services, medical services,
major medical, dental, disability, survivor benefits and life insurance). The
officer also would be entitled under the agreement to immediate vesting of
stock-based compensation, including awards under Banknorth's stock option plan
and predecessor plans. Benefits under the change-in-control agreements are
subject to reduction to the extent necessary to avoid payment of compensation
that would be considered "excess parachute payments" under Section 280G of the
Internal Revenue Code. Pursuant to the applicable change-in-control agreements,
the estimated maximum amount of the lump sum payable to Messrs. Dougan, Pruitt,
Fitzpatrick and Becker in the event that their employment was terminated within
two years following the effective time of the merger and which is consistent
with the requirement that payments thereunder not constitute "excess parachute
payments" under Section 280G is approximately $600,000, $1.4 million,
$1.0 million and $500,000, respectively.
Mr. Dougan and Banknorth are also parties to an employment agreement
pursuant to which Mr. Dougan serves as vice chairman of Banknorth, which was
entered into in connection with Banknorth's acquisition of Evergreen
Bancorp, Inc. on December 31, 1998. The term of the contract is for three years
and it provides for an annual salary of $225,000. Pursuant to the employment
agreement, Banknorth would be obligated to pay to Mr. Dougan his base
compensation and specified bonus compensation for the remainder of the term of
the employment agreement in the event that Banknorth terminated his employment
without cause or Mr. Dougan terminated his employment because of a breach of the
employment agreement by Banknorth or a significant reduction in his authorities,
powers, functions or duties as vice chairman of Banknorth during the term of the
employment agreement. Payments to Mr. Dougan under his change-in-control
agreement would be in lieu of any other payment to which he would otherwise be
entitled under his employment agreement.
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INDEMNIFICATION AND INSURANCE. Pursuant to the merger agreement, Peoples
Heritage agreed to indemnify and hold harmless each present and former director,
officer and employee of Banknorth or a Banknorth subsidiary determined as of the
effective time of the merger 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 of the
merger, whether asserted or claimed prior to, at or after the effective time of
the merger, 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 Banknorth or a subsidiary
of Banknorth or any of their respective predecessors or (ii) the merger
agreement, the Banknorth stock option agreement or any of the transactions
contemplated thereby, to the fullest extent to which such indemnified parties
would be entitled under the certificate of incorporation and bylaws of Banknorth
or the equivalent documents of any Banknorth subsidiary, as applicable, or any
agreement, arrangement or understanding disclosed by Banknorth to Peoples
Heritage pursuant to the merger agreement, in each case as in effect on the date
of the merger agreement. Pursuant to the merger agreement, Peoples Heritage also
generally agreed to honor all limitations on liability existing in favor of the
indemnified parties as provided in the certificate of incorporation, bylaws or
similar governing instruments of Banknorth and its subsidiaries as in effect as
of the date of the merger agreement with respect to matters occurring prior to
the effective time of the merger.
Pursuant to the merger agreement, Peoples Heritage also agreed to maintain
Banknorth'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 of the merger by persons
who are currently covered by such insurance policy maintained by Banknorth for a
period of six years following the effective time of the merger, subject to a
cost limitation set forth in the merger agreement.
Other than as set forth above, no director or executive officer of Banknorth
has any direct or indirect material interest in the merger, except insofar as
ownership of Banknorth common stock might be deemed such an interest. See
"Certain Beneficial Owners of Banknorth Common Stock."
CERTAIN EMPLOYEE MATTERS
As soon as administratively practicable after the effective time of the
merger, Peoples Heritage will take all reasonable action so that employees of
Banknorth and its subsidiaries will be entitled to participate in the Peoples
Heritage employee benefit plans of general applicability to the same extent as
similarly-situated employees of Peoples Heritage and its subsidiaries (it being
understood that inclusion of the employees of Banknorth and its subsidiaries in
the Peoples Heritage employee benefit plans may occur at different times with
respect to different plans). For purposes of determining eligibility to
participate in, the vesting of benefits and for all other purposes (but not for
accrual of pension benefits) under the Peoples Heritage employee benefit plans,
Peoples Heritage and the Peoples Heritage employee benefit plans will recognize
years of service with Banknorth, any Banknorth subsidiary or any predecessor
thereof or entity acquired by Banknorth or a Banknorth subsidiary as such
service is recognized by and reflected on the records of Banknorth and the
Banknorth employee benefit plans. Peoples Heritage and the Peoples Heritage
employee benefit plans will provide employees of Banknorth and Banknorth
subsidiaries with full credit for copayment, deductible amounts and
out-of-pocket maximums under any Banknorth employee benefit plan paid by such
employees prior to the effective time of the merger and will 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 Peoples Heritage and its subsidiaries.
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All employees of Banknorth or a Banknorth subsidiary as of the effective
time of the merger will become employees of Peoples Heritage or a Peoples
Heritage subsidiary as of such time, and Peoples Heritage or a Peoples Heritage
subsidiary will use its best efforts to give such persons (other than any person
who is party to an employment agreement or a severance agreement) at least four
weeks prior written notice of any job elimination during the 90-day period after
the effective time of the merger. Subject to such four-week notice requirement,
Peoples Heritage or a Peoples Heritage subsidiary will have no obligation to
continue the employment of any employee of Banknorth or a Banknorth subsidiary
and nothing contained in the merger agreement will be deemed to give any
employee of Banknorth or any Banknorth subsidiary a right to continuing
employment with Peoples Heritage or a Peoples Heritage subsidiary after the
effective time of the merger. An employee of Banknorth or a Banknorth subsidiary
(other than an employee who is party to an employment agreement or a severance
agreement) who is involuntarily terminated other than for cause following the
effective time of the merger will be entitled to receive severance payments in
accordance with, and to the extent provided in, the Peoples Heritage employee
severance plan applicable to the merger.
For a period of six months following the effective time of the merger,
Peoples Heritage will provide job counseling and outplacement services to all
employees of Banknorth and its subsidiaries whose employment was terminated
other than for cause, disability or retirement at or following the effective
time of the merger. During that period, Peoples Heritage also will notify those
former employees who wish to continue to be so notified of opportunities for
positions with Peoples Heritage or a Peoples Heritage subsidiary for which
Peoples Heritage 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 will be made in the
sole discretion of Peoples Heritage.
BANK MERGERS AND CONSOLIDATION OF TRUST OPERATIONS
Pursuant to the merger agreement, certain banking subsidiaries of Peoples
Heritage and Banknorth will be combined as soon as practicable following
consummation of the merger. These transactions are as follows:
- Granite Savings Bank and Trust Company, a Banknorth subsidiary, will be
merged with and into The Howard Bank, N.A., which also is a Banknorth
subsidiary;
- Farmington National Bank, a Banknorth subsidiary, and Bank of New
Hampshire, a Peoples Heritage subsidiary, will combine under the name of
the latter; and
- Family Bank, a Peoples Heritage subsidiary, and First Massachusetts Bank,
N.A., a Banknorth subsidiary, will combine under the name of the latter.
The merger agreement also provides that, subject to the requirements of
applicable laws and regulations, any requirement of an applicable regulatory
authority and the fiduciary duties of the board of directors of Peoples
Heritage, Peoples Heritage will use its reasonable best efforts following the
merger to consolidate the trust operations of its banking subsidiaries with and
into The Stratevest Group, N.A. and will maintain the headquarters of this
company in Vermont for at least two years following the merger of Banknorth and
Peoples Heritage.
RESALE OF PEOPLES HERITAGE COMMON STOCK
The Peoples Heritage common stock issued pursuant to the merger will be
freely transferable under the Securities Act of 1933, except for shares issued
to any Banknorth shareholder who may be deemed to be an affiliate of Peoples
Heritage for purposes of Rule 144 promulgated under the Securities Act of 1933
or an affiliate of Banknorth for purposes of Rule 145 promulgated under the
Securities Act of 1933. Affiliates will include persons (generally executive
officers, directors and 10%
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shareholders) who control, are controlled by or are under common control with
(i) Peoples Heritage or Banknorth at the time of the special meetings or
(ii) Peoples Heritage at or after the effective time of the merger.
Rules 144 and 145 will restrict the sale of Peoples Heritage common stock
received in the merger by Affiliates and certain of their family members and
related interests. Generally speaking, during the year following the effective
time of the merger, those persons who are affiliates of Banknorth at the time of
the special meetings, provided they are not affiliates of Peoples Heritage at or
following the effective time of the merger, may publicly resell any Peoples
Heritage common stock received by them in the merger, subject to certain
limitations as to, among other things, the amount of Peoples Heritage common
stock sold by them in any three-month period and as to the manner of sale. After
the one-year period, such affiliates may resell their shares without such
restrictions so long as there is adequate current public information with
respect to Peoples Heritage as required by Rule 144. Persons who are affiliates
of Peoples Heritage after the effective time of the merger may publicly resell
the Peoples Heritage common stock received by them in the merger subject to
similar limitations and subject to certain filing requirements specified in
Rule 144.
The ability of affiliates to resell shares of Peoples Heritage common stock
received in the merger under Rules 144 or 145 as summarized herein generally
will be subject to Peoples Heritage's having satisfied its reporting
requirements under the Securities Exchange Act of 1934 for specified periods
prior to the time of sale. Affiliates also would be permitted to resell Peoples
Heritage common stock received in the merger pursuant to an effective
registration statement under the Securities Act of 1933 or another available
exemption from the Securities Act of 1933 registration requirements. Neither the
registration statement of which this prospectus/joint proxy statement is a part
nor this prospectus/joint proxy statement cover any resales of Peoples Heritage
common stock received by persons who may be deemed to be affiliates of Peoples
Heritage or Banknorth in the merger.
Guidelines of the Securities and Exchange Commission regarding qualifying
for the pooling of interests method of accounting also limit sales of shares of
the acquiring and acquired company by affiliates of either company in a business
combination. Securities and Exchange Commission guidelines indicate further that
the pooling of interests method of accounting generally will not be challenged
on the basis of sales by affiliates of the acquiring or acquired company if they
do not dispose of any of the shares of the corporation they own or shares of a
corporation they receive in connection with a merger during the period beginning
30 days before the merger and ending when financial results covering at least
30 days of post-merger operations of the combined entity have been published.
Each of Peoples Heritage and Banknorth has agreed in the merger agreement to
use its reasonable best efforts to cause each person who may be deemed to be an
affiliate (for purposes of Rule 145 and for purposes of qualifying the merger
for pooling of interests accounting treatment) of such party to deliver to
Peoples Heritage a letter agreement intended to preserve the ability to treat
the merger as a pooling of interests and, in the case of affiliates of
Banknorth, to ensure compliance with the Securities Act of 1933. See "--Letter
Agreements."
FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following is a summary description of the material federal
income tax consequences of the merger to shareholders of Banknorth, which is
based upon the opinion of Elias, Matz, Tiernan & Herrick L.L.P., special counsel
to Peoples Heritage. The federal income tax laws are complex and the tax
consequences of the merger may vary depending upon each shareholder's individual
circumstances or tax status. Accordingly, this summary is not a complete
description of all of the consequences of the merger and, in particular, may not
address federal income tax considerations that may affect the treatment of
shareholders subject to special treatment under United States federal income tax
law (including, for example, foreign persons, financial institutions, dealers in
securities,
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traders in securities who elect to apply a mark-to-market method of accounting,
insurance companies, tax-exempt entities, holders who acquired their shares of
Banknorth common stock pursuant to the exercise of an employee stock option or
right or otherwise as compensation and holders who hold Banknorth common stock
as part of a "hedge," "straddle" or "conversion transaction"). In addition, no
opinion is expressed with respect to the tax consequences of the Merger under
applicable foreign, state or local laws or under any federal tax laws other than
those pertaining to the income tax. This summary is based on laws, regulations,
rulings and judicial decisions as in effect on the date of this prospectus/joint
proxy statement, without consideration of the particular facts or circumstances
of any holder of Banknorth common stock. These authorities are all subject to
change and any such change may be made with retroactive effect. No assurance can
be given that, after any such change, this summary would not be different.
CONSEQUENTLY, EACH SHAREHOLDER OF BANKNORTH IS URGED TO CONSULT HIS OR HER
OWN TAX ADVISOR CONCERNING THE SPECIFIC FEDERAL AND ANY FOREIGN, STATE AND LOCAL
INCOME TAX AND OTHER TAX CONSEQUENCES OF THE MERGER APPLICABLE TO SUCH
SHAREHOLDER.
THE MERGER. Peoples Heritage and Banknorth have received an opinion from
Elias, Matz, Tiernan & Herrick L.L.P., which is based on facts, representations
and assumptions that were provided by Banknorth and Peoples Heritage and that
are consistent with the state of facts that Banknorth and Peoples Heritage
believe will be existing as of the effective time of the merger. On the basis of
such facts, representations and assumptions, Elias, Matz, Tiernan & Herrick
L.L.P. has opined that for federal income tax purposes the merger, when
consummated in accordance with the terms of the merger agreement, will
constitute a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code and, accordingly:
- neither Peoples Heritage nor Banknorth will recognize any gain or loss as
a result of the merger;
- no gain or loss will be recognized by shareholders of Banknorth upon the
exchange of their Banknorth common stock solely for shares of Peoples
Heritage common stock pursuant to the merger, except in respect of cash
received in lieu of a fractional share interest in Peoples Heritage common
stock;
- the basis of the Peoples Heritage common stock received by a Banknorth
shareholder receiving solely Peoples Heritage common stock will be the
same as his or her basis in the Banknorth common stock surrendered in
exchange therefor, reduced by any amount allocable to a fractional share
interest for which cash is received (as described below); and
- the holding period of the shares of Peoples Heritage common stock received
by a Banknorth shareholder receiving solely Peoples Heritage common stock
will include the period during which such Banknorth shareholder held the
Banknorth common stock surrendered in exchange therefor, provided the
surrendered Banknorth common stock was held by such shareholder as a
capital asset at the effective time of the merger.
For federal income tax purposes, cash received by a holder of Banknorth
common stock in lieu of a fractional share interest in Peoples Heritage common
stock will be treated as received in redemption of the fractional share
interest, and gain or loss will be recognized for federal income tax purposes
measured by the difference between the amount of cash received and the portion
of the basis of the share of Banknorth common stock allocable to such fractional
share interest, if the deemed redemption meaningfully reduces the Banknorth
shareholder's interest in Peoples Heritage, taking into account the constructive
ownership rules of the Code. Such gain or loss should be long-term capital gain
or loss if such share of Banknorth common stock is held as a capital asset and
has been held for more than one year at the effective time of the merger. A
common shareholder that owns an extremely small percentage of the Banknorth
common stock, exercises no control over the affairs of Peoples Heritage or
Banknorth and does not actually or constructively own any shares of Peoples
Heritage common
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stock other than those received in the merger will be treated as experiencing a
meaningful reduction in interest.
CLOSING OPINION. It is a condition precedent to the obligations of Peoples
Heritage and Banknorth to effect the merger that they receive an opinion from
Elias, Matz, Tiernan & Herrick L.L.P., dated as of the effective time of the
merger, with respect to the federal income tax consequences of the merger
described under the subheading "--The Merger" above. Such opinion will be based
upon facts existing at the effective time of the merger, and in rendering such
opinion counsel will require and rely upon facts, representations and
assumptions that will be provided by Peoples Heritage, Banknorth and others.
ACCOUNTING TREATMENT OF THE MERGER
It is expected that the merger will be accounted for as a pooling of
interests under generally accepted accounting principles, and it is a condition
to the obligations of Peoples Heritage and Banknorth to consummate the merger
that they receive a letter, dated the date of this prospectus/joint proxy
statement (which has been received) and confirmed in writing as of the effective
time of the merger, from KPMG LLP, Peoples Heritage's and Banknorth's
independent public accountants, to the effect that the merger qualifies for such
accounting treatment. See "The Merger--Conditions to the Merger." As required by
generally accepted accounting principles, under pooling of interests accounting,
as of the effective time of the merger, the assets and liabilities of Banknorth
would be added to those of Peoples Heritage at their recorded book values and
the shareholders' equity accounts of Peoples Heritage and Banknorth would be
combined on Peoples Heritage's consolidated balance sheet. On a pooling of
interests accounting basis, income and other financial statements of Peoples
Heritage issued after consummation of the merger would be restated retroactively
to reflect the consolidated combined financial position and results of
operations of Peoples Heritage and Banknorth as if the merger had taken place
prior to the periods covered by such financial statements. The unaudited pro
forma per share financial information contained herein has been prepared using
the pooling of interests accounting method to account for the merger. See
"Summary--Unaudited Comparative Per Share and Selected Financial Data."
EXPENSES OF THE MERGER
The merger agreement provides that each party thereto will each bear and pay
all costs and expenses incurred by it in connection with the transactions
contemplated by the merger agreement, including fees and expenses of its own
financial consultants, accountants and counsel, except that expenses of printing
the registration statement of which this prospectus/joint proxy statement is a
part and the registration fee to be paid to the Securities and Exchange
Commission in connection therewith will be shared equally between Peoples
Heritage and Banknorth.
AMENDMENT TO ARTICLES OF INCORPORATION OF PEOPLES HERITAGE
Pursuant to the merger agreement, the articles of incorporation of Peoples
Heritage, as in effect immediately prior to consummation of the merger, will be
the articles of incorporation of the combined company until altered, amended or
repealed in accordance with their terms and applicable law, except that
article 1 of such articles of incorporation will 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 04112-9540.
By virtue of adopting the merger agreement, shareholders of Peoples Heritage
will be adopting the foregoing amendment to the articles of incorporation of
Peoples Heritage.
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STOCK OPTION AGREEMENTS
As an inducement and a condition to Peoples Heritage's entering into the
merger agreement, Peoples Heritage and Banknorth also entered into a stock
option agreement (the "Banknorth stock option agreement"), pursuant to which
Banknorth, as issuer, granted Peoples Heritage, as grantee, an option, upon the
occurrence of certain events (none of which has occurred as of the date hereof
to the knowledge of Peoples Heritage and Banknorth), to purchase up to 4,621,085
shares of Banknorth common stock, representing 19.9% of the outstanding shares
of Banknorth common stock, at a price of $26.80 per share, subject to adjustment
in certain circumstances and termination within certain periods (the "Banknorth
option").
As an inducement and a condition to Banknorth's entering into the merger
agreement, Peoples Heritage and Banknorth also entered a stock option agreement
(the "Peoples Heritage stock option agreement," and together with the Banknorth
stock option agreement the "stock option agreements"), pursuant to which Peoples
Heritage, as issuer, granted Banknorth, as grantee, an option, upon the
occurrence of certain events (none of which has occurred as of the date hereof
to the knowledge of Peoples Heritage and Banknorth), to purchase up to
20,820,000 shares of Peoples Heritage common stock, representing 19.9% of the
outstanding shares of Peoples Heritage common stock at the time of execution of
the Peoples Heritage stock option agreement, at a price of $19.20 per share,
subject to adjustment in certain circumstances and termination within certain
periods (the "Peoples Heritage option," and together with the Banknorth option
the "options").
For purposes of the following summary of the material provisions of the
stock option agreements, the term (i) "issuer" means Banknorth with respect to
the Banknorth stock option agreement and Peoples Heritage with respect to the
Peoples Heritage stock option agreement, (ii) "grantee" means Peoples Heritage
with respect to the Banknorth stock option agreement and Banknorth with respect
to the Peoples Heritage stock option agreement, (iii) "option" means the
Banknorth option or the Peoples Heritage option, as applicable, and
(iv) "issuer common stock" shall mean the Banknorth common stock or the Peoples
Heritage common stock, as applicable. With the exception of the number and
percentage of shares of issuer common stock subject to an option and the per
share price at which an option may be exercised, the terms of the Banknorth
stock option agreement and the Peoples Heritage stock option agreement are
substantially identical.
Subject to applicable law and regulatory restrictions, grantee may exercise
the option, in whole or in part, if, but only if, both an initial triggering
event (as hereinafter defined) and a subsequent triggering event (as hereinafter
defined) have occurred prior to the occurrence of an exercise termination event
(as hereinafter defined), provided that written notice of such exercise is given
within six months following the first subsequent triggering event to occur (or
such later period as is provided in each stock option agreement).
Notwithstanding the foregoing, grantee may not exercise the option if it is in
willful breach of the merger agreement such that issuer shall be entitled to
terminate the merger agreement therefor in accordance with its terms.
As defined in each stock option agreement, the term "initial triggering
event" means any of the following events or transactions occurring on or after
the date of execution of the stock option agreement:
- Issuer or any subsidiary of issuer, 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 each stock option agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934 and the rules and regulations thereunder),
other than grantee or any subsidiary of grantee, or the board of directors
of issuer 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 each stock option agreement, the
term "acquisition transaction" shall
58
<PAGE>
mean (i) a merger or consolidation, or any similar transaction, involving
issuer or any issuer subsidiary, (ii) 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, (iii) 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 (iv) any substantially similar
transaction, provided that in no event shall any merger, consolidation,
purchase or similar transaction (x) 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 (y) permitted by the merger agreement be deemed to be
an acquisition transaction;
- 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 Issuer common stock (the term
"beneficial ownership" for purposes of each stock option agreement having
the meaning assigned thereto in Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations thereunder);
- Any person, other than grantee or a grantee subsidiary, shall have made a
bona fide proposal to issuer or its shareholders by public announcement or
written communication that is or becomes the subject of public disclosure
to engage in an acquisition transaction;
- The shareholders 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;
- The board of directors of issuer, 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 shareholders 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;
- Any person, other than grantee or a grantee subsidiary, shall have filed
with the Securities and Exchange Commission 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 Securities and Exchange Commission
with respect to a potential vote by its shareholders to approve the
issuance of shares to be offered in such an exchange offer);
- After an overture is made by any person, other than grantee or a grantee
subsidiary, to issuer or its shareholders 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 date the holder of the option sends issuer a
written notice to exercise the option in whole or in part; or
59
<PAGE>
- Any person, other than grantee or a grantee subsidiary, shall have filed
an application or notice with the Federal Reserve Board or other federal
or state bank regulatory or antitrust authority, which application or
notice has been accepted for processing, for approval to engage in an
acquisition transaction.
As defined in each stock option agreement, the term "subsequent triggering
event" means any of the following events or transactions occurring after the
date of execution of the stock option agreement:
- The acquisition by any person, other than grantee or any grantee
subsidiary, of beneficial ownership of 25% or more of the then outstanding
issuer common stock; or
- The occurrence of the initial triggering event described in the first
paragraph of the definition of initial triggering event above, except that
the percentage referred to in clause (iii) of such paragraph shall be 25%;
provided, however, that, notwithstanding any other provision of the stock option
agreement to the contrary, a subsequent triggering event shall be deemed to have
occurred upon the occurrence of certain distribution or triggering events set
forth in issuer's shareholder rights plan.
As defined in each stock option agreement, "exercise termination event"
means each of the following:
- the effective time of the merger;
- 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 due to a breach of the
merger agreement (unless the breach by issuer giving rise to such right of
termination was non-volitional); or
- 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 due to a breach 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. As defined in each stock option
agreement, the term "last triggering event" means the last initial
triggering event to expire.
Under applicable law, grantee would be required to obtain the prior approval
of the Federal Reserve Board prior to acquiring 5% or more of the outstanding
shares of issuer common stock. In addition, certain other regulatory approvals
also may be required before such an acquisition could be consummated.
Upon the occurrence of a subsequent triggering event that occurs prior to an
exercise termination event, (i) at the request of any holder of the option
delivered within 90 days following such occurrence (or such later period as is
provided in each stock option agreement), Issuer (or any successor thereto)
shall repurchase the option from the holder of the option at a price equal to
the greater of (1) $20.0 million and (2) the amount by which (A) the
market/offer price (as defined in each stock option agreement) exceeds (B) the
option exercise 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 is provided in each stock
option agreement), issuer (or any
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<PAGE>
successor thereto) shall repurchase such number of the shares of issuer common
stock acquired upon exercise of an option from the owner as the owner shall
designate at a 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.
Each stock option agreement provides that in no event shall grantee's total
profit (as defined in each stock option agreement, which definitions are
incorporated herein by reference) exceed $40,000,000 and, if it otherwise would
exceed such amount, grantee, at its sole election, shall either (i) reduce the
number of shares of issuer common stock subject to the option, (ii) deliver to
issuer for cancellation shares of issuer common stock previously purchased by
grantee pursuant to the option, (iii) pay cash to 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. Each stock option
agreement also provides that the option may not be exercised for a number of
shares as would, as of the date of exercise, result in a notional total profit
(as defined in each stock option agreement, which definitions are incorporated
herein by reference) of more than $40,000,000, provided that this provision
shall not restrict any exercise of the option permitted on any subsequent date.
The stock option agreements are intended to increase the likelihood that the
merger will be consummated in accordance with the terms of the merger agreement.
The existence of the options could significantly increase the cost to a
potential acquiror of acquiring Peoples Heritage or Banknorth compared to its
cost had the stock option agreements and the merger agreement not been entered
into. Such increased cost might discourage a potential acquiror from considering
or proposing an acquisition or might result in a potential acquiror proposing to
pay a lower per share price to acquire Peoples Heritage or Banknorth than it
might otherwise have proposed to pay. Moreover, following consultation with
their respective independent accountants, Peoples Heritage and Banknorth believe
that the exercise or repurchase of either of the options is likely to prohibit
any other acquiror of the Issuer of such option from accounting for an
acquisition of such Issuer using the pooling of interests accounting method for
a period of two years. In light of the foregoing, the stock option agreements
may have the effect of discouraging persons who might now or at any other time
prior to the effective time of the merger be interested in acquiring all or a
significant interest in Peoples Heritage or Banknorth from considering or
proposing such an acquisition, even if any such person was prepared to offer to
pay consideration that had a higher current market price.
A copy of the Banknorth stock option agreement and the Peoples Heritage
stock option agreement are included as Annex II and Annex III hereto,
respectively, and reference is made thereto for the complete terms thereof. The
foregoing discussion is qualified in its entirety by reference to the stock
option agreements.
TERMINATION FEE
In connection with an amendment to the merger agreement to extend the
termination date from April 1, 2000 to May 31, 2000, Peoples Heritage agreed to
pay to Banknorth, within two business days of a demand therefor by Banknorth,
$5 million in immediately available funds in the event that required regulatory
approvals are not obtained or the merger is not completed by May 31, 2000, other
than due to a breach of the merger agreement by Banknorth. See "--Regulatory
Approvals--Federal Approvals and Notices."
LETTER AGREEMENTS
In connection with the execution of the merger agreement, the directors and
executive officers of Banknorth entered into a letter agreement with Peoples
Heritage pursuant to which such persons agreed to vote all shares of Banknorth
common stock beneficially owned by them as of the record date
61
<PAGE>
for the Banknorth special meeting to approve the merger agreement at the
Banknorth special meeting, and the directors and executive officers of Peoples
Heritage entered into a letter agreement with Peoples Heritage pursuant to which
such persons agreed to do the same with respect to the shares of Peoples
Heritage common stock beneficially owned by them at the Peoples Heritage special
meeting. Pursuant to the foregoing letter agreements, directors and executive
officers of Banknorth and Peoples Heritage agreed to certain restrictions on the
transfer of shares of Peoples Heritage common stock and Banknorth common stock
which are intended to ensure that the merger will be accounted for as a pooling
of interests under generally accepted accounting principles and, in the case of
directors and executive officers of Banknorth, compliance with applicable
federal securities laws in connection with the transfer of shares of Peoples
Heritage common stock received by them upon consummation of the merger. See "The
Merger--Resale of Peoples Heritage Common Stock."
NO DISSENTERS' RIGHTS
In accordance with Section 262 of the Delaware General Corporation Law,
appraisal rights are not available to holders of any class of shares of a
Delaware corporation such as Banknorth that, at the record date for determining
shareholders entitled to vote on a plan of merger or consolidation, was listed
on a national securities exchange or designated as a Nasdaq Stock Market
National Market security, provided that such holders are not required by the
terms of the plan of merger or consolidation to accept for such shares anything
other than, among other things, shares of stock in the acquiring corporation
which are so listed, plus cash in lieu of any fractional share interests.
Because the Banknorth common stock and the Peoples Heritage common stock are
listed on the Nasdaq Stock Market's National Market, Banknorth shareholders have
no dissenters' rights of appraisal in connection with the merger.
In accordance with Section 908 of the Maine Business Corporation Act,
appraisal rights are not available to holders of any class of shares of a Maine
corporation such as Peoples Heritage that, at the record date for determining
shareholders entitled to vote on a plan of merger or consolidation, was
registered with the Securities and Exchange Commission pursuant to
Section 12(g) of the Securities Exchange Act of 1934, provided that such holders
are not required by the terms of the plan of merger or consolidation to accept
for such shares anything other than shares of stock in the surviving
corporation, among other things. Because the Peoples Heritage common stock is
registered under Section 12(g) and the outstanding shares of Peoples Heritage
common stock will be unaffected by the merger, Peoples Heritage shareholders
have no dissenters' rights of appraisal in connection with the merger.
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<PAGE>
MANAGEMENT AND OPERATIONS OF PEOPLES HERITAGE
AFTER THE MERGER
MANAGEMENT
Pursuant to the merger agreement, at the effective time of the merger the
board of directors of Peoples Heritage will be expanded to include Angelo P.
Pizzagalli and five other persons serving as directors of Banknorth immediately
prior to the effective time who are designated by Banknorth and who both meet
the director qualification requirements set forth in the bylaws of Peoples
Heritage and are otherwise reasonably acceptable to Peoples Heritage. The merger
agreement also provides that, at the effective time of the merger,
Mr. Pizzagalli will become chairman of the executive committee of the board of
directors of Peoples Heritage.
The following table sets forth certain information about each director of
Banknorth who will become a director of Peoples Heritage upon consummation of
the merger.
<TABLE>
<CAPTION>
POSITION WITH BANKNORTH AND DIRECTOR OF
PRINCIPAL OCCUPATION BANKNORTH
NAME AGE DURING THE PAST FIVE YEARS SINCE
- ---- -------- --------------------------------------------- -----------
<S> <C> <C> <C>
Thomas J. Amidon, Esq.......... 59 Attorney at Law 1982
Susan C. Crampton, C.P.A....... 58 Principal, The Vermont Partnership, Jericho, 1985
Vermont (business consultants)
George W. Dougan............... 60 Vice Chairman and Director of Banknorth since 1998
1998; Chairman, President and Chief Executive
Officer of Evergreen Bancorp
Luther F. Hackett.............. 65 President, Hackett, Valine & McDonald, Inc., 1983
South Burlington, Vermont (insurance agency);
Director, Central Vermont Public Service
Corporation and Vermont Electric Power
Company, Inc.
Angelo P. Pizzagalli........... 64 Co-Chairman, Pizzagalli Construction Company, 1983
South Burlington Vermont (construction
business)
Patrick E. Welch............... 52 Chairman and Chief Executive Officer, 1998
National Life Insurance Company, Montpelier,
Vermont
</TABLE>
Pursuant to the merger agreement, and subject to compliance with the
director qualification requirements set forth in Peoples Heritage's bylaws and
the fiduciary duties of the board of directors of Peoples Heritage, Peoples
Heritage will include each of the foregoing persons on its list of nominees for
director at the first annual meeting of shareholders of Peoples Heritage
following the effective time of the merger, which persons shall be allocated
equally among the three classes of directors of Peoples Heritage and nominated
for election for three, two or one-year terms, as applicable.
Additional information about the foregoing persons is contained in
Banknorth's annual report on Form 10-K for the year ended December 31, 1998,
which is incorporated by reference in this prospectus/joint proxy statement. See
"Where You Can Find More Information."
For information about certain executive officers of Banknorth who will
become executive officers of Peoples Heritage upon consummation of the merger,
see "The Merger--Interests of Certain Persons in the Merger."
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<PAGE>
OPERATIONS
Peoples Heritage expects to achieve significant cost savings, revenue
enhancements and other operating synergies subsequent to the merger. The cost
savings and operating synergies are expected to be derived primarily from
reductions in personnel and the integration of other facilities and back office
operations. In addition, because Banknorth will be merged with and into Peoples
Heritage, the costs associated with Banknorth operating as a publicly-held
entity also will be eliminated. The after-tax cost savings, revenue enhancements
and other operating synergies for 2000 and 2001 are estimated to amount to
approximately $13.3 million and $28.2 million, respectively. The estimated
amounts are larger in 2001 because system consolidation and bank mergers are not
anticipated to occur until sometime in the second quarter of 2000. Because of
the uncertainties inherent in merging two financial institutions, changes in the
regulatory environment and changes in economic conditions, no assurances can be
given that any particular level of cost savings, revenue enhancements and other
operating synergies will be realized, that any such cost savings, revenue
enhancements and other operating synergies will be realized over the time period
currently anticipated or that such cost savings, revenue enhancements and other
operating synergies will not be offset to some degree by increases in other
expenses, including expenses related to integrating the two companies.
Based upon the projected after-tax cost savings, revenue enhancements and
other operating synergies expected to be realized by the combined company,
Peoples Heritage believes that the merger will be dilutive to the earnings of
the combined company by $.04 per share, or 2.2%, in 2000, and accretive to the
earnings of the combined company by $.04 per share, or 1.9%, in 2001. The
earnings estimates for 2000 are based on First Call Corporation consensus
estimates made prior to announcement of the proposed merger, and the earnings
estimates for 2001 assume that the estimated earnings of Peoples Heritage and
Banknorth in 2000 increase by 11.8% and 9.8%, respectively.
Although management of Peoples Heritage has performed substantial financial
analysis of the proposed merger, identification of all cost savings and
potential earnings enhancements associated with the merger has not been
completed. Moreover, no assurances can be given that cost savings or any revenue
enhancements will be realized at any given time in the future.
The estimated cost savings which are expected to be realized by the combined
company do not reflect an estimated one-time, after-tax charge of approximately
$31.0 million relating to merger reorganization and restructuring costs, which
will be incurred in connection with the merger. The one-time charge relates
primarily to terminations of employment contracts, change-in-control contracts
and severance obligations, professional fees, conversion and integration
expenses, exit costs associated with contract terminations and other operating
expenses required to be accrued in accordance with generally accepted accounting
principles, less estimated tax benefits. In evaluating the cost savings and
other potential benefits of the merger, the Peoples Heritage board of directors
considered the amount of the one-time merger charges which are necessary to
realize future annual savings resulting from consolidation of support functions
and economies of scale.
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<PAGE>
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed consolidated balance
sheet combines the consolidated historical balance sheets of Peoples Heritage
and Banknorth, assuming the merger was consummated as of September 30, 1999 on a
pooling of interests accounting basis, and the following unaudited pro forma
combined condensed consolidated statements of operations present the combined
consolidated statements of operations of Peoples Heritage and Banknorth assuming
the merger was consummated as of the beginning of the indicated periods. See
"The Merger--Accounting Treatment of the Merger." Certain insignificant
reclassifications have been reflected in the pro forma information to conform
statement presentations.
The effect of an expected reorganization and restructuring charge in
connection with the merger has been reflected in the pro forma combined
condensed consolidated balance sheet; however, because the reorganization and
restructuring charge is nonrecurring, it has not been reflected in the pro forma
combined condensed consolidated statements of operations. The pro forma
financial data does not reflect cost savings, revenue enhancements and other
operating synergies which are expected to be realized after the merger is
completed. See "Management and Operations of Peoples Heritage After the Merger."
The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the Merger been consummated at September 30, 1999 or at the
beginning of the periods indicated, nor is it necessarily indicative of the
results of operations in future periods or the future financial position of the
combined entities.
The pro forma information should be read in conjunction with the historical
consolidated financial statements of Peoples Heritage and Banknorth, including
the related notes, incorporated by reference herein, and the selected
consolidated and other pro forma financial information, including the notes
thereto, appearing elsewhere in this prospectus/joint proxy statement. See
"Where You Can Find More Information "and "Summary-Selected Pro Forma
Consolidated Financial Data."
65
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
PEOPLES HERITAGE AND BANKNORTH
SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PEOPLES PRO FORMA
HERITAGE BANKNORTH ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks..................... $ 278,761 $ 135,958 $ -- $ 414,719
Federal funds sold and other short-term
investments............................... 183,334 100 -- 183,434
Securities available for sale, at market
value..................................... 5,412,505 1,135,573 -- 6,548,078
Securities held to maturity................. 565,783 16,454 582,237
Loans held for sale......................... 98,575 17,462 -- 116,037
Loans and leases............................ 6,691,169 2,954,772 -- 9,645,941
Less: Allowance for loan and lease losses... 110,788 46,165 -- 156,953
----------- ---------- ---------- -----------
Net loans and leases...................... 6,580,381 2,908,607 -- 9,488,988
Premises and equipment...................... 140,749 50,930 -- 191,679
Goodwill and other intangibles.............. 114,206 73,369 -- 187,575
Mortgage servicing rights................... 48,103 6,029 -- 54,132
Bank owned life insurance................... 225,329 59,547 -- 284,876
Other assets................................ 233,138 78,162 -- 311,300
----------- ---------- ---------- -----------
Total assets............................ $13,880,864 $4,482,191 $ -- $18,363,055
=========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest-bearing.......................... $ 6,682,086 $3,100,073 $ -- $ 9,782,159
Non-interest bearing...................... 1,276,536 526,973 -- 1,803,509
Brokered deposits......................... 143,819 -- -- 143,819
----------- ---------- ---------- -----------
Total deposits.......................... 8,102,441 3,627,046 -- 11,729,487
Borrowings from the Federal Home Loan Bank
of Boston................................. 4,206,474 180,881 -- 4,387,355
Federal funds purchased and securities sold
under repurchase agreements............... 565,760 221,077 -- 786,837
Other borrowings............................ 30,542 35,443 -- 65,985
Other liabilities........................... 54,739 50,755 30,972(1) 136,466
----------- ---------- ---------- -----------
Total liabilities....................... 12,959,956 4,115,202 30,972(1) 17,106,130
----------- ---------- ---------- -----------
Corporation-obligated, mandatorily
redeemable securities of subsidiary
trust..................................... 68,775 30,000 -- 98,775
----------- ---------- ---------- -----------
Shareholders' equity:
Preferred Stock........................... -- -- -- --
Common Stock:
Peoples Heritage........................ 1,066 426 (2) 1,492
Banknorth............................... 23,548 (23,548)(2) --
Paid-in capital............................. 508,836 85,622 16,169 (2) 610,627
Retained earnings........................... 499,159 249,149 (30,972)(1) 717,336
Unamortized employee restricted stock....... -- (1,222) -- (1,222)
Unearned compensation....................... (1,775) (139) -- (1,914)
Accumulated other comprehensive income:
Net unrealized loss on securities
available for sale...................... (70,752) (13,016) -- (83,768)
Treasury stock, at cost..................... (84,401) (6,953) 6,953 (2) (84,401)
----------- ---------- ---------- -----------
Total shareholders' equity................ 852,133 336,989 (30,972)(1) 1,158,150
----------- ---------- ---------- -----------
Total liabilities and shareholders'
equity................................ $13,880,864 $4,482,191 $ -- $18,363,055
=========== ========== ========== ===========
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
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<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCED SHEET
(1) The unaudited pro forma condensed combined balance sheet at September 30,
1999 reflects anticipated one-time merger and integration costs, which are
presently estimated to total approximately $41.4 million before taxes and
$31.0 million after taxes. These amounts differ from prior estimates of
pre-tax and after-tax one-time merger and integration costs of
$55.2 million and $40.5 million, respectively, primarily because of
reductions in the estimated number of persons who will receive severance,
the estimated aggregate amount of severance and the deduction of charges
that Peoples Heritage will take ($3.6 million pre-tax, $2.4 million
after-tax) in the first quarter of 2000 related to branch consolidations
that will occur regardless whether the merger is consummated. Anticipated
merger and integration cost estimates are not included in the unaudited pro
forma condensed combined statements of operations for any of the periods
presented. See "Management and Operations of Peoples Heritage After the
Merger." The following table provides details of the estimated merger and
integration costs by type:
<TABLE>
<CAPTION>
ESTIMATED PRE-TAX ESTIMATED AFTER-TAX
AMOUNT AMOUNT
----------------- -------------------
(IN MILLIONS)
<S> <C> <C>
Severance costs............................. $ 7.6 $ 5.1
Data processing/systems integration......... 4.5 3.0
Professional fees........................... 9.0 8.3
Asset writedowns and lease termination...... 13.1 8.8
Customer communications..................... 3.3 2.2
Other merger expenses....................... 3.9 3.6
----- -----
Total..................................... $41.4 $31.0
===== =====
</TABLE>
(2) Reflects the par value of the Peoples Heritage common stock to be issued in
exchange for Banknorth common stock in connection with the merger, with
related adjustments to paid-in capital, as well as the cancellation of
Banknorth's treasury stock pursuant to the merger agreement. The Peoples
Heritage common stock to be issued in connection with the merger was
calculated by multiplying the number of outstanding shares of Banknorth
common stock as of September 30, 1999 by the 1.825 exchange ratio and adding
the number of shares of Peoples Heritage common stock issuable or
potentially issuable prior to the effective time of the merger, based on the
1.825 exchange ratio, with respect to the Banknorth common stock equivalents
which were outstanding on such date.
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<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
PEOPLES HERITAGE AND BANKNORTH
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PEOPLES PRO FORMA
HERITAGE BANKNORTH COMBINED(1)
----------- ---------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases................ $ 436,016 $ 183,627 $ 619,643
Interest and dividends on securities................. 231,323 53,267 284,590
----------- ---------- -----------
Total interest and dividend income................. 667,339 236,894 904,233
----------- ---------- -----------
Interest expense:
Interest on deposits................................. 190,589 90,033 280,622
Interest on borrowed funds........................... 144,883 14,360 159,243
----------- ---------- -----------
Total interest expense............................. 335,472 104,393 439,865
----------- ---------- -----------
Net interest income................................ 331,867 132,501 464,368
Provision for loan and lease losses.................... 10,695 6,875 17,570
----------- ---------- -----------
Net interest income after provision for loan
losses........................................... 321,172 125,626 446,798
----------- ---------- -----------
Noninterest income:
Customer services.................................... 37,955 14,002 51,957
Mortgage banking services............................ 14,277 3,338 17,615
Trust and investment advisory services............... 14,562 14,634 29,196
Insurance commissions................................ 14,277 -- 14,277
Net securities gains................................. 281 374 655
Bank owned life insurance income..................... 8,385 1,835 10,220
Bank owned life insurance claim...................... -- 1,389 1,389
Other noninterest income............................. 5,597 6,469 12,066
----------- ---------- -----------
95,334 42,041 137,375
----------- ---------- -----------
Noninterest expenses:
Salaries and employee benefits....................... 120,410 50,971 171,381
Data processing...................................... 20,985 5,425 26,410
Occupancy............................................ 20,631 9,064 29,695
Equipment............................................ 15,527 7,611 23,138
Amortization of goodwill and deposit premiums........ 8,834 6,631 15,465
Distributions on securities of subsidiary trust...... 5,129 2,367 7,496
Advertising and marketing............................ 6,812 3,586 10,398
Special charges...................................... 33,235 1,233 34,468
Other noninterest expenses........................... 38,255 20,937 59,192
----------- ---------- -----------
269,818 107,825 377,643
----------- ---------- -----------
Income before income tax expense....................... 146,688 59,842 206,530
Income tax expense..................................... 49,847 18,560 68,407
----------- ---------- -----------
Net income........................................... $ 96,841 $ 41,282 $ 138,123
=========== ========== ===========
Basic earnings per share............................... $ 0.94 $ 1.76 $ 0.95
=========== ========== ===========
Diluted earnings per share............................. $ 0.93 $ 1.74 $ 0.93
=========== ========== ===========
Average common shares--basic........................... 103,427,165 23,392,786 146,118,999
=========== ========== ===========
Average common shares--diluted......................... 104,622,386 23,696,575 147,868,635
=========== ========== ===========
</TABLE>
(FOOTNOTE ON PAGE 73)
68
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
PEOPLES HERITAGE AND BANKNORTH
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PEOPLES PRO FORMA
HERITAGE BANKNORTH COMBINED(1)
----------- ---------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases................ $ 508,114 $ 178,546 $ 686,660
Interest and dividends on securities................. 120,390 51,499 171,889
----------- ---------- -----------
Total interest and dividend income................. 628,504 230,045 858,549
----------- ---------- -----------
Interest expense:
Interest on deposits................................. 214,087 89,318 303,405
Interest on borrowed funds........................... 94,177 19,234 113,411
----------- ---------- -----------
Total interest expense............................. 308,264 108,552 416,816
----------- ---------- -----------
Net interest income.................................. 320,240 121,493 441,733
Provision for loan and lease losses.................... 10,457 7,010 17,467
----------- ---------- -----------
Net interest income after provision for loan and
lease losses....................................... 309,783 114,483 424,266
----------- ---------- -----------
Noninterest income:
Customer services.................................... 29,817 11,852 41,669
Mortgage banking services............................ 22,329 4,101 26,430
Trust and investment advisory services............... 12,105 9,047 21,152
Insurance commissions................................ 9,050 -- 9,050
Net securities gains (losses)........................ 3,509 (7) 3,502
Bank owned life insurance income..................... 2,807 1,660 4,467
Other noninterest income............................. 8,329 3,174 11,503
----------- ---------- -----------
87,946 29,827 117,773
----------- ---------- -----------
Noninterest expenses:
Salaries and employee benefits....................... 123,136 47,991 171,127
Data processing...................................... 18,183 5,417 23,600
Occupancy............................................ 20,229 7,321 27,550
Equipment............................................ 15,355 7,045 22,400
Amortization of goodwill and deposit premiums........ 8,664 3,964 12,628
Distributions on securities of subsidiary trust...... 6,795 2,367 9,162
Advertising and marketing............................ 8,558 2,948 11,506
Special charges...................................... 35,374 -- 35,374
Other noninterest expenses........................... 41,337 19,139 60,476
----------- ---------- -----------
277,631 96,192 373,823
----------- ---------- -----------
Income before income tax expense....................... 120,098 48,118 168,216
Income tax expense..................................... 39,204 14,836 54,040
----------- ---------- -----------
Net income......................................... $ 80,894 $ 33,282 $ 114,176
=========== ========== ===========
Basic earnings per share............................... $ 0.78 $ 1.43 $ 0.78
=========== ========== ===========
Diluted earnings per share............................. $ 0.76 $ 1.40 $ 0.77
=========== ========== ===========
Average common shares--basic........................... 103,529,930 23,305,115 146,061,765
=========== ========== ===========
Average common shares--diluted......................... 105,818,328 23,711,125 149,091,131
=========== ========== ===========
</TABLE>
(FOOTNOTE ON PAGE 73)
69
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
PEOPLES HERITAGE AND BANKNORTH
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PEOPLES PRO FORMA
HERITAGE BANKNORTH COMBINED(1)
----------- ---------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases................ $ 669,991 $ 238,953 $ 908,944
Interest and dividends on securities................. 167,468 69,748 237,216
----------- ---------- -----------
Total interest and dividend income................. 837,459 308,701 1,146,160
----------- ---------- -----------
Interest expense:
Interest on deposits................................. 284,935 120,481 405,416
Interest on borrowed funds........................... 126,051 24,177 150,228
----------- ---------- -----------
Total interest expense............................. 410,986 144,658 555,644
----------- ---------- -----------
Net interest income.................................. 426,473 164,043 590,516
Provision for loan and lease losses.................... 14,430 9,345 23,775
----------- ---------- -----------
Net interest income after provision for loan and
lease
losses............................................. 412,043 154,698 566,741
----------- ---------- -----------
Noninterest income:
Customer services.................................... 40,982 16,142 57,124
Mortgage banking services............................ 27,202 5,492 32,694
Trust and investment advisory services............... 16,590 12, 838 29,428
Insurance commissions................................ 13,006 -- 13,006
Net securities gains................................. 5,904 519 6,423
Bank owned life insurance income..................... 3,705 2,229 5,934
Other noninterest income............................. 11,297 4,253 15,550
----------- ---------- -----------
118,686 41,473 160,159
----------- ---------- -----------
Noninterest expenses:
Salaries and employee benefits....................... 164,888 65,545 230,433
Data processing...................................... 25,399 6,889 32,288
Occupancy............................................ 26,811 9,826 36,637
Equipment............................................ 20,621 9,392 30,013
Amortization of goodwill and deposit premiums........ 11,611 5,743 17,354
Distributions on securities of subsidiary trust...... 9,060 3,156 12,216
Advertising and marketing............................ 10,805 3,870 14,675
Special charges...................................... 39,172 21,968 61,140
Other noninterest expenses........................... 52,631 26,347 78,978
----------- ---------- -----------
360,998 152,736 513,734
----------- ---------- -----------
Income before income tax expense....................... 169,731 43,435 213,166
Income tax expense..................................... 56,907 14,515 71,422
----------- ---------- -----------
Net income......................................... $ 112,824 $ 28,920 $ 141,744
=========== ========== ===========
Basic earnings per share............................... $ 1.09 $ 1.24 $ 0.97
=========== ========== ===========
Diluted earnings per share............................. $ 1.07 $ 1.22 $ 0.95
=========== ========== ===========
Average common shares--basic........................... 103,637,875 23,277,560 146,119,422
=========== ========== ===========
Average common shares--diluted......................... 105,767,728 23,669,540 148,964,639
=========== ========== ===========
</TABLE>
(FOOTNOTE ON PAGE 73)
70
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
PEOPLES HERITAGE AND BANKNORTH
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PEOPLES PRO FORMA
HERITAGE BANKNORTH COMBINED(1)
----------- ---------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases................ $ 590,000 $ 233,414 $ 823,414
Interest and dividends on securities................. 171,270 61,343 232,613
----------- ---------- -----------
Total interest and dividend income................. 761,270 294,757 1,056,027
----------- ---------- -----------
Interest expense:
Interest on deposits................................. 261,478 109,443 370,921
Interest on borrowed funds........................... 94,868 23,892 118,760
----------- ---------- -----------
Total interest expense............................. 356,346 133,335 489,681
----------- ---------- -----------
Net interest income................................ 404,924 161,422 566,346
Provision for loan and lease losses.................... 6,391 9,372 15,763
----------- ---------- -----------
Net interest income after provision for loan and
lease losses..................................... 398,533 152,050 550,583
----------- ---------- -----------
Noninterest income:
Customer services.................................... 34,525 15,260 49,785
Mortgage banking services............................ 28,679 4,667 33,346
Trust and investment advisory services............... 12,621 11,223 23,844
Insurance commissions................................ 1,899 -- 1,899
Bank owned life insurance income..................... 2,251 77 2,328
Net securities gains................................. 2,571 266 2,837
Other noninterest income............................. 11,825 6,363 18,188
----------- ---------- -----------
94,371 37,856 132,227
----------- ---------- -----------
Noninterest expenses:
Salaries and employee benefits....................... 156,197 62,994 219,191
Data processing...................................... 19,833 7,232 27,065
Occupancy............................................ 24,741 10,259 35,000
Equipment............................................ 21,641 9,398 31,039
Amortization of goodwill and deposit premiums........ 8,743 5,286 14,029
Distributions on securities of subsidiary trust...... 8,351 2,104 10,455
Advertising and marketing............................ 10,998 3,428 14,426
Special charges...................................... 23,559 -- 23,559
Other noninterest expenses........................... 58,176 27,228 85,404
----------- ---------- -----------
332,239 127,929 460,168
----------- ---------- -----------
Income before income tax expense..................... 160,665 61,977 222,642
Income tax expense................................... 56,993 20,161 77,154
----------- ---------- -----------
Net income......................................... $ 103,672 $ 41,816 $ 145,488
=========== ========== ===========
Basic earnings per share............................. $ 1.01 $ 1.76 $ 1.00
=========== ========== ===========
Diluted earnings per share........................... $ 0.99 $ 1.74 $ 0.98
=========== ========== ===========
Average common shares--basic......................... 102,219,049 23,705,320 145,481,258
=========== ========== ===========
Average common shares--diluted....................... 104,722,008 24,042,800 148,600,118
=========== ========== ===========
</TABLE>
(FOOTNOTE ON PAGE 73)
71
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
PEOPLES HERITAGE AND BANKNORTH
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PEOPLES PRO FORMA
HERITAGE BANKNORTH COMBINED(1)
---------- ---------- -----------
<S> <C> <C> <C>
Interest and dividend income:
Interest and fees on loans and leases................. $ 478,934 $ 215,528 $ 694,462
Interest and dividends on securities.................. 132,142 45,013 177,155
---------- ---------- -----------
Total interest and dividend income.................. 611,076 260,541 871,617
---------- ---------- -----------
Interest expense:
Interest on deposits.................................. 223,100 98,182 321,282
Interest on borrowed funds............................ 55,947 12,307 68,254
---------- ---------- -----------
Total interest expense.............................. 279,047 110,489 389,536
---------- ---------- -----------
Net interest income................................. 332,029 150,052 482,081
Provision for loan and lease losses..................... 8,810 7,040 15,850
---------- ---------- -----------
Net interest income after provision for loan and
lease losses...................................... 323,219 143,012 466,231
---------- ---------- -----------
Noninterest income:
Customer services..................................... 26,107 13,430 39,537
Mortgage banking services............................. 20,839 4,561 25,400
Trust and investment advisory services................ 10,227 10,217 20,444
Bank owned life insurance income...................... 975 -- 975
Net securities gains.................................. 3,495 25 3,520
Other noninterest income.............................. 10,517 3,457 13,974
---------- ---------- -----------
72,160 31,690 103,850
---------- ---------- -----------
Noninterest expenses:
Salaries and employee benefits........................ 130,087 59,830 189,917
Data processing....................................... 16,815 7,005 23,820
Occupancy............................................. 21,518 9,176 30,694
Equipment............................................. 17,086 8,501 25,587
Amortization of goodwill and deposit premiums......... 5,527 4,715 10,242
Advertising and marketing............................. 8,930 3,538 12,468
Special charges....................................... 9,627 1,583 11,210
Other noninterest expenses............................ 54,657 26,995 81,652
---------- ---------- -----------
264,247 121,343 385,590
---------- ---------- -----------
Income before income tax expense........................ 131,132 53,359 184,491
Income tax expense...................................... 43,791 17,656 61,447
---------- ---------- -----------
Net income.......................................... $ 87,341 $ 35,703 $ 123,044
========== ========== ===========
Basic earnings per share................................ $ 0.91 $ 1.51 $ 0.88
========== ========== ===========
Diluted earnings per share.............................. $ 0.89 $ 1.50 $ 0.87
========== ========== ===========
Average common shares--basic............................ 96,068,639 23,626,266 139,186,574
========== ========== ===========
Average common shares--diluted.......................... 98,112,141 23,860,882 141,658,251
========== ========== ===========
</TABLE>
(FOOTNOTE ON PAGE 73)
72
<PAGE>
NOTE TO PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Peoples Heritage expects to achieve cost savings, revenue enhancements
and other operating synergies following consummation of the merger. The cost
savings, revenue enhancements and other operating synergies are expected to be
achieved in various amounts at various times during the periods subsequent to
consummation of the merger and not ratably over or at the beginning or end of
such periods. See "Management and Operations of Peoples Heritage After the
Merger." No adjustment has been reflected in the pro forma combined statements
of operations for the anticipated cost savings, revenue enhancements and other
operating synergies.
For the reasons noted above, it should not be assumed that the dilution in
Peoples Heritage earnings per share reflected in the pro forma combined
condensed consolidated statements of operations will represent actual dilution
with respect to the merger.
MARKET FOR COMMON STOCK AND DIVIDENDS
The Peoples Heritage common stock is traded on the Nasdaq Stock
Market Inc.'s National Market under the symbol "PHBK," and the Banknorth common
stock is traded on the same under the symbol "BKNG." As of the record date for
the special meetings, there were 101,959,636 shares of Peoples Heritage common
stock outstanding, which were held by approximately 11,682 holders of record,
and there were 23,451,731 shares of Banknorth common stock outstanding, which
were held by approximately 4,855 holders of record. Such numbers of shareholders
do not reflect the number of individuals or institutional investors holding
stock in nominee name through banks, brokerage firms and others.
It is anticipated that following the merger the common stock of the combined
company will trade on the Nasdaq Stock Market's National Market under the symbol
"BKNG."
The following table sets forth during the periods indicated the high and low
prices of the Peoples Heritage common stock and the Banknorth common stock as
reported on the Nasdaq Stock Market Inc.'s National Market and the dividends
declared per share of Peoples Heritage common stock and Banknorth common stock.
<TABLE>
<CAPTION>
PEOPLES HERITAGE BANKNORTH
------------------------------- -------------------------------
DIVIDENDS DIVIDENDS
MARKET PRICE DECLARED MARKET PRICE DECLARED
------------------- PER ------------------- PER
HIGH LOW SHARE HIGH LOW SHARE
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
2000
- ---------------------------------
First Quarter (through January
28)............................ $15.31 $12.69 $0.125 $27.12 $22.00 $ 0.20
1999
- ---------------------------------
First Quarter.................... 20.25 16.50 0.115 37.25 24.75 0.360
Second Quarter................... 20.13 15.75 0.115 33.00 25.00 --
Third Quarter.................... 19.81 16.06 0.120 35.25 28.44 0.18
Fourth Quarter................... 19.56 14.31 0.120 35.50 24.63 0.18
1998
- ---------------------------------
First Quarter.................... 24.66 18.69 0.110 37.38 27.63 0.160
Second Quarter................... 26.75 21.56 0.110 39.13 33.38 0.160
Third Quarter.................... 26.25 15.69 0.110 42.75 27.00 0.160
Fourth Quarter................... 21.25 12.81 0.110 37.88 23.50 0.160
</TABLE>
Set forth below is information regarding the closing price per share of
Peoples Heritage common stock and Banknorth common stock on (i) June 1, 1999,
the last trading day preceding public
73
<PAGE>
announcement of the merger agreement, and (ii) January 28, 2000, the last
practicable trading day prior to the printing of this prospectus/joint proxy
statement. The historical prices are as reported on the Nasdaq Stock
Market Inc.'s National Market.
<TABLE>
<CAPTION>
HISTORICAL MARKET
VALUE PER SHARE
--------------------
PEOPLES EQUIVALENT MARKET VALUE
DATE HERITAGE BANKNORTH PER SHARE OF BANKNORTH(1)
- ---- -------- --------- -------------------------
<S> <C> <C> <C>
June 1, 1999........................ $18.00 $26.75 $32.85
January 28, 2000....................
</TABLE>
- ------------------------
(1) Equivalent market value per share of Banknorth common stock represents the
historical market value per share of Peoples Heritage common stock
multiplied by the exchange ratio of 1.825.
Shareholders are advised to obtain current market quotations for the Peoples
Heritage common stock and the Banknorth common stock. Because the consideration
to be provided to shareholders of Banknorth in connection with the merger is
based on a fixed number of shares of Peoples Heritage common stock, shareholders
of Banknorth are not assured of receiving a specific market value of Peoples
Heritage common stock (and thus a specific market value for their shares of
Banknorth common stock) at the effective time of the merger. The market price of
the Peoples Heritage common stock at the effective time of the merger may be
higher or lower than the market price at the time the merger agreement was
executed, at the date of mailing of this prospectus/joint proxy statement or at
the time of the special meetings of shareholders of Peoples Heritage and
Banknorth.
INFORMATION ABOUT PEOPLES HERITAGE
GENERAL
Peoples Heritage is a Maine-chartered, multi-bank holding company registered
under the Bank Holding Company Act. As used herein, the term "Peoples Heritage"
refers to such corporation and, where the context requires, its subsidiaries.
Peoples Heritage conducts business from its headquarters in Portland, Maine
and, as of September 30, 1999, 220 banking offices located in Maine, New
Hampshire, Massachusetts and Connecticut. At September 30, 1999, Peoples
Heritage had consolidated assets of $13.9 billion and consolidated shareholders'
equity of $852.1 million. Based on total assets at September 30, 1999, Peoples
Heritage is the largest independent bank holding company headquartered in Maine.
Peoples Heritage offers a broad range of commercial and consumer banking
services and products and trust and investment advisory services primarily
through four banking subsidiaries, as set forth below.
- Peoples Heritage Bank is a Maine-chartered universal bank which operates
75 offices throughout Maine and, through subsidiaries, engages in mortgage
banking, financial planning, equipment leasing, securities brokerage and
insurance brokerage activities. At September 30, 1999, Peoples Heritage
Bank had consolidated assets of $4.7 billion and consolidated
shareholder's equity of $321.7 million.
- Bank of New Hampshire is a New Hampshire-chartered commercial bank which
operates 77 offices throughout New Hampshire. At September 30, 1999, Bank
of New Hampshire had consolidated assets of $4.7 billion and consolidated
shareholder's equity of $263.0 million.
- Family Bank, FSB is a federally-chartered savings bank which operates 56
offices in northern and western Massachusetts and four offices in southern
New Hampshire. At September 30, 1999,
74
<PAGE>
Family Bank had consolidated assets of $4.3 billion and consolidated
shareholder's equity of $242.2 million.
- Glastonbury Bank & Trust Company is a Connecticut-chartered commercial
bank which operates eight offices in central Connecticut. At
September 30, 1999, Glastonbury Bank & Trust Company had consolidated
assets of $338.2 million and consolidated shareholder's equity of
$21.5 million.
Peoples Heritage also offers its customers a range of non-FDIC insured
investment products such as annuities, mutual funds and securities through an
investment planning and financial management subsidiary (Heritage Investment
Planning Group, Inc.), in conjunction with a third-party registered
broker-dealer, and insurance agency subsidiaries (the largest of which is Morse,
Payson & Noyes).
The principal executive offices of Peoples Heritage are located at One
Portland Square, Portland, Maine 04112-9540, and its telephone number is
(207) 761-8500.
ACQUISITIONS
Acquisitions have been and are anticipated to continue to be an important
part of Peoples Heritage's business in the future. Since January 1, 1994,
Peoples Heritage has completed three acquisitions which have been accounted for
under the pooling of interests method and eight acquisitions which have been
accounted for under the purchase method. Acquisitions by Peoples Heritage since
January 1, 1996 have included the following transactions.
- On January 1, 1999, Peoples Heritage acquired SIS Bancorp, Inc., a
$2.0 billion asset bank holding company which conducted business in
western Massachusetts through SIS Bank and in central Connecticut through
Glastonbury Bank & Trust Company. Upon consummation of this acquisition,
SIS's Massachusetts-based banking subsidiary was merged into Family Bank.
The acquisition of SIS was accounted for as a pooling of interests and, as
a result, all financial information relating to Peoples Heritage contained
herein reflects the combined financial position and results of operations
of Peoples Heritage and SIS as if the acquisition of SIS had taken place
prior to the periods covered by such financial information. For additional
information in this regard, reference is made to the consolidated
financial statements and related financial information of Peoples Heritage
which reflect the acquisition of SIS, which are contained in the Current
Report on Form 8-K filed by Peoples Heritage on June 10, 1999. See "Where
You Can Find More Information."
- On April 10, 1998, Peoples Heritage acquired CFX Corporation, a
$2.9 billion asset bank holding company which conducted business through
banking subsidiaries located in New Hampshire and Massachusetts. Upon
consummation of this acquisition, which was accounted for as a pooling of
interests, CFX's New Hampshire and Massachusetts-based banking
subsidiaries were merged into Bank of New Hampshire and Family Bank,
respectively.
- On October 10, 1997, Peoples Heritage acquired, through Peoples Heritage
Bank, MPN Holdings, the holding company of Morse, Payson & Noyes, an
insurance brokerage firm. In late 1998, the Company also acquired three
insurance brokerage agencies which conducted business in Massachusetts and
New Hampshire.
- On October 1, 1997, Peoples Heritage acquired Atlantic Bancorp, a
$463 million asset bank holding company which conducted business in
southern Maine through Atlantic Bank, N.A. Upon consummation of this
acquisition, which was accounted for under the purchase method, Atlantic
Bank, N.A. was merged into Peoples Heritage Bank.
- On December 6, 1996, Peoples Heritage acquired Family Bancorp, a
$926 million asset savings and loan holding company which conducted
business in north and central Massachusetts through Family Bank. This
transaction was accounted for under the purchase method.
75
<PAGE>
- On April 2, 1996, Peoples Heritage acquired Bank of New Hampshire Corp., a
$978 million asset bank holding company which conducted business in New
Hampshire through Bank of New Hampshire. This transaction was accounted
for as a pooling of interests.
Peoples Heritage continually evaluates acquisition opportunities and
frequently conducts due diligence in connection with possible acquisitions. As a
result, acquisition discussions and, in some cases, negotiations frequently take
place and future acquisitions involving cash, debt or equity securities can be
expected. Acquisitions typically involve the payment of a premium over book and
market values, and therefore, some dilution of Peoples Heritage's book value and
net income per common share may occur in connection with any future
transactions.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to Peoples Heritage is incorporated by reference or set forth
in Peoples Heritage's annual report on Form 10-K for the year ended
December 31, 1998, and is incorporated herein by reference. Shareholders
desiring copies of such document may contact Peoples Heritage at its address or
telephone number indicated under "Where You Can Find More Information."
INFORMATION ABOUT BANKNORTH
GENERAL
Banknorth is a Delaware-chartered multi-bank holding company registered
under the Bank Holding Company Act. As used herein, the term "Banknorth" refers
to such corporation and, where the context requires, its subsidiaries.
Banknorth conducts business from its headquarters in Burlington, Vermont
and, as of September 30, 1999, 100 banking offices in Vermont, Massachusetts,
New Hampshire and New York. At September 30, 1999, Banknorth had consolidated
assets of $4.5 billion and consolidated shareholders' equity of $337.0 million.
Banknorth offers a broad array of commercial and consumer banking and
fiduciary services and products to commercial, retail, institutional and
municipal customers, primarily through seven banking subsidiaries, a trust and
investment management subsidiary and a mortgage banking subsidiary, as set forth
below.
- Banknorth's four Vermont-based banks (The Howard Bank, N.A., First Vermont
Bank and Trust Company, Franklin Lamoille Bank and Granite Savings Bank
and Trust Company) maintain 40 banking offices throughout Vermont.
- Banknorth's New Hampshire-based bank (Farmington National Bank) operates
seven banking offices in the central and seacoast areas of New Hampshire.
- Banknorth's Massachusetts-based bank (First Massachusetts Bank, N.A.)
operates 25 offices throughout central and western Massachusetts.
- Banknorth's New York-based bank (Evergreen Bank, N.A.) operates 28 offices
throughout eastern New York State.
- Banknorth's mortgage banking company (Banknorth Mortgage Company, Inc.)
originates a full range of mortgage banking products through the offices
of its affiliated banks, and services a $1.7 billion residential mortgage
loan portfolio, approximately $929 million of which is serviced for
unaffiliated third parties.
76
<PAGE>
- Banknorth's trust and investment management subsidiary (The Stratevest
Group, N.A.) offers a variety of personal and corporate fiduciary
services, and currently has a trust and investment asset portfolio of over
$4.1 billion, including approximately $2.7 billion in discretionary trust
assets under management.
Banknorth also offers its customers a range of non-FDIC insured investment
products such as annuities, mutual funds and securities, through its insurance
agency subsidiary (Northgroup Investment and Insurance Services, Inc.), in
conjunction with a third-party registered broker-dealer.
Banknorth's network of community banks is committed to providing superior,
efficient and personalized service to customers in chosen market areas. To that
end, operating efficiencies are achieved through the centralization of all major
support functions at the parent company level. Banknorth's community banking
management structure allows each bank's local management team and board of
directors to focus on its customers and market area and to set its loan and
deposit prices in light of local competition and other market factors.
The principal executive offices of Banknorth are located at 100 Bank Street,
7th Floor, Burlington, Vermont 05401 and its telephone number is
(802) 658-9959.
ACQUISITIONS
Acquisitions have been an important part of Banknorth's business.
Acquisitions by Banknorth since January 1, 1996 have consisted of the following
transactions.
- On December 31, 1998, Banknorth merged with Evergreen Bancorp, Inc., a
$1.1 billion asset bank holding company which conducted banking business
throughout eastern New York State through Evergreen Bank. This transaction
was accounted for as a pooling of interests.
- On November 13, 1998, Banknorth acquired, through its Massachusetts-based
bank, BankBoston, N.A.'s Berkshire County, Massachusetts banking
operations, which consisted of ten full-service branch offices, one
limited service branch office and nine remote ATM locations. At the date
of acquisition these offices had $292 million of deposits and associated
private banking relationships which brought $1.0 billion of trust and
investment assets under management. This transaction was accounted for
under the purchase method.
- On February 16, 1996, Banknorth acquired from Shawmut Bank, N.A. 13
banking offices in central and western Massachusetts. The acquisition of
these offices, which had approximately $560 million of deposits, was
effected through its newly-formed Massachusetts-based banking subsidiary.
This transaction was accounted for under the purchase method.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various benefit
plans (including stock option and restricted stock plans), voting securities and
the principal holders thereof, certain relationships and related transactions
and other related matters as to Banknorth is incorporated by reference or set
forth in Banknorth's annual report on Form 10-K for the year ended December 31,
1998, and is incorporated herein by reference. Shareholders desiring copies of
such document may contact Banknorth at its address or telephone number indicated
under "Where You Can Find More Information."
77
<PAGE>
SUPERVISION AND REGULATION OF PEOPLES HERITAGE AND BANKNORTH
GENERAL
As registered bank holding companies, Peoples Heritage and Banknorth are
subject to the supervision of, and to regular inspection by, the Federal Reserve
Board. The bank subsidiaries of both Peoples Heritage and Banknorth are
organized either as national banks, which are subject to regulation, supervision
and examination by the Office of the Comptroller of the Currency ("OCC"), or as
state chartered banks, which are subject to regulation, supervision and
examination by the relevant state regulators and the Federal Deposit Insurance
Corporation ("FDIC"), or in the case of Peoples Heritage's Massachusetts bank,
Family Bank, as a federally-chartered savings bank subject to supervision,
regulation and examination by the Office of Thrift Supervision ("OTS"). The
following discussion summarizes certain aspects of those federal banking laws
and regulations that affect Peoples Heritage and Banknorth.
The activities of Peoples Heritage and Banknorth and those of companies that
each controls or in which either holds more than 5% of the voting stock are
limited to banking, managing or controlling banks, furnishing services to or
performing services for their subsidiaries or any other activity that the
Federal Reserve Board determines to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. In making such
determinations, the Federal Reserve Board is required to consider whether the
performance of such activities by a bank holding company or its subsidiaries can
reasonably be expected to produce benefits to the public such as greater
convenience, increased competition or gains in efficiency that outweigh possible
adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices. Generally, bank
holding companies such as Peoples Heritage and Banknorth are required to obtain
prior approval of the Federal Reserve Board to engage in any new activity or to
acquire more than 5% of any class of voting stock of any company.
Bank holding companies are also required to obtain the prior approval of the
Federal Reserve Board before acquiring more than 5% of any class of voting stock
of any bank that is not already majority owned by the bank holding company.
Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking and Branching Act"), a bank holding company became
able to acquire banks in states other than its home state beginning
September 29, 1995, without regard to the permissibility of such acquisitions
under state law, but subject to any state requirement that the bank has been
organized and operating for a minimum period of time, not to exceed five years,
and the requirement that the bank holding company, prior to or following the
proposed acquisition, controls no more than 10% of the total amount of deposits
of insured depository institutions in the United States and less than 30% of
such deposits in that state (or such lesser or greater amount set by state law).
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, subject to certain restrictions, thereby creating interstate
branches. Pursuant to the Interstate Banking and Branching Act, a bank is now
able to open new branches in a state in which it does not already have banking
operations if the state enacts a law permitting such de novo branching.
CAPITAL AND OPERATIONAL REQUIREMENTS
The Federal Reserve Board, the OCC, the FDIC and the OTS have issued
substantially similar risk-based and leverage capital guidelines applicable to
U.S. banking organizations. In addition, those regulatory agencies may from time
to time require that a banking organization maintain capital above the minimum
levels, whether because of its financial condition or actual or anticipated
growth. The Federal Reserve Board risk-based guidelines define a three-tier
capital framework. "Tier 1 capital" generally consists of common and qualifying
preferred shareholders' equity, less certain intangibles and other adjustments.
"Tier 2 capital" and "Tier 3 capital" generally consist of subordinated and
other
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qualifying debt, preferred stock that does not qualify as Tier 1 capital and the
allowance for credit losses up to 1.25% of risk-weighted assets.
The sum of Tier 1, Tier 2 and Tier 3 capital, less investments in
unconsolidated subsidiaries, represents qualifying "total capital," at least 50%
of which must consist of Tier 1 capital. Risk-based capital ratios are
calculated by dividing Tier 1 capital and total capital by risk-weighted assets.
Assets and off-balance sheet exposures are assigned to one of four categories of
risk weights, based primarily on relative credit risk. The minimum Tier 1
capital ratio is 4% and the minimum total capital ratio is 8%. At September 30,
1999, Peoples Heritage's Tier 1 capital and total risk-based capital ratios
under these guidelines were 10.69% and 11.94%, respectively, and Banknorth's
were 9.36% and 10.61%, respectively.
The "leverage ratio" requirement is determined by dividing Tier 1 capital by
adjusted average total assets. Although the stated minimum ratio is 3%, most
banking organizations are required to maintain ratios of at least 100 to 200
basis points above 3%. At September 30, 1999, Peoples Heritage's and Banknorth's
leverage ratios were 6.36% and 6.99%, respectively.
Federal bank regulatory agencies require banking organizations that engage
in significant trading activity to calculate a capital charge for market risk.
Significant trading activity means trading activity of at least 10% of total
assets or $1 billion, whichever is smaller, calculated on a consolidated basis
for bank holding companies. Federal bank regulators may apply the market risk
measure to other banks and bank holding companies as the agency deems necessary
or appropriate for safe and sound banking practices. Each agency may exclude
organizations that it supervises that otherwise meet the criteria under certain
circumstances. The market risk charge will be included in the calculation of an
organization's risk-based capital ratios. Neither Peoples Heritage nor Banknorth
is currently subject to this special capital charge.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective U.S. federal regulatory agencies
to implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines could
also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5% of the bank's assets at the time it became undercapitalized or
the amount needed to comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. In addition, FDICIA requires the
various regulatory agencies to prescribe certain non-capital standards for
safety and soundness related generally to operations and management, asset
quality and executive compensation and permits regulatory action against a
financial institution that does not meet such standards.
The various federal bank regulatory agencies have adopted substantially
similar regulations that define the five capital categories identified by
FDICIA, using the total risk-based capital, Tier 1 risk-based capital and
leverage capital ratios as the relevant capital measures. Such regulations
establish various degrees of corrective action to be taken when an institution
is considered undercapitalized. Under the regulations, a "well capitalized"
institution must have a Tier 1 capital ratio of at least 6%, a total capital
ratio of at least 10% and a leverage ratio of at least 5% and not be subject to
a capital directive order. An "adequately capitalized" institution must have a
Tier 1 capital ratio of at least 4%, a total capital ratio of at least 8% and a
leverage ratio of at least 4%, or 3% in some cases. Under
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these guidelines, each of the banking subsidiaries of Peoples Heritage and
Banknorth is considered "well capitalized."
The Federal bank regulatory agencies also have adopted regulations which
mandate that regulators take into consideration concentrations of credit risk
and risks from non-traditional activities, as well as an institution's ability
to manage those risks, when determining the adequacy of an institution's
capital. That evaluation will be made as part of the institution's regular
safety and soundness examination. Banking agencies also have adopted final
regulations requiring regulators to consider interest rate risk (when the
interest rate sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance sheet position) in the
determination of a bank's capital adequacy. Concurrently, banking agencies have
proposed a methodology for evaluating interest rate risk. The banking agencies
do not intend to establish an explicit risk-based capital charge for interest
rate risk but will continue to assess capital adequacy for interest rate risk
under a risk assessment approach based on a combination of quantitative and
qualitative factors and have provided guidance on prudent interest rate risk
management practices.
DISTRIBUTIONS
Peoples Heritage and Banknorth both derive funds for cash distributions to
their respective shareholders primarily from dividends received from their
respective banking subsidiaries. Each of their banking subsidiaries is subject
to various general regulatory policies and requirements relating to the payment
of dividends, including requirements to maintain capital above regulatory
minimums. The appropriate U.S. federal regulatory authority is authorized to
determine under certain circumstances relating to the financial condition of the
bank or bank holding company that the payment of dividends would be an unsafe or
unsound practice and to prohibit payment thereof.
In addition to the foregoing, the ability of Peoples Heritage, Banknorth and
their respective banking subsidiaries to pay dividends may be affected by the
various minimum capital requirements and the capital and non-capital standards
established under FDICIA, as described above. The right of Peoples Heritage,
Banknorth and their respective shareholders and creditors to participate in any
distribution of the assets or earnings of the respective subsidiaries of Peoples
Heritage and Banknorth is further subject to the prior claims of creditors of
such subsidiaries.
"SOURCE OF STRENGTH" POLICY
According to Federal Reserve Board policy, bank holding companies are
expected to act as a source of financial strength to each subsidiary bank and to
commit resources to support each such subsidiary. This support may be required
at times when a bank holding company may not be able to provide such support.
Similarly, under the cross-guarantee provisions of the Federal Deposit Insurance
Act, in the event of a loss suffered or anticipated by the FDIC--either as a
result of default of a banking or thrift subsidiary of a bank holding company
such as Peoples Heritage or Banknorth or related to FDIC assistance provided to
a subsidiary in danger of default--the other banking subsidiaries of such bank
holding company may be assessed for the FDIC's loss, subject to certain
exceptions.
FINANCIAL MODERNIZATION
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act which will, effective March 11, 2000, permit bank holding
companies to become financial holding companies and thereby affiliate with
securities firms and insurance companies and engage in other activities that are
financial in nature. A bank holding company may become a financial holding
company if each of its subsidiary banks is well capitalized under the FDICIA
prompt corrective action provisions, is well managed and has at least a
satisfactory rating under the Community Reinvestment Act by filing a
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declaration that the bank holding company wishes to become a financial holding
company. No regulatory approval will be required for a financial holding company
to acquire a company, other than a bank or savings association, engaged in
activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve Board.
The Gramm-Leach-Bliley Act defines "financial in nature" to include
securities underwriting, dealing and market making; sponsoring mutual funds and
investment companies; insurance underwriting and agency; merchant banking
activities; and activities that the Federal Reserve Board has determined to be
closely related to banking. A national bank also may engage, subject to
limitations on investment, in activities that are financial in nature, other
than insurance underwriting, insurance company portfolio investment, real estate
development and real estate investment, through a financial subsidiary of the
bank, if the bank is well capitalized, well managed and has at least a
satisfactory Community Reinvestment Act rating. Subsidiary banks of a financial
holding company or national banks with financial subsidiaries must continue to
be well capitalized and well managed in order to continue to engage in
activities that are financial in nature without regulatory actions or
restrictions, which could include divestiture of the financial in nature
subsidiary or subsidiaries. In addition, a financial holding company or a bank
may not acquire a company that is engaged in activities that are financial in
nature unless each of the subsidiary banks of the financial holding company or
the bank has a Community Reinvestment Act rating of satisfactory or better.
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DESCRIPTION OF PEOPLES HERITAGE CAPITAL STOCK
Peoples Heritage is authorized to issue up to 200,000,000 shares of Peoples
Heritage common stock and up to 5,000,000 shares of preferred stock. The capital
stock of Peoples Heritage does not represent or constitute a deposit account and
is not insured by the FDIC.
The following description of the Peoples Heritage capital stock does not
purport to be complete and is qualified in all respects by reference to Peoples
Heritage's articles of incorporation, as amended, and bylaws, the Peoples
Heritage shareholder rights plan and the Maine Business Corporation Act.
PEOPLES HERITAGE COMMON STOCK
GENERAL. Each share of Peoples Heritage common stock has the same relative
rights and is identical in all respects with each other share of Peoples
Heritage common stock. The Peoples Heritage common stock is not subject to call
for redemption and, upon receipt by Peoples Heritage of the shares of Banknorth
common stock surrendered in exchange for Peoples Heritage common stock, each
share of Peoples Heritage common stock offered hereby will be fully paid and
non-assessable.
VOTING RIGHTS. Except as provided in any resolution or resolutions adopted
by the Peoples Heritage board of directors establishing any series of Peoples
Heritage preferred stock, the holders of Peoples Heritage common stock possess
exclusive voting rights in Peoples Heritage. Each holder of Peoples Heritage
common stock is entitled to one vote for each share held on all matters voted
upon by shareholders, and shareholders are not permitted to cumulate votes in
elections of directors.
DIVIDENDS. Subject to the rights of the holders of any series of Peoples
Heritage preferred stock, the holders of the Peoples Heritage common stock are
entitled to such dividends as may be declared from time to time by the Peoples
Heritage board of directors out of funds legally available therefor.
PREEMPTIVE RIGHTS. Holders of Peoples Heritage common stock do not have any
preemptive rights with respect to any shares which may be issued by Peoples
Heritage in the future; thus, Peoples Heritage may sell shares of Peoples
Heritage common stock without first offering them to the then holders of the
Peoples Heritage common stock.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
Peoples Heritage, the holders of the Peoples Heritage common stock would be
entitled to receive, after payment of all debts and liabilities of Peoples
Heritage, all assets of Peoples Heritage available for distribution, subject to
the rights of the holders of any Peoples Heritage preferred stock which may be
issued with a priority in liquidation or dissolution over the holders of the
Peoples Heritage common stock.
PEOPLES HERITAGE PREFERRED STOCK
The Peoples Heritage board of directors is authorized to issue Peoples
Heritage preferred stock and to fix and state voting powers, designations,
preferences or other special rights of such shares and the qualifications,
limitations and restrictions thereof. The Peoples Heritage preferred stock may
be issued in distinctly designated series, may be convertible into Peoples
Heritage common stock and may rank prior to the Peoples Heritage common stock as
to dividend rights, liquidation preferences, or both.
The authorized but unissued shares of Peoples Heritage preferred stock (as
well as the authorized but unissued and unreserved shares of Peoples Heritage
common stock) are available for issuance in future mergers or acquisitions, in a
future public offering or private placement or for other general corporate
purposes. Except as otherwise required to approve the transaction in which the
additional authorized shares of Peoples Heritage preferred stock (as well as
Peoples Heritage common stock) would be issued, shareholder approval generally
would not be required for the issuance of these shares. Depending on the
circumstances, however, shareholder approval may be required pursuant to the
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requirements for continued listing of the Peoples Heritage common stock on the
Nasdaq Stock Market's National Market or the requirements of any exchange on
which the Peoples Heritage common stock may then be listed.
PEOPLES HERITAGE RIGHTS
Each share of Peoples Heritage common stock has attached to it one preferred
stock purchase right (a "Peoples Heritage right") issued pursuant to an amended
and restated rights agreement (the "Peoples Heritage rights agreement") between
Peoples Heritage and American Stock Transfer & Trust Company, as the Peoples
Heritage rights agent. Each Peoples Heritage right entitles the registered
holder to purchase from Peoples Heritage a unit consisting of one-hundredth of a
share of Series A Junior Participating Preferred Stock, par value $.01 per
share, at a purchase price of $80, subject to adjustment.
The Peoples Heritage rights will not separate from the Peoples Heritage
common stock, be distributed and become exercisable until a date (the
"distribution date") which will occur upon the earlier of (i) 10 days following
a public announcement that a person or group of affiliated or associated
persons, other than employee benefit plans of Peoples Heritage (an "acquiring
person"), has acquired beneficial ownership of 15% or more of the outstanding
shares of Peoples Heritage common stock (the "stock acquisition date"), or
(ii) 10 business days (or such later date as may be determined by action of the
Peoples Heritage board of directors prior to such time as any person becomes an
acquiring person) following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer that would result in a person or group
beneficially owning 15% or more of the outstanding shares of Peoples Heritage
common stock. Until the distribution date, the Peoples Heritage rights will be
evidenced by the Peoples Heritage common stock certificates and will be
transferred with and only with such Peoples Heritage common stock certificates,
and the surrender for transfer of any certificates for Peoples Heritage common
stock outstanding also will constitute the transfer of the Peoples Heritage
rights associated with the Peoples Heritage common stock represented by such
certificate. The Peoples Heritage rights are not exercisable until the
distribution date and will expire at the close of business on September 25,
2009, unless earlier redeemed by Peoples Heritage, as described below.
Unless the Peoples Heritage rights are earlier redeemed or expire in
accordance with their terms, in the event that any person or group of affiliated
or associated persons, other than employee benefit plans of Peoples Heritage,
acquires beneficial ownership of 15% or more of the outstanding shares of
Peoples Heritage common stock, each holder of a Peoples Heritage right, other
than rights beneficially owned by an acquiring person (which will thereafter be
null and void), will thereafter have the right to receive upon exercise that
number of shares of Peoples Heritage common stock having a market value of two
times the exercise price of the Peoples Heritage right. In addition, unless the
Peoples Heritage rights are earlier redeemed or expire in accordance with their
terms, in the event that Peoples Heritage is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold after a person or group acquires beneficial ownership of
15% or more of the outstanding shares of Peoples Heritage common stock, each
holder of a Peoples Heritage right, other than rights beneficially owned by an
acquiring person (which will be null and void), will thereafter have the right
to receive that number of shares of common stock of the acquiring company which
at the time of such transaction will have a market value of two times the
exercise price of the Peoples Heritage right.
At any time after a person becomes an acquiring person, Peoples Heritage may
exchange all or part of the Peoples Heritage rights (other than Peoples Heritage
rights which previously have been voided as set forth above) for shares of
Peoples Heritage common stock at an exchange ratio of one share per Peoples
Heritage right, as such may be appropriately adjusted to reflect any stock split
or similar transaction.
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At any time until 10 days following the stock acquisition date, Peoples
Heritage may redeem the Peoples Heritage rights in whole, but not in part, at a
price of $.01 per Peoples Heritage right. Immediately upon the action of the
Peoples Heritage board of directors ordering redemption of the Peoples Heritage
rights, the Peoples Heritage rights will terminate and the only right of the
holders of Peoples Heritage rights will be to receive the redemption price.
The Peoples Heritage rights may have certain anti-takeover effects. The
Peoples Heritage rights would cause substantial dilution to a person or group
that acquires 15% or more of the outstanding shares of Peoples Heritage common
stock if a triggering event thereafter occurs without the Peoples Heritage
rights having been redeemed. However, the Peoples Heritage rights should not
interfere with any merger or other business combination approved by the Peoples
Heritage board of directors because the Peoples Heritage rights are redeemable
under certain circumstances.
The complete terms of the Peoples Heritage rights are set forth in the
Peoples Heritage rights agreement, which is incorporated by reference as an
exhibit to Peoples Heritage's current report on Form 8-K filed on July 28, 1999.
See "Where You Can Find More Information."
OTHER PROVISIONS
The articles of incorporation and bylaws of Peoples Heritage contain a
number of provisions that may have the effect of discouraging or delaying
attempts to gain control of Peoples Heritage, including provisions in the
Peoples Heritage articles of incorporation: (i) classifying the Peoples Heritage
board of directors into three classes to serve for three years with one class
being elected annually; (ii) authorizing the Peoples Heritage board of directors
to fix the size of the Peoples Heritage board of directors between three and 25
directors; (iii) authorizing directors to fill vacancies in the Peoples Heritage
board of directors; (iv) increasing the vote for removal of directors by
shareholders; (v) increasing the amount of stock required to be held by
shareholders seeking to call a special meeting of shareholders; and
(vi) requiring an increased vote of shareholders to approve certain business
combinations unless certain price and procedural requirements are met or the
Peoples Heritage board of directors approves the business combination in the
manner provided therein. The provisions in the bylaws of Peoples Heritage
include specific conditions under which (i) persons may be nominated for
election as directors of Peoples Heritage at an annual meeting of shareholders;
and (ii) business may be transacted at an annual meeting of shareholders.
In addition to the foregoing, in certain instances the issuance of
authorized but unissued shares of Peoples Heritage common stock or Peoples
Heritage preferred stock may have an anti-takeover effect by making it more
difficult and/or expensive to acquire Peoples Heritage. Sections 611-A and 910
of the Maine Business Corporation Act also may have the same anti-takeover
effects. See "Comparison of the Rights of Shareholders--State Anti-takeover
Statutes."
TRANSFER AGENT
The transfer agent and registrar for the Peoples Heritage common stock is
American Stock Transfer & Trust Company.
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COMPARISON OF THE RIGHTS OF SHAREHOLDERS
Peoples Heritage is a Maine corporation subject to the provisions of the
Maine Business Corporation Act and Banknorth is a Delaware corporation subject
to the provisions of the Delaware General Corporation Law. When the merger is
completed, shareholders of Banknorth will become shareholders of Peoples
Heritage and their rights as shareholders of Peoples Heritage will be governed
by the articles of incorporation and bylaws of Peoples Heritage and the Maine
Business Corporation Act.
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE
DIFFERENCES AFFECTING THE RIGHTS OF BANKNORTH'S SHAREHOLDERS, BUT RATHER
SUMMARIZES THE MORE SIGNIFICANT DIFFERENCES AFFECTING THE RIGHTS OF SUCH
SHAREHOLDERS AND CERTAIN IMPORTANT SIMILARITIES; THE SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE CERTIFICATE OF INCORPORATION AND BYLAWS OF
BANKNORTH, THE ARTICLES OF INCORPORATION AND BYLAWS OF PEOPLES HERITAGE AND
APPLICABLE LAWS AND REGULATIONS.
AUTHORIZED CAPITAL STOCK
BANKNORTH. Banknorth's certificate of incorporation authorizes the issuance
of up to 70,000,000 shares of Banknorth common stock, $1.00 par value per share,
of which 23,451,731 shares were outstanding as of the record date for the
special meetings, and up to 500,000 shares of preferred stock, $0.01 par value
per share, of which no shares are issued and outstanding. The Banknorth common
stock is issuable in series, each series having such rights and preferences as
the Banknorth board of directors may fix and determine by resolution.
PEOPLES HERITAGE. Peoples Heritage's articles of incorporation authorize
the issuance of up to 200,000,000 shares of Peoples Heritage common stock, $0.01
par value per share, of which 101,959,636 shares were outstanding as of the
record date for the special meetings, and up to 5,000,000 shares of Peoples
Heritage preferred stock, $0.01 par value per share, of which no shares are
issued and outstanding. The Peoples Heritage preferred stock is issuable in
series, each series having such rights and preferences as the Peoples Heritage
board of directors may fix and determine by resolution.
ISSUANCE OF CAPITAL STOCK
BANKNORTH. Under the certificate of incorporation of Banknorth and the
Delaware General Corporation Law, Banknorth may issue shares of Banknorth
capital stock and rights or options for the purchase of shares of capital stock
of Banknorth on such terms and for such consideration as may be determined by
the Banknorth board of directors. Neither the Delaware General Corporation Law
nor Banknorth's certificate of incorporation and bylaws require shareholder
approval of any such actions. However, Banknorth is subject to the requirements
of the National Association of Securities Dealers, Inc., which generally require
corporations, such as Banknorth, with securities which are traded on the Nasdaq
Stock Market Inc.'s National Market to obtain shareholder approval of certain
issuances of common stock and most stock compensation plans for directors,
officers and key employees. Banknorth also may elect to seek shareholder
approval of stock-related compensation plans in certain instances in order to
qualify such plans for favorable federal income tax and securities law treatment
under current laws and regulations. Holders of Banknorth capital stock do not
have preemptive rights with respect to any shares of Banknorth capital stock
which may be issued.
PEOPLES HERITAGE. Under the Maine Business Corporation Act, Peoples
Heritage may issue shares of Peoples Heritage capital stock and rights or
options for the purchase of shares of capital stock of Peoples Heritage on such
terms and for such consideration as may be determined by the Peoples Heritage
board of directors. Neither the Maine Business Corporation Act nor Peoples
Heritage's articles of incorporation and bylaws require shareholder approval of
any such actions, except that pursuant to the Maine Business Corporation Act
such rights or options to purchase Peoples Heritage capital stock may be issued
to directors, officers or employees of Peoples Heritage or its subsidiaries
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only if the issuance or plan pursuant to which they are issued is approved by
the holders of a majority of the outstanding shares of Peoples Heritage capital
stock entitled to vote thereon. Peoples Heritage also is subject to the
requirements of the National Association of Securities Dealers, Inc., which as
noted above generally require corporations, such as Peoples Heritage, with
securities which are listed on the Nasdaq Stock Market Inc.'s National Market to
obtain shareholder approval of certain issuances of common stock and most stock
compensation plans for directors, officers and key employees. Peoples Heritage
also may elect to seek shareholder approval of stock-related compensation plans
in certain instances in order to qualify such plans for favorable federal income
tax and securities laws treatment under current laws and regulations. Holders of
Peoples Heritage capital stock do not have preemptive rights with respect to any
shares of Peoples Heritage capital stock which may be issued.
VOTING RIGHTS
BANKNORTH. Each share of Banknorth common stock is entitled to one vote per
share on all matters properly presented at meetings of shareholders of
Banknorth, and shareholders of Banknorth do not have the right to cumulate votes
in an election of directors.
PEOPLES HERITAGE. Each share of Peoples Heritage common stock is entitled
to one vote per share on all matters properly presented at meetings of
shareholders of Peoples Heritage, and shareholders of Peoples Heritage do not
have the right to cumulate votes in an election of directors.
CLASSIFICATION AND SIZE OF BOARD OF DIRECTORS
BANKNORTH. The certificate of incorporation and bylaws of Banknorth provide
that the number of directors of Banknorth shall be fixed from time to time by
the Banknorth board of directors up to a maximum of 20. Currently the number of
directors of Banknorth is 16.
Pursuant to the certificate of incorporation and bylaws of Banknorth, the
Banknorth board of directors is divided into three classes as nearly equal in
number as possible and approximately one-third of the directors are elected
annually to serve three-year terms.
PEOPLES HERITAGE. The articles of incorporation of Peoples Heritage provide
that the Peoples Heritage board of directors may increase or decrease the number
of directors of Peoples Heritage by resolution, and that the shareholders of
Peoples Heritage may increase or decrease the number of directors by the
affirmative vote of the holders of at least 67% of the shares entitled to vote
generally in an election of directors, provided in each case that the minimum
number of directors shall be three and the maximum number of directors shall be
25, and further provided that no decrease in the number of directors shall have
the effect of shortening the term of any incumbent director. Currently the
number of directors of Peoples Heritage is 15.
Pursuant to the articles of incorporation and bylaws of Peoples Heritage,
the Peoples Heritage board of directors is divided into three classes as nearly
equal in number as possible and approximately one-third of the directors are
elected annually to serve three-year terms.
DIRECTOR VACANCIES AND REMOVAL OF DIRECTORS
BANKNORTH. Any vacancy occurring in the Banknorth board as a result of
death, resignation, retirement, disqualification, removal or an increase in the
number of directors may be filled by vote of a majority of the remaining
directors of Banknorth. A director elected to fill such a vacancy shall hold
office for the remainder of the full term of the class in which the vacancy
occurred or the new directorship was created and until such director's successor
has been elected and qualified.
Under Banknorth's certificate of incorporation, a director of Banknorth may
be removed only for cause and only by the affirmative vote of at least a
majority of the voting power of Banknorth's then outstanding capital stock
entitled to vote generally in an election of directors, considered as one class,
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which vote shall include the affirmative vote of at least a majority of the
outstanding shares of voting stock held by shareholders other than an
"interested stockholder," as defined in Banknorth's certificate of
incorporation. See "--Mergers, Consolidations and Sales of Assets."
PEOPLES HERITAGE. Any vacancy occurring in the Peoples Heritage board of
directors by reason of an increase in the number of directors may be filled by
the Peoples Heritage board of directors, and any directors so chosen shall hold
office until the next election of directors by the shareholders of Peoples
Heritage. Any other vacancy in the Peoples Heritage board of directors, whether
by reason of death, resignation, removal or otherwise, may be filled by the
remaining directors of Peoples Heritage, or by a sole remaining director, and
any directors so chosen shall hold office until the next election of the class
for which such directors shall have been chosen and until their successors are
elected and qualified.
Pursuant to Peoples Heritage's articles of incorporation, directors of
Peoples Heritage may be removed, with or without cause, by the holders of two
thirds of the votes entitled to vote for directors at a meeting of shareholders
called expressly for such purpose. Directors of Peoples Heritage also can be
removed by Peoples Heritage for cause in the manner specified in the Maine
Business Corporation Act.
DIRECTOR DUTIES
BANKNORTH. Under Banknorth's certificate of incorporation, the board of
directors of Banknorth, when evaluating any offer of another person to
(i) purchase or exchange securities or property for any outstanding equity
securities of Banknorth, (ii) merge or consolidate Banknorth with another
entity, or (iii) purchase or otherwise acquire all or substantially all of the
properties and assets of Banknorth, shall, in connection with the exercise of
its judgment in determining what is in the best interests of Banknorth and its
shareholders, give due consideration not only to the price or other
consideration being offered but also to all other relevant factors, including
without limitation the financial and managerial resources and future prospects
of the other party and the possible effects on the business of Banknorth and its
subsidiaries and on the depositors, loan and other customers, employees and the
communities served by Banknorth and its subsidiaries.
PEOPLES HERITAGE. Under the Maine Business Corporation Act, directors and
officers may, in considering the best interests of the corporation and its
shareholders, consider the effects of any action upon employees, suppliers and
customers of the corporation, communities in which offices or other
establishments of the corporation are located and all other pertinent factors.
CONFLICT OF INTEREST TRANSACTIONS
BANKNORTH. The Delaware General Corporation Law generally provides that
transactions involving a Delaware corporation and an interested director or
officer of that corporation are not void or voidable solely because of such
director's or officer's interest if: (i) the material facts are disclosed and a
majority of disinterested directors or a committee of the board authorize the
transaction, (ii) the material facts are disclosed to or are known to the
shareholders entitled to vote thereon and the transaction is specifically
approved in good faith by vote of the shareholders, or (iii) the transaction was
fair to the corporation at the time it is authorized by the board of directors,
a board committee or the shareholders.
PEOPLES HERITAGE. The Maine Business Corporation Act generally provides
that transactions involving a Maine corporation and an interested director or
officer of that corporation are not void or voidable solely because of such
director's or officer's interest if: (i) the material facts are disclosed and
noted in the minutes and a majority of disinterested directors on the board of
directors or a committee thereof authorize, approve or ratify the transaction,
(ii) the material facts are disclosed and a majority
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of shares entitled to vote thereon authorize, approve or ratify the transaction,
inclusive of any shares owned by or voted under the control of the benefitted
director, or (iii) the transaction was fair and equitable to the corporation at
the time it is authorized or approved and the party asserting the fairness of
the transaction establishes fairness.
EXCULPATION OF DIRECTORS AND OFFICERS
BANKNORTH. Banknorth's certificate of incorporation provides that no
director of Banknorth shall be personally liable to Banknorth or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (i) any breach of the director's duty of loyalty to
Banknorth or its shareholders, (ii) acts or omissions which are not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) actions for which a director may be liable under specified provisions of
the Delaware General Corporation Law or (iv) any transaction from which the
director derived an improper personal benefit.
PEOPLES HERITAGE. The Maine Business Corporation Act provides that a
director of a Maine corporation shall not be held personally liable for monetary
damages for failure to discharge any duty as a director unless the director is
found not to have acted honestly or in the reasonable belief that the action was
in or not opposed to the best interests of the corporation or its shareholders.
SPECIAL MEETINGS OF SHAREHOLDERS
BANKNORTH. Banknorth's bylaws provide that, unless otherwise required by
law, special meetings of shareholders of Banknorth may be called only by the
board of directors of Banknorth or its President.
PEOPLES HERITAGE. Special meetings of shareholders of Peoples Heritage may
be called by the chairman, the president or a majority of the Peoples Heritage
board of directors, and shall be called by the chairman, the president or the
clerk upon the written request of the holders of not less than 50% of the issued
and outstanding capital stock of Peoples Heritage entitled to vote on the matter
for which the meeting is called, voting together as a single class, provided,
however, that special meetings of shareholders of Peoples Heritage also may be
called by the Superior Court of the State of Maine upon the petition of the
holders of not less than 10% of the shares entitled to vote at the meeting.
SHAREHOLDER NOMINATIONS
BANKNORTH. Banknorth's bylaws generally provide that nominations by
shareholders for election as a director must be made in writing and delivered or
mailed to the secretary of Banknorth not later than (i) the close of business on
the 90th day nor earlier than the close of business on the 120th day prior to
the first anniversary of the preceding year's annual meeting, and (ii) with
respect to an election of directors to be held at a special meeting of
shareholders, the close of business on the tenth day following the date on which
notice of such meeting is first given to shareholders by Banknorth. Each such
notice shall set forth (i) as to each person whom the shareholder proposes to
nominate for election or reelection as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
regulations promulgated by the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected; and (ii) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination is made (a) the name and address
of such shareholder, as they appear on Banknorth's books, and of such beneficial
owner and (b) the class and number of shares of Banknorth which are owned
beneficially and of record by such shareholder and such beneficial owner.
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PEOPLES HERITAGE. Peoples Heritage's bylaws provide that nominations by
shareholders for election as a director must be made in writing and delivered or
mailed to the clerk of Peoples Heritage not later than (i) 90 days prior to the
anniversary date of the immediately preceding annual meeting, and (ii) with
respect to an election of directors to be held at a special meeting of
shareholders for the election of directors, the close of business on the tenth
day following the date on which notice of such meeting is first given to
shareholders. Each such notice shall set forth (i) the name and address of the
shareholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the shareholder is a holder of record
of stock of Peoples Heritage entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) a description of all arrangements or
understandings between the shareholder and each nominee and any other person or
person (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (iv) such other information
regarding each nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (v) the consent of each nominee to serve
as a director of Peoples Heritage if so elected.
SHAREHOLDER PROPOSALS
BANKNORTH. Banknorth's bylaws provide that a proposal by shareholders for
submission to a vote of shareholders at an annual meeting must be delivered to
the Secretary of Banknorth not later than the close of business on the 90th day
nor earlier than the close of business on the 120th day prior to the first
anniversary of the preceding year's annual meeting. Each such notice shall set
forth (i) as to any business that the shareholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such shareholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (ii) as to the shareholder
giving the notice and the beneficial owner, if any, on whose behalf the proposal
is made (a) the name and address of such shareholder, as they appear on
Banknorth's books, and of such beneficial owner and (b) the class and number of
shares of Banknorth which are owned beneficially and of record by such
shareholder and such beneficial owner.
PEOPLES HERITAGE. Peoples Heritage's bylaws provide that a proposal by
shareholders for submission to a vote of shareholders at an annual meeting must
be made in writing and delivered or mailed to the clerk of Peoples Heritage not
less than 90 days prior to the anniversary date of the immediately preceding
annual meeting. A shareholder's notice to the clerk shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting;
(b) the name and address, as they appear on Peoples Heritage's books, of the
shareholder proposing such business; (c) the class and number of shares of
Peoples Heritage which are beneficially owned by the shareholder; and (d) any
material interest of the shareholder in such business. Shareholder proposals
which are proposed to be included in the proxy statement and form of proxy of
Peoples Heritage relating to an annual meeting must be submitted in accordance
with the notice and other requirements of Rule 14a-8 under the Securities
Exchange Act of 1934.
SHAREHOLDER ACTION WITHOUT A MEETING
BANKNORTH. The certificate of incorporation and bylaws of Banknorth provide
that any action to be taken or which may be taken at any annual or special
meeting of shareholders may be taken without a meeting if a consent in writing,
setting forth the actions so taken, is given by the holders of all outstanding
shares of capital stock of Banknorth entitled to vote thereon at such a meeting.
PEOPLES HERITAGE. The bylaws of Peoples Heritage provide that any action to
be taken or which may be taken at any annual or special meeting of shareholders
may be taken without a meeting if a
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consent in writing, setting forth the actions so taken, is given by the holders
of all outstanding shares of capital stock of Peoples Heritage entitled to vote
thereon at such a meeting.
SHAREHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS
BANKNORTH. The bylaws of Banknorth provide that a list of shareholders will
be available for inspection by any shareholder for a period of not less than
10 days before and during each meeting of shareholders for a purpose which is
germane to the meeting. The Delaware General Corporation Law provides that a
record shareholder of a Delaware corporation such as Banknorth may, upon written
demand under oath stating the purpose thereof, have the right to inspect for any
proper purpose the corporation's stock ledger, a list of its shareholders and
its other books and records. The Delaware General Corporation Law authorizes a
shareholder of a Delaware corporation which refuses to permit an authorized
inspection to bring a legal action for an order directing the corporation to
permit such inspection.
PEOPLES HERITAGE. The bylaws of Peoples Heritage provide that a list of
shareholders will be available for inspection by any shareholder entitled to
vote for a period of not less than 10 days before and during each meeting of
shareholders. The Maine Business Corporation Act provides that a record
shareholder of a Maine corporation such as Peoples Heritage who has been such
for at least six months or owns of record 10% or more of the corporation's
outstanding shares may, for any proper purpose, and subject to the provision, if
requested, of specified affidavits, inspect the corporation's books and records
of account, minutes of meetings and list or record of shareholders. The Maine
Business Corporation Act authorizes a shareholder of a Maine corporation which
refuses to permit an authorized inspection to bring a legal action for an order
directing the corporation to permit such inspection and, if successful, to be
awarded costs and in certain circumstances specified punitive damages.
AMENDMENT OF GOVERNING INSTRUMENTS
BANKNORTH. Banknorth's certificate of incorporation provides that the
certificate of incorporation may be amended or repealed at any regular or
special meeting of shareholders by the affirmative vote of the holders of a
majority of the outstanding Banknorth common stock, unless a greater vote is
required by law or otherwise required by the certificate of incorporation.
However, the provisions of Banknorth's certificate of incorporation relating to
the number of directors of Banknorth and to certain antitakeover protections may
not be repealed or amended unless (i)(a) approved by the affirmative vote of
holders of 80% of the outstanding shares of Banknorth entitled to vote generally
in an election of directors and (b) if there is then in existence an "interested
stockholder" (as defined below under "--Mergers, Consolidations and Sales of
Assets"), the vote approving any such amendment includes the affirmative vote of
at least two thirds of the outstanding shares of Banknorth entitled to vote
generally in an election of directors held by shareholders other than the
"interested stockholder," or (ii) the amendment has been approved by at least a
majority of the Banknorth directors not affiliated with such "interested
stockholder."
Except for any amendment to the provision in the bylaws dealing with the
number of Banknorth directors, which may be amended in the manner set forth
above for the comparable provision in Banknorth's certificate of incorporation,
Banknorth's bylaws may be amended or repealed at any meeting of the Banknorth
board of directors by a majority vote or at a meeting of Banknorth shareholders
by the holders of at least a majority of the shares outstanding and entitled to
vote thereat.
PEOPLES HERITAGE. No amendment to the articles of incorporation of Peoples
Heritage generally may be made unless it is first proposed by the Peoples
Heritage board of directors and thereafter approved by the holders of at least a
majority of all outstanding shares entitled to vote thereon, with the exception
of amendments to certain sections thereof which generally require approval by
the
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holders of at least 75% of the shares of Peoples Heritage entitled to vote
generally in an election of directors unless the amendment is approved by the
affirmative vote of at least two thirds of the whole Peoples Heritage board of
directors (the total number of directors that Peoples Heritage would have if
there were no vacancies) and a majority of the Peoples Heritage directors who
are not affiliated with any person or entity which holds 10% or more of the
voting shares of Peoples Heritage. In addition, the "fair price" provision in
the articles of incorporation of Peoples Heritage may not be amended except in
the manner set forth therein. See "--Mergers, Consolidations and Sales of
Assets" below.
The articles of incorporation of Peoples Heritage provide that the Peoples
Heritage board of directors shall have the exclusive power to adopt, amend or
repeal the bylaws of Peoples Heritage.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
BANKNORTH. The articles of incorporation of Banknorth generally provide
that, except as provided below, any merger, consolidation, sale of assets or
dissolution involving Banknorth that is required to be approved by the
shareholders of Banknorth under the Delaware General Corporation Law shall
require the affirmative vote of the holders of not less than a majority of the
outstanding shares of voting stock of Banknorth.
The certificate of incorporation of Banknorth contains a provision which
requires that mergers and certain other business combinations with an
"interested stockholder" be approved by the holders of at least 80% of the
capital stock of Banknorth entitled to vote on the matter and that the vote must
include the affirmative vote of at least two-thirds of such voting stock held by
shareholders other than an "interested stockholder." If, however, certain price
and procedural requirements are met or the merger or other business combination
is approved by a majority of Banknorth's "continuing directors," only the
affirmative vote of a majority of the shares then outstanding and entitled to
vote on the matter will be required. An "interested stockholder" for this
purpose generally includes any person, firm or entity which is the beneficial
owner of more than 10% of the outstanding capital stock of Banknorth entitled to
vote generally in an election of directors, and a "continuing director" for this
purpose generally is any director who was elected as a director by the
shareholders of Banknorth prior to the date the "interested stockholder"
acquired in excess of 5% of the then outstanding capital stock of Banknorth
entitled to vote generally in an election of directors, or a person recommended
to succeed such a continuing director by a majority of continuing directors.
PEOPLES HERITAGE. The Maine Business Corporation Act requires the approval
of the Peoples Heritage board of directors and the holders of at least a
majority of the outstanding Peoples Heritage common stock for mergers and
consolidations in which Peoples Heritage is a participating corporation and for
sales of all or substantially all of Peoples Heritage's property and assets.
The articles of incorporation of Peoples Heritage contain a provision which
requires that mergers and certain other business combinations with a "related
person," as defined, be approved by the holders of not less than 80% of the
outstanding voting stock of Peoples Heritage and an "independent majority of
stockholders," as defined, unless certain price and procedural requirements are
met or the Peoples Heritage board, including a majority of the "continuing
directors," as defined, approves the merger or other business combination in the
manner provided therein. A "related person" generally is defined to include any
person, firm or entity which is the beneficial owner of 10% or more of the
voting shares of Peoples Heritage, and a "continuing director" generally is
defined as any director who was a director of Peoples Heritage prior to the time
the "related person" became such and who is not an affiliate or associate of a
"related person."
STATE ANTI-TAKEOVER STATUTES
BANKNORTH. Section 203 of the Delaware General Corporation Law generally
provides that a Delaware corporation shall not engage in any "business
combination" with an "interested stockholder"
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for a period of three years following the date that such stockholder became an
"interested stockholder" unless (1) prior to such time the board of directors of
the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an "interested stockholder;" or
(2) upon consummation of the transaction which resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned at
least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for this purpose shares owned by persons who
are directors and also officers and shares owned by employee stock ownership
plans in which employee participants do not have the right to determine
confidentially whether the shares held subject to the plan will be tendered in a
tender offer or exchange offer; or (3) at or subsequent to such time, the
business combination is approved by the board of directors and authorized at an
annual or special meeting of shareholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the "interested
stockholder." The three-year prohibition on business combinations with an
"interested stockholder" does not apply under certain circumstances, including
business combinations with a corporation which does not have a class of voting
stock that is (i) listed on a national securities exchange, (ii) authorized for
quotation on the Nasdaq Stock Market's National Market or (iii) held of record
by more than 2,000 shareholders, unless in each case this result was directly or
indirectly caused by the "interested stockholder" or from a transaction in which
a person became an "interested stockholder."
An "interested stockholder" generally means any person that (i) is the owner
of 15% or more of the outstanding voting stock of the corporation or (ii) is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an "interested stockholder;" and the
affiliates and associates of such a person. The term "business combination" is
broadly defined to include a wide variety of transactions, including mergers,
consolidations, sales of 10% or more of a corporation's assets and various other
transactions which may benefit an "interested stockholder."
PEOPLES HERITAGE. Section 910 of the Maine Business Corporation Act
generally provides shareholders of a Maine corporation which has a class of
voting shares registered or traded on a national securities exchange or
registered under the Securities Exchange Act of 1934, such as Peoples Heritage,
with the right to demand payment of an amount equal to the fair value of each
voting share in the corporation held by the shareholder from a person or group
of persons which become a "controlling person," which generally is defined to
mean an individual, firm or entity (or group thereof) which has voting power
over at least 25% of the outstanding voting shares of the corporation. Such a
demand must be submitted to the "controlling person" within 30 days after the
"controlling person" provides required notice to the shareholders of the
acquisition or transactions which resulted in such person or group becoming a
"controlling person." Section 910 could be interpreted to provide that a person
or group of persons could become a "controlling person" for purposes of such
section by soliciting and acquiring revocable proxies to vote at least 25% of
the voting shares of a corporation.
Section 611-A of the Maine Business Corporation Act generally provides that
a Maine corporation which has a class of voting stock registered or traded on a
national securities exchange or under the Securities Exchange Act of 1934 may
not engage in any business combination for five years following an "interested
stockholder's" "stock acquisition date" unless the business combination is
(i) approved by the corporation's board of directors prior to that "interested
stockholder's" "stock acquisition date" or (ii) approved, subsequent to that
"interested stockholder's" "stock acquisition date," by the board of directors
of the Maine corporation and authorized by the holders of a majority of the
outstanding voting stock of the corporation not beneficially owned by that
"interested stockholder" or any affiliate or associate thereof or by persons who
are either directors or officers and also employees of the corporation. An
"interested stockholder" is defined to include any person, firm or entity that
is directly or indirectly the beneficial owner of 25% or more of the outstanding
voting stock of the corporation,
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other than by reason of a revocable proxy given in response to a proxy
solicitation conducted in accordance with the Securities Exchange Act 1934 which
is not then reportable on a Schedule 13D under the Securities Exchange Act of
1934, and "stock acquisition date" is defined to mean the date that any person,
firm or entity first becomes an "interested stockholder" of that corporation.
DISSENTERS' RIGHTS OF APPRAISAL
BANKNORTH. Under the Delaware General Corporation Law, a shareholder of a
Delaware corporation such as Banknorth generally has the right to dissent from a
merger or consolidation in which the corporation is participating or sale of all
or substantially all of the assets of the corporation, subject to specified
procedural requirements. The Delaware General Corporation Law generally does not
confer appraisal rights, however, if the corporation's stock is either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders.
Even if a corporation's stock meets the foregoing requirements, however, the
Delaware General Corporation Law provides that appraisal rights generally will
be permitted if shareholders of the corporation are required to accept for their
stock in any merger, consolidation or similar transaction anything other than
(i) shares of the corporation surviving or resulting from the transaction, or
depository receipts in respect thereof, or such shares or depository receipts
plus cash in lieu of fractional interests, or (ii) shares of any other
corporation, or depository receipts in respect thereof, plus cash in lieu of
fractional interests, unless such shares or depository receipts are listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2000 holders, or any combination of
the foregoing.
PEOPLES HERITAGE. Under the Maine Business Corporation Act, a shareholder
of a Maine corporation such as Peoples Heritage generally has the right to
dissent from a merger or consolidation in which the corporation is participating
or sale of all or substantially all of the assets of the corporation, subject to
specified procedural requirements. The Maine Business Corporation Act generally
does not confer appraisal rights, however, if the corporation's stock is either
(i) registered or traded on a national securities exchange or (ii) registered
with the Securities and Exchange Commission pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as is the Peoples Heritage common stock. Even
if a corporation's stock meets the foregoing requirements, however, the Maine
Business Corporation Act provides that appraisal rights generally will be
permitted if shareholders of the corporation are required to accept for their
stock in any merger, consolidation or similar transaction anything other than
(i) shares of the surviving or new corporation resulting from the transaction,
or such shares plus cash in lieu of fractional shares, or (ii) shares, or shares
plus cash in lieu of fractional shares, of any other corporation unless such
shares are registered or traded on a national securities exchange or held of
record by not less than 2,000 shareholders, or any combination of the foregoing.
SHAREHOLDER RIGHTS PLANS
BANKNORTH. Each share of Banknorth common stock has attached to it one
preferred stock purchase right (a "Banknorth right") issued pursuant to the
rights agreement, dated as of November 27, 1990, and amended and restated as of
September 4, 1998, between Banknorth and Registrar and Transfer Company, as
rights agent. Each Banknorth right entitles the registered holder to purchase
from Banknorth a unit consisting of one-hundredth of a share of Banknorth's
Series A Junior Participating Preferred Stock, par value $0.01 per share, at a
purchase price of $100, subject to adjustment. The Banknorth rights will not
separate from the Banknorth common stock, be distributed and become exercisable
until on a date (the "distribution date") which will occur upon the earlier of
(i) 10 business days following a public announcement that a person or group of
affiliated or associated
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persons, other than Banknorth or any subsidiary thereof and subject to certain
other exceptions (an "acquiring person"), has acquired beneficial ownership of
20% or more of the outstanding shares of Banknorth common stock (the "share
acquisition date"), or (ii) 10 business days (or such later date as may be
determined by action of the Banknorth board of directors prior to such time as
any person becomes an acquiring person) following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 20% or more of such outstanding shares of Banknorth common stock. Until
the distribution date, the Banknorth rights will be evidenced by the Banknorth
common stock certificates and will be transferred with and only with such
Banknorth common stock certificates, and the surrender for transfer of any
certificate for Banknorth common stock outstanding also will constitute the
transfer of the Banknorth rights associated with the Banknorth common stock
represented by such certificate. The Banknorth rights are not exercisable until
the distribution date and will expire at the close of business on November 27,
2005, unless earlier redeemed by Banknorth. In connection with the execution of
the merger agreement, Banknorth and the Banknorth rights agent adopted an
amendment to the Banknorth rights agreement which generally provides that none
of the execution and delivery of the merger agreement and the Banknorth stock
option agreement or the consummation of the transactions contemplated thereby
shall have any consequences for purposes of the Banknorth rights agreement.
The terms of the Banknorth rights agreement are substantially similar to the
terms of the Peoples Heritage rights agreement. See "Description of Peoples
Heritage Capital Stock--Peoples Heritage Rights."
PEOPLES HERITAGE. Peoples Heritage has adopted a shareholder rights plan,
as described under "Description of Peoples Heritage Capital Stock--Peoples
Heritage Rights." In connection with the execution of the merger agreement,
Peoples Heritage and the Peoples Heritage rights agent adopted an amendment to
the Peoples Heritage rights agreement which generally provides that none of the
execution and delivery of the merger agreement and the Peoples Heritage stock
option agreement or the consummation of the transactions contemplated thereby
shall have any consequences for purposes of the Peoples Heritage rights
agreement.
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CERTAIN BENEFICIAL OWNERS OF PEOPLES HERITAGE COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the Peoples Heritage common
stock beneficially owned as of September 30, 1999 by (i) each director and
certain named executive officers of Peoples Heritage and (ii) all directors and
executive officers of Peoples Heritage as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
AS OF SEPTEMBER 30,
1999(1)
--------------------------
NAME OF BENEFICIAL OWNER AMOUNT PERCENT
- ------------------------ --------- --------
<S> <C> <C>
Directors:
Gary R. Bahre............................................. 1,212 --%
P. Kevin Condron.......................................... 55,299(4) --
Katherine M. Greenleaf.................................... 23,729(2) --
Douglas S. Hatfield....................................... 73,821(4) --
David D. Hindle........................................... 96,390(7) --
Dana S. Levenson.......................................... 29,668(2) --
Philip A. Mason........................................... 34,011(4) --
John M. Naughton.......................................... 67,462(5) --
Malcolm W. Philbrook, Jr.................................. 91,267(2)(6) --
Pamela P. Plumb........................................... 28,112(2) --
Seth A. Resnicoff......................................... 45,687(4) --
William J. Ryan........................................... 595,576(7) --
Curtis M. Scribner........................................ 26,989(2) --
Paul R. Shea.............................................. 47,479(3) --
John E. Veasey............................................ 322,886(3) --
Certain named executive officers:
Peter J. Verrill.......................................... 178,181(7) --
R. Scott Bacon............................................ 59,185(7) --
All directors and executive officers of
Peoples Heritage as a group (23 persons).................. 2,275,648(8) 2.2%
</TABLE>
- ------------------------
(1) The number of shares beneficially owned by the persons set forth above is
determined under rules under Section 13 of the Securities Exchange Act of
1934, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, an individual is
considered to beneficially own any shares of Peoples Heritage common stock
if he or she directly or indirectly has or shares: (i) voting power, which
includes the power to vote or to direct the voting of the shares, or
(ii) investment power, which includes the power to dispose or direct the
disposition of the shares. Unless otherwise indicated, an individual has
sole voting power and sole investment power with respect to the indicated
shares and all individual holdings amount to less than 1% of the outstanding
Peoples Heritage common stock.
(2) In the case of directors Greenleaf, Levenson, Philbrook, Plumb and Scribner
includes options to purchase 10,500 shares of Peoples Heritage common stock
granted pursuant to the Peoples Heritage directors' stock option plan.
(3) In the case of directors Shea and Veasey includes options to purchase 6,500
shares of Peoples Heritage common stock granted pursuant to the Peoples
Heritage directors' stock option plan.
(4) In the case of directors Condron, Mason, Hatfield and Resnicoff includes
options to purchase 4,500 shares of Peoples Heritage common stock granted
pursuant to the Peoples Heritage
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directors' stock option plan and options to purchase 10,672, 26,524, 26,524
and 8,064 of Peoples Heritage common stock, respectively, granted by CFX
Corporation and converted into options to acquire Peoples Heritage common
stock in connection with its merger into Peoples Heritage.
(5) Includes options to purchase 27,000 shares of Peoples Heritage common stock
granted by SIS Bancorp, Inc. and converted into options to acquire Peoples
Heritage common stock in connection with its acquisition by Peoples
Heritage.
(6) Includes 3,340 shares held by one entity for which Mr. Philbrook serves as
director; beneficial ownership of such shares is shared with the other
members of the investment committee. Also includes 28,832 shares held in
various trusts for which Mr. Philbrook serves as sole trustee or in one case
as co-trustee; beneficial ownership of 5,010 of such shares is shared with a
co-trustee.
(7) Includes shares over which the person has voting power pursuant to the
Peoples Heritage thrift incentive plan and profit sharing employee stock
ownership plan and options to purchase shares of Peoples Heritage common
stock granted pursuant to Peoples Heritage's stock option plans which are
exercisable within 60 days of September 30, 1999, as follows:
<TABLE>
<CAPTION>
PROFIT SHARING
THRIFT EMPLOYEE STOCK CURRENTLY
INCENTIVE PLAN OWNERSHIP PLAN EXERCISABLE OPTIONS
-------------- -------------- -------------------
<S> <C> <C> <C>
William J. Ryan.................. 52,106 7,298 506,336
Peter J. Verrill................. 38,222 7,297 107,086
R. Scott Bacon................... 4,939 669 48,650
David D. Hindle.................. 0 6,327 53,350
</TABLE>
(8) Includes an aggregate of 160,458 shares of Peoples Heritage common stock
which are held by the trusts established pursuant to the Peoples Heritage
thrift incentive plan (125,540 shares) and the Peoples Heritage profit
sharing employee stock ownership plan (34,918 shares) on behalf of executive
officers of Peoples Heritage as a group. Also includes 1,264,164 shares
which may be acquired by directors and executive officers as a group upon
the exercise of outstanding stock options which are exercisable within
60 days of September 30, 1999; shares subject to the foregoing stock options
are deemed to be outstanding for the purpose of computing the percentage of
Peoples Heritage common stock beneficially owned by directors and executive
officers of Peoples Heritage as a group.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Peoples Heritage is not aware of any person or entity, including any "group"
as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934,
who or which was the beneficial owner of 5% or more of the outstanding Peoples
Heritage common stock as of September 30, 1999.
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CERTAIN BENEFICIAL OWNERS OF BANKNORTH COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the Banknorth common stock
beneficially owned as of September 30, 1999 by (i) each director and certain
named executive officers of Banknorth and (ii) all directors and executive
officers of Banknorth as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
AS OF SEPTEMBER 30,
1999(1)(2)
-------------------------
NAME OF BENEFICIAL OWNER AMOUNT PERCENT
- ------------------------ -------- --------
<S> <C> <C>
Directors:
Thomas J. Amidon, Esq..................................... 23,691(3) --%
Jacqueline D. Arthur...................................... 2,290(4) --
Robert A. Carrara......................................... 7,818(5) --
William H. Chadwick....................................... 137,835(6) --
Susan C. Crampton, CPA.................................... 17,221(7) --
George W. Dougan.......................................... 182,156(8) --
Robert F. Flacke.......................................... 14,052(9) --
Luther Frederick Hackett.................................. 51,705(10) --
Kathleen Hoisington....................................... 1,039 --
Anthony J. Mashuta........................................ 12,121(11) --
John B. Packard........................................... 1,989(12) --
Angelo P. Pizzagalli...................................... 34,108(13) --
Thomas P. Salmon, Esq..................................... 3,417(14) --
Patrick E. Welch.......................................... 1,427(15) --
Certain named executive officers:
Owen H. Becker............................................ 11,500(16) --
Richard J. Fitzpatrick.................................... 36,378(17) --
Thomas J. Pruitt.......................................... 67,031(18)
All directors and executive officers of
Banknorth as a group (20 persons)......................... 624,203(2) 2.6%
</TABLE>
- ------------------------
(1) The number of shares beneficially owned by the persons set forth above is
determined under rules under Section 13 of the Securities Exchange Act of
1934, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, an individual is
considered to beneficially own any shares of Banknorth common stock if he
or she directly or indirectly has or shares: (i) voting power, which
includes the power to vote or to direct the voting of the shares, or
(ii) investment power, which includes the power to dispose or direct the
disposition of the shares. Unless otherwise indicated, an individual has
sole voting power and sole investment power with respect to the indicated
shares and all individual holdings amount to less than 1% of the
outstanding Banknorth common stock.
(2) Includes (i) 17,075 shares with respect to which voting or investment
powers are shared; (ii) 1,705 shares as to which beneficial ownership is
disclaimed; (iii) 51,100 shares of unvested performance stock awarded to
certain members of the group under the Banknorth 1997 equity compensation
plan or predecessor plans; (iv) 239,700 shares underlying exercisable stock
options awarded to certain members of the group under the Banknorth equity
compensation plan; (v) 44,552 stock units accrued to the accounts of
certain members of the group under the Banknorth 1994 deferred compensation
plan, as amended; and (vi) approximately 30,239 shares in which certain
members of the group have an indirect interest by virtue of their
participation in a pooled
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Banknorth stock fund maintained under the Banknorth 401(k) plan. Each stock
unit accrued under the Banknorth deferred compensation plan will be payable
in the form of one share of Banknorth common stock. Share information
relating to the Banknorth 401(k) plan is as of September 30, 1999, the date
of the most recent Banknorth 401(k) plan report and share information
relating to the Banknorth deferred compensation plan is as of
September 30, 1999, the date of the most recent quarterly Banknorth
deferred compensation plan accrual.
(3) Includes 8,605 stock units accrued to Mr. Amidon's account under the
Banknorth deferred compensation plan.
(4) Includes 2,090 stock units accrued to Ms. Arthur's account under the
Banknorth deferred compensation plan.
(5) Includes 4,080 stock units accrued to Mr. Carrara's account under the
Banknorth deferred compensation plan.
(6) Includes (i) 12,075 shares held by Mr. Chadwick indirectly through the
Banknorth 401(k) plan; (ii) 24,200 shares of unvested performance stock
granted under the Banknorth equity compensation plan and (iii) 32,000
shares underlying exercisable stock options awarded to Mr. Chadwick under
the Banknorth equity compensation plan.
(7) Includes (i) 6,277 shares held by Ms. Crampton jointly with her husband;
(ii) 4,080 shares held by her husband; and (iii) 6,864 stock units accrued
to Ms. Crampton's account under the Banknorth deferred compensation plan.
(8) Includes (i) 126,000 shares underlying exercisable stock options which were
awarded to Mr. Dougan by Evergreen Bancorp and converted into stock options
to purchase Banknorth common stock upon consummation of the Evergreen
merger; (ii) 1,284 shares allocated to Mr. Dougan's account under
Evergreen's employee stock ownership plan; and (iii) 1,000 shares of
unvested performance stock granted under the Banknorth equity compensation
plan.
(9) Includes (i) 3,600 shares underlying exercisable stock options which were
awarded to Mr. Flacke by Evergreen Bancorp and converted into stock options
to purchase Banknorth common stock upon consummation of the Evergreen
merger; and (ii) 1,013 shares held by Mr. Flacke's wife, as to which
beneficial ownership is disclaimed.
(10) Includes (i) 42,504 shares held by various corporations controlled by
Mr. Hackett; and (ii) 116 shares held by Mrs. Hackett's wife, as to which
beneficial ownership is disclaimed.
(11) Includes (i) 3,600 shares underlying exercisable stock options which were
awarded to Mr. Mashuta by Evergreen Bancorp and converted into stock
options to purchase Banknorth common stock upon consummation of the
Evergreen merger; (ii) 2,700 shares held by Cool Insuring Agency, Inc., of
which Mr. Mashuta is president; and (iii) 3,138 shares accrued to
Mr. Mashuta's account under the Banknorth deferred compensation plan.
(12) Includes 1,789 stock units accrued to Mr. Packard's account under the
Banknorth deferred compensation plan.
(13) Includes (i) 6,718 shares held by Pizzagalli Construction Company, Inc.,
an affiliate of Mr. Pizzagalli as to which voting and investment power is
shared; and (ii) 15,390 stock units accrued to Mr. Pizzagalli's account
under the Banknorth deferred compensation plan.
(14) Includes (i) 576 shares held by Mr. Salmon's wife as to which Mr. Salmon
disclaims beneficial ownership; and (ii) 1,696 stock units accrued to
Mr. Salmon's account under the Banknorth deferred compensation plan.
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(15) Includes 827 stock units accrued to Mr. Welch's account under the
Banknorth deferred compensation plan.
(16) Includes (i) 6,500 shares of unvested performance stock granted to
Mr. Becker under the Banknorth equity compensation plan; and (ii) 5,000
shares underlying exercisable stock options awarded to Mr. Becker under
the Banknorth equity compensation plan.
(17) Includes (i) 8,128 shares held by Mr. Fitzpatrick indirectly through the
Banknorth 401(k) plan; (ii) 6,500 shares of unvested performance stock
granted under the Banknorth equity compensation plan; and (iii) 15,000
shares underlying exercisable stock options awarded to Mr. Fitzpatrick
under the Banknorth equity compensation plan.
(18) Includes (i) 7,623 shares held by Mr. Pruitt indirectly through the
Banknorth 401(k) plan; (ii) 9,400 shares of unvested performance stock
granted under the Banknorth equity compensation plan; and (iii) 29,000
shares underlying exercisable stock options awarded to Mr. Pruitt under
the Banknorth equity compensation plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Banknorth is not aware of any person or entity, including any "group" as
that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934,
who or which was the beneficial owner of 5% or more of the outstanding Banknorth
common stock as of September 30, 1999.
LEGAL OPINION
The validity of the Peoples Heritage common stock to be issued in the merger
will be passed upon for Peoples Heritage by Elias, Matz, Tiernan & Herrick
L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements of Peoples Heritage included in
Peoples Heritage's annual report on Form 10-K for the year ended December 31,
1998 and Peoples Heritage's current report on Form 8-K filed on June 10, 1999,
have been incorporated by reference herein in reliance upon the reports of KPMG
LLP, independent certified public accountants, which are incorporated herein by
reference, and upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Banknorth and subsidiaries as of
December 31, 1998 and 1997, and for each of the years in the three-year period
ended December 31, 1998, included in Banknorth's annual report on Form 10-K for
the year ended December 31, 1998, have been incorporated by reference herein, in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of such firm as experts
in accounting and auditing.
99
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PROPOSALS FOR THE 2000 ANNUAL MEETINGS
BANKNORTH. Pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, the deadline for the submission of proposals by shareholders for inclusion
in the proxy statement and form of proxy to be used by Banknorth in connection
with the next annual meeting of shareholders of Banknorth, which will be held
only if the merger is not consummated before the time of such meeting, was
November 26, 1999.
Pursuant to Banknorth's bylaws, the date for submission of shareholder
nominations for election as a director or other shareholder proposals for
consideration at the next annual meeting of shareholders of Banknorth outside of
the processes of Rule 14a-8 is no earlier than January 12, 2000 and no later
than February 11, 2000.
PEOPLES HERITAGE. Pursuant to Rule 14a-8 under the Securities Exchange Act
of 1934, the deadline for submission of proposals by shareholders for inclusion
in the proxy statement and form of proxy to be used by Peoples Heritage in
connection with the next annual meeting of shareholders was November 22, 1999.
Pursuant to Peoples Heritage's bylaws, the date for submission of
shareholder nominations for election as a director or other shareholder
proposals for consideration at the next annual meeting of shareholders of
Peoples Heritage outside of the processes of Rule 14a-8 was January 26, 2000.
WHERE YOU CAN FIND MORE INFORMATION
Each of Peoples Heritage and Banknorth files annual, quarterly and current
reports, proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, proxy statements or other
information filed by Peoples Heritage and Banknorth at the Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
You can request copies of these documents, upon payment of a duplicating fee, by
writing to the Commission. Please call the Commission at 1-800-SEC-0330 for
further information on the operation of the Commission's public reference rooms.
Peoples Heritage's and Banknorth's Commission filings are also available to the
public from document retrieval services and at the Commission's Internet website
(http://www.sec.gov).
Peoples Heritage has filed with the Commission a registration statement on
Form S-4 under the Securities Act and the rules and regulations thereunder. This
prospectus/joint proxy statement is a part of that registration statement. As
permitted by the Commission's rules, this prospectus/joint proxy statement does
not contain all of the information you can find in the registration statement.
The registration statement is available for inspection and copying as set forth
above.
The Commission allows Peoples Heritage and Banknorth to "incorporate by
reference" into this prospectus/joint proxy statement, which means that Peoples
Heritage and Banknorth can disclose important information to you by referring
you to another document filed separately with the Commission. The information
incorporated by reference is considered to be part of this prospectus/ joint
proxy statement, except for any information superseded by information contained
in later filed documents incorporated by reference in this prospectus/joint
proxy statement. Each of Peoples Heritage and Banknorth incorporates by
reference the respective documents filed by them with the Commission
100
<PAGE>
listed below and any future filings made by it with the Commission before the
special meetings under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934.
<TABLE>
<CAPTION>
PEOPLES HERITAGE SEC FILINGS (FILE NO. 000-16947) PERIOD/DATE
- ------------------------------------------------- -----------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999,
June 30, 1999 and September 30,
1999
Current Reports on Form 8-K Filed on January 4, April 23,
June 2, as amended on June 9,
June 10, July 27, July 28 and
December 23, 1999 and January 19,
2000
BANKNORTH SEC FILINGS (FILE NO. 000-18173) PERIOD/DATE
------------------------------------- -------------------------------------
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999,
June 30, 1999 and September 30,
1999
Current Reports on Form 8-K Filed on January 15, February 15,
June 2, as amended on June 9, and
December 23, 1999 and January 21,
2000.
</TABLE>
You may request a copy of these filings, at no cost, by writing or
telephoning the appropriate company at the following addresses:
<TABLE>
<S> <C>
Peoples Heritage Financial Group, Inc. Banknorth Group, Inc.
P.O. Box 9540 P.O. Box 5420
One Portland Square 100 Bank Street
Portland, Maine 04112-9540 7th Floor
Attention: Brian S. Arsenault Burlington, Vermont 05401
(207) 761-8517 Attention: Thomas J. Pruitt
(802) 658-9959
</TABLE>
To obtain timely delivery, you should request desired information no later
than five business days prior to the date of the special meetings, or by
February 28, 2000.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS/ JOINT PROXY STATEMENT. NEITHER PEOPLES HERITAGE
NOR BANKNORTH HAS AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM THAT WHICH IS CONTAINED IN THIS PROSPECTUS/JOINT PROXY STATEMENT.
MOREOVER, NEITHER PEOPLES HERITAGE NOR BANKNORTH IS MAKING AN OFFER TO SELL OR
SOLICITING AN OFFER TO BUY ANY SECURITIES OTHER THAN THE PEOPLES HERITAGE COMMON
STOCK TO BE ISSUED BY PEOPLES HERITAGE IN THE MERGER, AND NEITHER PEOPLES
HERITAGE NOR BANKNORTH IS MAKING AN OFFER OF SUCH SECURITIES IN ANY STATE WHERE
THE OFFER IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS/ JOINT
PROXY STATEMENT SPEAKS ONLY AS OF ITS DATE UNLESS THE INFORMATION SPECIFICALLY
INDICATES THAT ANOTHER DATE APPLIES.
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<PAGE>
ANNEX I
AGREEMENT AND PLAN OF MERGER
BETWEEN
PEOPLES HERITAGE FINANCIAL GROUP, INC.
AND
BANKNORTH GROUP, INC.
DATED AS OF JUNE 1, 1999
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I DEFINITIONS....................................................... 1
ARTICLE II THE MERGER....................................................... 6
2.1 The Merger.................................................. 6
2.2 Effective Time; Closing..................................... 7
2.3 Treatment of Capital Stock.................................. 7
2.4 Shareholder Rights; Stock Transfers......................... 7
2.5 Fractional Shares........................................... 7
2.6 Exchange Procedures......................................... 8
2.7 Anti-Dilution Provisions.................................... 9
2.8 Options..................................................... 9
2.9 Additional Actions.......................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 10
3.1 Capital Structure........................................... 10
3.2 Organization, Standing and Authority of the Company......... 10
3.3 Ownership of the Company Subsidiaries....................... 10
Organization, Standing and Authority of the Company
3.4 Subsidiaries.............................................. 11
3.5 Authorized and Effective Agreement.......................... 11
3.6 Securities Documents and Regulatory Reports................. 12
3.7 Financial Statements........................................ 12
3.8 Material Adverse Change..................................... 13
3.9 Environmental Matters....................................... 13
3.10 Tax Matters................................................. 14
3.11 Legal Proceedings........................................... 14
3.12 Compliance with Laws........................................ 15
3.13 Certain Information......................................... 15
3.14 Employee Benefit Plans...................................... 15
3.15 Certain Contracts........................................... 17
3.16 Brokers and Finders......................................... 17
3.17 Insurance................................................... 17
3.18 Properties.................................................. 18
3.19 Labor....................................................... 18
3.20 Loans; Nonperforming and Classified Assets.................. 18
3.21 Administration of Fiduciary Accounts........................ 19
3.22 Derivative Transactions..................................... 19
3.23 Year 2000................................................... 19
Required Vote; Company Rights Agreement; Antitakeover
3.24 Provisions................................................ 19
3.25 Ownership of PHFG Common Stock.............................. 20
3.26 Fairness Opinion............................................ 20
3.27 Accounting for the Merger; Reorganization................... 20
3.28 Disclosures................................................. 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PHFG........................... 20
4.1 Capital Structure........................................... 20
4.2 Organization, Standing and Authority of PHFG................ 21
4.3 Ownership of the PHFG Subsidiaries.......................... 21
</TABLE>
i
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<TABLE>
<S> <C> <C> <C>
Organization, Standing and Authority of the PHFG
4.4 Subsidiaries.............................................. 21
4.5 Authorized and Effective Agreement.......................... 21
4.6 Securities Documents and Regulatory Reports................. 22
4.7 Financial Statements........................................ 23
4.8 Material Adverse Change..................................... 23
4.9 Environmental Matters....................................... 23
4.10 Tax Matters................................................. 24
4.11 Legal Proceedings........................................... 24
4.12 Compliance with Laws........................................ 24
4.13 Certain Information......................................... 25
4.14 Employee Benefit Plans...................................... 25
4.15 Certain Contracts........................................... 26
4.16 Brokers and Finders......................................... 26
4.17 Insurance................................................... 27
4.18 Properties.................................................. 27
4.19 Labor....................................................... 27
4.20 Loans....................................................... 27
4.21 Administration of Fiduciary Accounts........................ 28
4.22 Derivative Transactions..................................... 28
4.23 Year 2000................................................... 28
Required Vote; PHFG Rights Agreement; Antitakeover
4.24 Provisions................................................ 28
4.25 Ownership of Company Common Stock........................... 29
4.26 Fairness Opinion............................................ 29
4.27 Accounting for the Merger; Reorganization................... 29
4.28 Disclosures................................................. 29
ARTICLE V COVENANTS......................................................... 29
5.1 Reasonable Best Efforts..................................... 29
5.2 Shareholder Meetings........................................ 29
5.3 Regulatory Matters.......................................... 30
5.4 Investigation and Confidentiality........................... 30
5.5 Press Releases.............................................. 31
5.6 Business of the Parties..................................... 31
5.7 Current Information......................................... 34
5.8 Indemnification; Insurance.................................. 34
5.9 Directors and Officers...................................... 36
5.10 Employee Benefit Plans and Arrangements..................... 36
5.11 Stock Exchange Listing...................................... 37
5.12 The Bank Mergers; Consolidation of Trust Operations......... 37
5.13 Affiliates; Restrictions on Resale.......................... 38
5.14 Disclosure Supplements...................................... 38
5.15 Failure to Fulfill Conditions............................... 38
ARTICLE VI CONDITIONS PRECEDENT............................................. 39
6.1 Conditions Precedent--PHFG and the Company.................. 39
6.2 Conditions Precedent--The Company........................... 40
6.3 Conditions Precedent--PHFG.................................. 41
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT............................... 41
7.1 Termination................................................. 41
7.2 Effect of Termination....................................... 43
</TABLE>
ii
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<TABLE>
<S> <C> <C> <C>
7.3 Survival of Representations, Warranties and Covenants....... 43
7.4 Waiver...................................................... 43
7.5 Amendment or Supplement..................................... 44
ARTICLE VIII MISCELLANEOUS.................................................. 44
8.1 Expenses.................................................... 44
8.2 Entire Agreement............................................ 44
8.3 Assignment; Successors...................................... 44
8.4 Notices..................................................... 45
8.5 Alternative Structure....................................... 45
8.6 Interpretation.............................................. 46
8.7 Counterparts................................................ 46
8.8 Governing Law............................................... 46
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
Matters to be covered by Opinion(s) of Counsel to the
Exhibit D Company
</TABLE>
iii
<PAGE>
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.
"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.
<PAGE>
"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.
"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.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
2
<PAGE>
"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.
"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.
3
<PAGE>
"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.
"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.
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"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, 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.
"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.
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"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.
(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
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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
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 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
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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. 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
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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 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.
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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 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 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.
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(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 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
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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.
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.
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3.10 TAX MATTERS
(a) The Company and the Company Subsidiaries have timely filed all federal,
state and local (and, if applicable, foreign) income, franchise, bank, excise,
real property, personal property and other tax returns required by applicable
law to be filed by them (including, without limitation, estimated tax returns,
income tax returns, information returns and withholding and employment tax
returns) and have paid, or where payment is not required to have been made, have
set up an adequate reserve or accrual for the payment of, all taxes required to
be paid in respect of the periods covered by such returns and, as of the
Effective Time, will have paid, or where payment is not required to have been
made, will have set up an adequate reserve or accrual for the payment of, all
taxes for any subsequent periods ending on or prior to the Effective Time.
Neither the Company nor any Company Subsidiary will have any material liability
for any such taxes in excess of the amounts so paid or reserves or accruals so
established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and the Company Subsidiaries are complete and accurate in
all material respects. Neither the Company nor any Company Subsidiary is
delinquent in the payment of any tax, assessment or governmental charge, and
none of them has requested any extension of time within which to file any tax
returns in respect of any fiscal year or portion thereof which have not since
been filed. The federal, state and local income tax returns of the Company and
the Company Subsidiaries have been examined by the applicable tax authorities
(or are closed to examination due to the expiration of the applicable statute of
limitations) and no deficiencies for any tax, assessment or governmental charge
have been proposed, asserted or assessed (tentatively or otherwise) against the
Company or any Company Subsidiary as a result of such examinations or otherwise
which have not been settled and paid. There are currently no agreements in
effect with respect to the Company or a Company Subsidiary to extend the period
of limitations for the assessment or collection of any tax. As of the date
hereof, no audit, examination or deficiency or refund litigation with respect to
such return is pending or, to the best of the Company's knowledge, threatened.
(c) Neither the Company nor any Company Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes, (ii) is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary 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 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
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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 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
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any benefits under any Company Employee Plan or (iii) result in any material
increase in benefits payable under any Company Employee Plan.
(j) Neither the Company nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would not
reasonably be expected to be deductible as a result of the limitations under
Section 162(m) of the Code and the regulations issued thereunder.
(k) As a result, directly or indirectly, of the transactions contemplated by
this Agreement (including, without limitation, as a result of any termination of
employment prior to or following the Effective Time), none of the Company, PHFG
or any of their respective Subsidiaries will be obligated to make a payment that
would be characterized as an "excess parachute payment" to an individual who is
a "disqualified individual" (as such terms are defined in Section 280G of the
Code), without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
3.15 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the Company or a Company Subsidiary (other than deposits,
federal funds purchased, FHLB advances and securities sold under agreements to
repurchase) or the guarantee by the Company or a Company Subsidiary of any
obligation, (ii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election or retention in office of
any present or former director, officer or employee of the Company or a Company
Subsidiary, (iii) any agreement, arrangement or understanding pursuant to which
the Company or a Company Subsidiary is obligated to indemnify any 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
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accordance with good business practice, customarily be insured and have
maintained all insurance required by applicable laws and regulations.
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.
(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
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(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.
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.
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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.
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.
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4.2 ORGANIZATION, STANDING AND AUTHORITY OF PHFG
PHFG is a corporation duly organized, validly existing and in good standing
under the laws of the State of Maine with full corporate power and authority to
own or lease all of its properties and assets and to carry on its business as
now conducted and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which its ownership or leasing of property or
the conduct of its business requires such licensing or qualification, except
where the failure to be so licensed, qualified or in good standing would not
have a Material Adverse Effect on PHFG. PHFG is duly registered as a bank
holding company under the BHCA and the regulations of the FRB thereunder. PHFG
has heretofore delivered to the Company true and complete copies of the Articles
of Incorporation and Bylaws of PHFG as in effect as of the date hereof.
4.3 OWNERSHIP OF THE PHFG SUBSIDIARIES
PHFG has Previously Disclosed the name, jurisdiction of incorporation and
percentage ownership of each direct or indirect PHFG Subsidiary and identified
its Significant Subsidiaries as of the date hereof. 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 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.
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(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the 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 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.
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(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. 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,
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except any such violations or liabilities which would not singly or in the
aggregate have a Material Adverse Effect on PHFG.
(c) To the best of PHFG's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents that could reasonably
form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against PHFG or a PHFG Subsidiary or against
any person or entity whose liability for any Environmental Claim PHFG or a PHFG
Subsidiary has or may have retained or assumed either contractually or by
operation of law, except such which would not have a Material Adverse Effect on
PHFG.
4.10 TAX MATTERS
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-discrimination,
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antitrust, and wage and hour laws, ordinances, orders, rules and regulations),
or in default with respect to any order, writ, injunction or decree of any
court, or in default under any order, license, regulation or demand of any
governmental agency, any of which violations or defaults could reasonably be
expected to have a Material Adverse Effect on 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.
(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).
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(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.
(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.
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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 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
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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 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.
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
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making of such recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
5.3 REGULATORY MATTERS
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the parties hereto shall use its reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing, and PHFG and the Company each shall thereafter promptly mail the
Proxy Statement to its respective shareholders. PHFG shall use its reasonable
best efforts to obtain all necessary state securities law or "blue sky" permits
and approvals required to carry out the issuance of PHFG Common Stock pursuant
to the Merger and all other transactions contemplated by this Agreement, and the
Company shall furnish all information concerning the Company and the holders of
the Company Common Stock as may be reasonably requested in connection with any
such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the Bank Mergers). PHFG
and the Company shall have the right to review in advance, and to the extent
practicable each will consult with the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
which appears in any filing made with or written materials submitted to any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) PHFG and the Company shall, upon request, furnish each other with all
information concerning themselves, their respective Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, the Form S-4 or any other
statement, filing, notice or application made by or on behalf of PHFG, the
Company or any of their respective 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,
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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 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
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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;
(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;
(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;
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(xii) enter into any futures contract, option contract, interest rate
caps, interest rate floors, interest rate exchange agreement or other
derivative instruments other than for purposes of hedging interest rate risk
on U.S. dollar-denominated securities and other financial instruments in the
ordinary course of business consistent with past 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 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.
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(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 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
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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.
(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 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.
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(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-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
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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 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
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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.
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
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.
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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 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.
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6.3 CONDITIONS PRECEDENT--PHFG
The obligations of PHFG to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following conditions at or
prior to the Effective Time unless waived by PHFG pursuant to Section 7.4
hereof.
(a) The representations and warranties of the Company set forth in
Article III hereof shall be true and correct as of the date of this Agreement
and as of the Effective Time as though made on and as of the Effective Time (or
on the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.3(a) shall be
deemed to have been satisfied even if such representations or warranties are not
true and correct (exclusive of any exceptions in such representations and
warranties relating to materiality or Material Adverse Effect) unless the
failure of any of the representations or warranties to be so true and correct
would have, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to PHFG a certificate, dated the date
of the Closing and signed by its President and Chief Executive Officer and by
its Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.
(d) PHFG shall have received the written 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
41
<PAGE>
herein, which in the case of the Company would have, or could reasonably be
expected to have, a Material Adverse Effect on the Company and in the case of
PHFG would have, or could reasonably be expected to have, a Material Adverse
Effect on PHFG, in any case if such breach has not been cured by the earlier of
30 days after the date on which written notice of such breach is given to the
party committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the applications
for prior approval referred to in Section 5.3 hereof are denied or withdrawn at
the request or recommendation of the applicable Governmental Entity or are
approved in a manner which does not satisfy the requirements of
Section 6.1(b) hereof, and the time period for appeals and requests for
reconsideration has run, or if any Governmental Entity of competent jurisdiction
shall have issued a final nonappealable order enjoining or otherwise prohibiting
the Merger;
(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");
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
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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.
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
43
<PAGE>
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.
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.
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8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to PHFG:
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Attn: William J. Ryan
Chairman, President and Chief Executive Officer
Fax: 207-761-8587
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to the Company:
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 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.
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8.6 INTERPRETATION
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The phrases "the date of this Agreement," "the
date hereof" and terms of similar import herein, unless the context otherwise
requires, shall be deemed to be the date first above written.
8.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maine applicable to agreements made and entirely to be
performed within such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers as of the day and
year first above written.
<TABLE>
<S> <C> <C>
Attest: PEOPLES HERITAGE FINANCIAL GROUP, INC.
/s/ PETER J. VERRILL By: /s/ WILLIAM J. RYAN
- ------------------------------------------ ------------------------------------------
Name: Peter J. Verrill Name: William J. Ryan
Title: Executive Vice President, Chief Title: Chairman, President and Chief
Operating Officer, Chief Financial Executive Officer
Officer and Treasurer
Attest: BANKNORTH GROUP, INC.
/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
</TABLE>
46
<PAGE>
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
First Amendment, dated as of December 22, 1999 (the "Amendment"), to the
Agreement and Plan of Merger, dated as of June 1, 1999 (the "Agreement"),
between Peoples Heritage Financial Group, Inc. ("PHFG") and Banknorth
Group, Inc.
WITNESSETH
WHEREAS, pursuant to Section 7.5 of the Agreement, the parties to the
Agreement desire to amend the Agreement;
NOW THEREFORE, in consideration of the premises, the mutual agreements
herein set forth and such other consideration the sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. AMENDMENT.
(a) Section 7.1(c) of the Agreement is hereby amended by deleting the words
"and the time period for appeals and requests for reconsideration has run,".
(b) Section 7.1(e) of the Agreement is hereby amended by changing the date
set forth therein from April 1, 2000 to May 31, 2000.
(c) The following paragraph is added at the end of Section 7.1 of the
Agreement:
"Peoples Heritage agrees to pay to Banknorth, upon demand, the amount of
$5 million in immediately available funds in the event that Banknorth terminates
the Agreement pursuant to Section 7.1(c) or (e). Such payment shall be made
within two business days of any such demand by Banknorth."
2. EFFECTIVENESS. 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 Agreement, all of which are ratified and affirmed
in all respects and shall continue in full force and effect and shall be
otherwise unaffected.
3. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws the State of Maine applicable to agreements made and
entirely to be performed within such State.
4. 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed in counterparts by their duly authorized officers as of the day and
year first above written.
<TABLE>
<S> <C> <C>
Attest: PEOPLES HERITAGE FINANCIAL GROUP, INC.
/s/ CAROL L. MITCHELL By: /s/ WILLIAM J. RYAN
- ------------------------------------------ ------------------------------------------
Name: Carol L. Mitchell Name: William J. Ryan
Title: Executive Vice President, General Title: Chairman, President and Chief
Counsel and Secretary Executive Officer
Attest: BANKNORTH GROUP, INC.
/s/ THOMAS J. PRUITT By: /s/ WILLIAM H. CHADWICK
- ------------------------------------------ ------------------------------------------
Name: Thomas J. Pruitt Name: William H. Chadwick
Title: Executive Vice President and Chief Title: President and Chief Executive
Financial Officer Officer
</TABLE>
2
<PAGE>
ANNEX II
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").
WITNESSETH:
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 1(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
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
<PAGE>
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 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,
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<PAGE>
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") 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
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<PAGE>
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 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.
(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.
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<PAGE>
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.
(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.
5
<PAGE>
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 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
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<PAGE>
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.
(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
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<PAGE>
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 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 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
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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.
(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.
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(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 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
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<PAGE>
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
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
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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 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.
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
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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.
<TABLE>
<S> <C> <C>
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
</TABLE>
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ANNEX III
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").
WITNESSETH:
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 1(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
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
<PAGE>
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 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,
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<PAGE>
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") 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
3
<PAGE>
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 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 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.
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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.
(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.
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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 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
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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.
(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
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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 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 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
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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.
(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.
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(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 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
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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
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
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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 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.
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
12
<PAGE>
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.
<TABLE>
<S> <C> <C>
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
</TABLE>
13
<PAGE>
[LOGO]
[LOGO]
ANNEX IV
February 1, 2000
Board of Directors
Banknorth Group, Inc.
300 Financial Plaza
Burlington, VT 05401
Ladies and Gentlemen:
Banknorth Group, Inc. ("Banknorth") and Peoples Heritage Financial
Group, Inc. ("Peoples Heritage") have entered into an Agreement and Plan of
Merger, dated as of June 1, 1999 (the "Agreement"), pursuant to which Banknorth
will be merged with and into Peoples Heritage (the "Merger"). Upon consummation
of the Merger, each share of Banknorth common stock, par value $1.00 per share
(together with the rights attached thereto issued pursuant to the Rights
Agreement, dated November 27, 1990 and amended and restated as of September 4,
1998 and further amended as of June 1, 1999, between Banknorth and Registrar &
Transfer Company, as Rights Agent), issued and outstanding immediately prior to
the Merger (the "Banknorth Shares"), other than certain shares specified in the
Agreement, will be converted into the right to receive 1.825 shares (the
"Exchange Ratio") of Peoples Heritage common stock, par value $0.01 per share
(together with the rights attached thereto issued pursuant to the Stockholder
Rights Agreement, dated as of September 12, 1989 and amended as of June 1, 1999,
between Peoples Heritage and American Stock Transfer & Trust Company, as Rights
Agent). The terms and conditions of the Merger are more fully set forth in the
Agreement. You have requested our opinion as to the fairness, from a financial
point of view, of the Exchange Ratio to the holders of Banknorth Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) the Stock Option
Agreements, dated June 1, 1999, by and between Banknorth and Peoples Heritage;
(iii) certain publicly available financial statements of Banknorth and other
historical financial information provided by Banknorth that we deemed relevant;
(iv) certain publicly available financial statements of Peoples Heritage and
other historical financial information provided by Peoples Heritage that we
deemed relevant; (v) certain internal financial analyses and forecasts of
Banknorth prepared by and reviewed with management of Banknorth and the views of
senior management of Banknorth, based on certain limited discussions with
certain members of senior management, regarding Banknorth's past and current
business, financial condition, results of
[LOGO]
<PAGE>
[LOGO]
Board of Directors
Banknorth Group, Inc.
Page 2
operations and future prospects; (vi) certain internal financial analyses and
forecasts of Peoples Heritage prepared by and reviewed with management of
Peoples Heritage and the views of senior management of Peoples Heritage, based
on certain limited discussions with certain members of senior management,
regarding Peoples Heritage's past and current business, financial condition,
results of operations and future prospects; (vii) the pro forma impact of the
Merger; (viii) the publicly reported historical price and trading activity for
Banknorth's and Peoples Heritage's common stock, including a comparison of
certain financial and stock market information for Banknorth and Peoples
Heritage with similar publicly available information for certain other companies
the securities of which are publicly traded; (ix) the financial terms of recent
business combinations in the commercial banking industry, to the extent publicly
available; (x) the current market environment generally and the banking
environment in particular; and (xi) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as we
considered relevant. In connection with our engagement, we were not asked to,
and did not, solicit indications of interest in a potential transaction from
other third parties.
In performing our review, we have assumed and relied upon the accuracy and
completeness of all the financial information, analyses and other information
that was publicly available or otherwise furnished to, reviewed by or discussed
with us, and we do not assume any responsibility or liability for independently
verifying the accuracy or completeness thereof. We did not make an independent
evaluation or appraisal of the specific assets, the collateral securing assets
or the liabilities (contingent or otherwise) of Banknorth or Peoples Heritage or
any of their subsidiaries, or the collectibility of any such assets, nor have we
been furnished with any such evaluations or appraisals. We did not make an
independent evaluation of the adequacy of the allowance for loan losses of
Banknorth or Peoples Heritage nor have we reviewed any individual credit files
relating to Banknorth or Peoples Heritage and, with your permission, we have
assumed that the respective allowances for loan losses for both Banknorth and
Peoples Heritage are adequate to cover such losses and will be adequate on a pro
forma basis for the combined entity. With respect to the financial projections
reviewed with management, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the respective managements of the respective future financial
performance of Banknorth and Peoples Heritage and that such performances will be
achieved, and we express no opinion as to such financial projections or the
assumptions on which they are based. We have also assumed that there has been no
material change in Banknorth's or Peoples Heritage's assets, financial
condition, results of operations, business or prospects since the date of the
most recent financial statements made available to us. We have assumed in all
respects material to our analysis that Banknorth and Peoples Heritage will
remain as going concerns for all periods relevant to our analyses, that all of
the representations and warranties contained in the Agreement and all related
agreements are true and correct, that each party to such agreements will perform
all of the covenants required to be performed by such party under such
agreements, that the conditions precedent in the Agreement are not waived and
that the Merger will be accounted for as a pooling of interests and will qualify
as a tax-free reorganization for federal income tax purposes.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect this
opinion. We have not undertaken to update, revise or reaffirm this opinion or
otherwise comment upon events occurring after the date hereof. We are expressing
no opinion herein as to what the value of Peoples Heritage common stock will be
when issued to
<PAGE>
Board of Directors
Banknorth Group, Inc.
Page 3
Banknorth's shareholders pursuant to the Agreement or the prices at which
Banknorth's or Peoples Heritage's common stock will trade at any time.
We have acted as Banknorth's financial advisor in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We have also received a fee for
rendering this opinion. In the past, we have also provided certain other
investment banking services for Banknorth and have received compensation for
such services.
In the ordinary course of our business as a broker-dealer, we may purchase
securities from and sell securities to Banknorth and Peoples Heritage. We may
also actively trade the debt and equity securities of Banknorth and Peoples
Heritage for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of Banknorth in connection
with its consideration of the Merger and does not constitute a recommendation to
any shareholder of Banknorth as to how such shareholder should vote at any
meeting of shareholders called to consider and vote upon the Merger. Our opinion
is not to be quoted or referred to, in whole or in part, in a registration
statement, prospectus, proxy statement or in any other document, nor shall this
opinion be used for any other purposes, without Sandler O'Neill's prior written
consent; provided, however, that we hereby consent to the inclusion of this
opinion as an annex to Banknorth's and Peoples Heritage's Prospectus/Joint Proxy
Statement dated the date hereof, included in Peoples Heritage's Registration
Statement, and to the references to this opinion therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Exchange Ratio is fair, from a financial point of view, to the
holders of Banknorth Shares.
Very truly yours,
[LOGO]
SANDLER O'NEILL & PARTNERS, L.P.
<PAGE>
[LOGO]
ANNEX V
February 1, 2000
Board of Directors
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the shareholders of Peoples Heritage
Financial Group, Inc. ("Peoples Heritage") of the exchange ratio in the proposed
merger (the "Merger") of Banknorth Group, Inc. ("Banknorth") with and into
Peoples Heritage, pursuant to the Agreement and Plan of Merger, dated as of
June 1, 1999, between Peoples Heritage and Banknorth (the "Agreement"). Under
the terms of the Agreement, upon consummation of the Merger holders of
outstanding shares of common stock of Banknorth will receive 1.825 shares of
common stock of Peoples Heritage (the "Exchange Ratio") for each share of
Banknorth common stock exchanged therefor, plus cash in lieu of any fractional
share interest. Keefe, Bruyette & Woods, Inc. ("KBW") was informed by Peoples
Heritage and assumed for purposes of its opinion, that the Merger would be
accounted for as a pooling-of-interests under generally accepted accounting
principles and that the Merger will otherwise be consummated on the terms
contemplated by the Agreement.
KBW as part of its investment banking business is continually engaged in the
valuation of banking businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. As specialists in the
securities of banking companies we have experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of our business as a
broker-dealer, we may, from time to time, purchase securities from, and sell
securities to Peoples Heritage and Banknorth and as a market maker in
securities, we may from time to time have a long or short position in, and buy
or sell, debt or equity securities of Peoples Heritage and Banknorth for our own
account and for the accounts of our customers. To the extent we have any such
position as of the date of this opinion it has been disclosed to Peoples
Heritage. We have acted as a financial advisor to the Board of Directors of
Peoples Heritage in rendering this fairness opinion and will receive a fee from
Peoples Heritage for our services.
In connection with this opinion, we have reviewed, among other things, the
Agreement and the related Stock Option Agreements; Annual Reports to
Shareholders of Peoples Heritage and Banknorth for the three years ended
December 31, 1998; certain interim reports to shareholders and Quarterly Reports
on Form 10-Q of Peoples Heritage and Banknorth, and certain internal financial
analyses and adjusted budget forecasts for Peoples Heritage and Banknorth
prepared by management. We also have held discussions with members of the senior
management of Peoples Heritage and Banknorth regarding
<PAGE>
[LOGO]
Board of Directors
February 1, 2000
Page 2
the past and current business operations, regulatory relationships, financial
condition and future prospects of their respective companies. In addition, we
have compared certain financial and stock market information for Peoples
Heritage and Banknorth with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the banking industry and performed such other
studies and analyses as we considered appropriate.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of Peoples Heritage and Banknorth as to the
reasonableness and achievability of the adjusted budget forecasts (and the
assumptions and bases therefor) provided to us, and we have assumed that such
forecasts reflect the best currently available estimates and judgments of
Banknorth and Peoples Heritage and that such forecasts will be realized in the
amounts and in the time period currently estimated by such managements. We have
also assumed that the aggregate allowances for loan losses for Peoples Heritage
and Banknorth are adequate to cover such losses. In rendering our opinion, we
have not made or obtained any evaluations or appraisals of the property of
Peoples Heritage or Banknorth nor have we examined any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following:
(i) the historical and current financial position and results of operations of
Peoples Heritage and Banknorth; (ii) the assets and liabilities of Peoples
Heritage and Banknorth; and (iii) the nature and terms of certain other merger
transactions involving banks and bank holding companies. We have also taken into
account our assessment of general economic, market and financial conditions and
our experience in other transactions, as well as our experience in securities
valuation and our knowledge of the banking industry generally. Our opinion is
necessarily based upon conditions as they exist and can be evaluated on the date
hereof and the information made available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio pursuant to the Agreement is fair, from a
financial point of view, to the common shareholders of Peoples Heritage.
Very truly yours,
[LOGO]
KEEFE, BRUYETTE & WOODS, INC.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 719 of the MBCA sets forth certain circumstances under which
directors, officers, employees and agents may be indemnified against liability
which they may incur in their capacity as such. Indemnification may be provided
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred; provided that no indemnification
may be provided with respect to any matter where such person shall have been
finally adjudicated (i) not to have acted honestly or in the reasonable belief
that such action was in or not opposed to the best interests of the corporation
or its shareholders, or (ii) with respect to any criminal action, to have had
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a person with respect to any action or matter by or in the right of
the corporation as to which that person is finally adjudicated to be liable to
the corporation unless the court in which the action was brought determines
that, in view of all the circumstances, that person is fairly and reasonably
entitled to indemnity for such amounts as the court deems reasonable. To the
extent such person has been successful on the merits or otherwise in defense of
such action, that person shall be entitled to indemnification. Any
indemnification, unless ordered by a court or required in the corporation's
bylaws, shall be made only as authorized in the specific case upon a
determination by the board of directors that indemnification is proper in the
circumstances and in the best interests of the corporation. Expenses incurred in
defending an action may be paid by the corporation in advance of the final
disposition of that action upon a determination made that the person seeking
indemnification satisfied the standard of conduct required for indemnification
and receipt by the corporation of a written undertaking by or on behalf of such
person to repay that amount if that person is finally adjudicated to not have
met such standard or not be entitled to such indemnification. In addition,
Section 719 of the MBCA provides that a corporation may purchase and maintain
insurance on behalf of directors, officers, employees and agents against
liability whether or not the corporation would have the power to indemnify such
person against liability under such section. See Title 13-A Maine Revised
Statutes Annotated Section719.
Article VI of the Bylaws of Peoples Heritage provides that the directors,
officers, employees and agents of Peoples Heritage shall be indemnified to the
full extent permitted by the MBCA. Such indemnity shall extend to expenses,
including attorney's fees, judgments, fines and amounts paid in the settlement,
prosecution or defense of the foregoing actions. Directors and officers also may
be indemnified pursuant to the terms of various employee benefit plans of
Peoples Heritage. In addition, Peoples Heritage carries a liability insurance
policy for its directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) List of Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT LOCATION
- ----------- ------------------------------------------------------------ --------
<C> <S> <C>
2(a) Agreement and Plan of Merger, dated as of June 1, 1999 (1)
between Peoples Heritage and Banknorth, including
Exhibits C and D thereto
2(b) Amendment No. 1, dated as of December 22, 1999, to Agreement (2)
and Plan of Merger between Peoples Heritage and Banknorth
2(c) Stock Option Agreement, dated as of June 1, 1999, between (1)
Banknorth (as issuer) and Peoples Heritage (as grantee)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT LOCATION
- ----------- ------------------------------------------------------------ --------
<C> <S> <C>
2(d) Stock Option Agreement, dated as of June 1, 1999, between (1)
Banknorth (as grantee) and Peoples Heritage (as issuer)
2(e) Form of letter agreement, dated as of June 1, 1999, between (1)
Peoples Heritage and affiliates of Banknorth
2(f) Form of letter agreement, dated as of June 1, 1999, between (1)
Peoples Heritage and affiliates of Peoples Heritage
3(a)(1) Amended and Restated Articles of Incorporation of Peoples (3)
Heritage
3(a)(2) Amendment to the Amended and Restated Articles of (4)
Incorporation of Peoples Heritage
3(b) Bylaws of Peoples Heritage (5)
4 Specimen Common Stock certificate
5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. regarding
legality of securities being registered
8 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. regarding
certain federal income tax consequences
10 Form of Consulting Agreement between Peoples Heritage and
William H. Chadwick
23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P. (contained
in the opinions included as Exhibits 5 and 8)
23(b) Consents of KPMG LLP
23(c) Consent of Sandler O'Neill & Partners, L.P.
23(d) Consent of Keefe, Bruyette & Woods, Inc.
24 Powers of Attorney (included in the signature page to this
Registration Statement)
99(a) Form of proxy for the Banknorth special meeting
99(b) Form of proxy for the Peoples Heritage special meeting
99(c) Other Peoples Heritage solicitation materials
99(d) Consents of Thomas J. Amidon, Susan C. Crampton, George W.
Dougan, Luther F. Hackett, Anthony P. Pizzagali and
Patrick E. Welch to be named as prospective directors of
Peoples Heritage.
</TABLE>
- ------------------------
(1) Exhibit is incorporated by reference to the amendment to Current Report on
Form 8-K filed by Peoples Heritage with the Securities and Exchange
Commission on June 9, 1999. In addition, Exhibits 2(a), 2(c) and 2(d) above
are attached as Annexes to the Prospectus/Joint Proxy Statement included
herein.
(2) Exhibit is incorporated by reference to the Current Report on Form 8-K filed
by Peoples Heritage with the Commission on December 23, 1999. In addition,
this exhibit is included in Annex I to the Prospectus/Joint Proxy Statement
included herein.
(3) Exhibit is incorporated by reference to the Current Report on Form 8-K filed
by Peoples Heritage with the Commission on November 3, 1997.
(4) Exhibit is incorporated by reference to the definitive proxy statement filed
by Peoples Heritage with the Commission on March 23, 1998.
II-2
<PAGE>
(5) Exhibit is incorporated by reference to the Annual Report on Form 10-K for
the year ended December 31, 1998 filed by Peoples Heritage with the
Securities and Exchange Commission on March 25, 1999.
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required information
is not applicable or is included in the consolidated financial statements or
related notes.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(4) That every prospectus (i) that is filed pursuant to
paragraph (3) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
(5) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(6) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(7) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, State of Maine
on the 25th day of January 2000.
<TABLE>
<S> <C> <C>
PEOPLES HERITAGE FINANCIAL GROUP, INC.
By: /s/ WILLIAM J. RYAN
-----------------------------------------
William J. Ryan
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of the directors and/or officers of
Peoples Heritage Financial Group, Inc. whose signature appears below hereby
appoints William J. Ryan and Peter J. Verrill, and each of them severally, as
his or her attorney-in-fact to sign in his or her name and behalf, in any and
all capacities stated below and to file with the Securities and Exchange
Commission any and all amendments, including post-effective amendments, to this
Registration Statement on Form S-4, making such changes in the Registration
Statement as appropriate, and generally to do all such things in their behalf in
their capacities as directors and/or officers to enable Peoples Heritage
Financial Group, Inc. to comply with the provisions of the Securities Act of
1933, and all requirements of the Securities and Exchange Commission.
<TABLE>
<S> <C>
- -------------------------------------------
Gary R. Bahre
Director
- -------------------------------------------
P. Kevin Condron
Director
/s/ KATHERINE M. GREENLEAF Date: January 25, 2000
- -------------------------------------------
Katherine M. Greenleaf
Director
/s/ DOUGLAS S. HATFIELD Date: January 25, 2000
- -------------------------------------------
Douglas S. Hatfield
Director
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
/s/ DAVID D. HINDLE Date: January 25, 2000
- -------------------------------------------
David D. Hindle
Director
/s/ DANA S. LEVENSON Date: January 25, 2000
- -------------------------------------------
Dana S. Levenson
Director
- -------------------------------------------
Philip A. Mason
Director
/s/ JOHN M. NAUGHTON Date: January 25, 2000
- -------------------------------------------
John M. Naughton
Director
/s/ MALCOLM W. PHILBROOK, JR. Date: January 25, 2000
- -------------------------------------------
Malcolm W. Philbrook, Jr.
Director
/s/ PAMELA P. PLUMB Date: January 25, 2000
- -------------------------------------------
Pamela P. Plumb
Vice Chairman
/s/ WILLIAM J. RYAN Date: January 25, 2000
- -------------------------------------------
William J. Ryan
Chairman, President and Chief Executive Officer
(principal executive officer)
/s/ SETH A. RESNICOFF Date: January 25, 2000
- -------------------------------------------
Seth A. Resnicoff
Director
/s/ CURTIS M. SCRIBNER Date: January 25, 2000
- -------------------------------------------
Curtis M. Scribner
Director
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C>
/s/ PAUL R. SHEA Date: January 25, 2000
- -------------------------------------------
Paul R. Shea
Director
/s/ JOHN E. VEASEY Date: January 25, 2000
- -------------------------------------------
John E. Veasey
Director
/s/ PETER J. VERRILL Date: January 25, 2000
- -------------------------------------------
Peter J. Verrill
Chief Operating Officer and
Chief Financial Officer
(principal financial and accounting officer)
</TABLE>
II-7
<PAGE>
EXHIBIT 4
(FORM OF STOCK CERTIFICATE - FRONT SIDE)
NUMBER SHARES
CUSIP
BANKNORTH GROUP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MAINE
This is to certify that _____________________________ is the owner of
_________________ fully paid and non-assessable shares of common stock, $.01 par
value per share, of Banknorth Group, Inc.
Transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to the provisions of the Articles of Incorporation and the
Bylaws of the Corporation as amended from time to time to which the holder by
acceptance hereby assents. This certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
- ---------------------------------- ------------------------------
Carol L. Mitchell William J. Ryan
Executive Vice President, Secretary and Clerk Chairman, President and Chief
Executive Officer
(SEAL)
<PAGE>
(FORM OF STOCK CERTIFICATE - BACK SIDE)
BANKNORTH GROUP, INC.
The Corporation will furnish to any shareholder upon request and
without charge a full statement of the designations, preferences, limitations,
and relative rights of the shares of each class authorized to be issued and,
with respect to the issuance of any preferred stock to be issued in series, the
relative rights and preferences between the shares of each series so far as the
rights and preferences have been fixed and determined, and the authority of the
Board of Directors to fix and determine the relative rights and preferences of
subsequent series.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT - .................... Custodian ....................
(Cust) (Minor)
Gifts to Minors Act ...................
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________________________________________
hereby sell, assign and transfer unto _______________________________________,
Shares of the capital stock represented by the within certificate, and do
hereby irrevocably constitute and appoint __________________, Attorney, to
transfer the said stock on the books of the within-name Corporation with full
power of substitution in the premises.
Dated
---------------------
--------------------------------------
Signature(s) Guaranteed
--------------------------------------------------------
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in an Amended and Restated Rights Agreement between
Banknorth Group, Inc. (the "Company") and American Stock Transfer & Trust
Company (the "Rights Agent"), dated as of September 12, 1989 and amended and
restated as of July 27, 1999 (as it may be amended from time to time, the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of
the Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written request therefor. Under
certain circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person or any Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement),
whether currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
<PAGE>
EXHIBIT 5
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
------------
Telephone (202) 347-0300
Facsimile (202) 347-2172
WWW.EMTH.COM
January 25, 2000
Board of Directors
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to Peoples Heritage Financial Group,
Inc. (the "Company") in connection with the preparation and filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of the registration statement on Form S-4 (the "Registration
Statement") relating to the issuance of up to approximately 46 million shares of
the Company's common stock, $.01 par value per share (the "Shares"), in
connection with the proposed merger of Banknorth Group, Inc. with and into the
Company, all as described in the Registration Statement. As such counsel, we
have made such legal and factual examinations and inquiries as we deemed
advisable for the purpose of rendering this opinion.
Based upon the foregoing, it is our opinion that the Shares, when
issued, delivered and sold in the manner described in the Registration
Statement, will be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement, and we consent to the use of our name under
the heading "Legal Opinion" in the Prospectus/Joint Proxy Statement constituting
a part thereof.
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ Gerard L. Hawkins
----------------------------
Gerard L. Hawkins, a Partner
<PAGE>
EXHIBIT 8
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
------------
Telephone (202) 347-0300
Facsimile (202) 347-2172
WWW.EMTH.COM
January 25, 2000
Peoples Heritage Financial Group, Inc.
One Portland Square
Portland, Maine 04112-9540
Banknorth Group, Inc.
100 Bank Street
Burlington, Vermont 05401-5420
Ladies/Gentlemen:
We have acted as a special counsel to Peoples Heritage Financial Group,
Inc., a Maine corporation ("Peoples Heritage"), in connection with the proposed
merger (the "Merger") of Banknorth Group, Inc., a Delaware corporation
("Banknorth"), with and into Peoples Heritage, pursuant to the Agreement and
Plan of Merger, dated as of June 1, 1999, between Peoples Heritage and
Banknorth, as amended (the "Merger Agreement"). At your request, in connection
with Peoples Heritage's filing of a Registration Statement on Form S-4 with the
Securities and Exchange Commission in connection with the Merger (as amended,
the "Registration Statement"), we are rendering our opinion pursuant to Item
601(b)(8) of Regulation S-K.
For purposes of the opinion set forth below, we have relied, with the
consent of Peoples Heritage and the consent of Banknorth, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of Peoples Heritage and
Banknorth dated the date hereof, and have assumed that such statements and
representations will be complete and accurate as of the effective time of the
Merger. We also have relied upon the accuracy of the Registration Statement and
the Prospectus/Joint Proxy Statement of Peoples Heritage and Banknorth included
therein (the "Prospectus/Joint Proxy Statement").
<PAGE>
Peoples Heritage Financial Group, Inc.
Banknorth Group, Inc.
January 25, 2000
Page 2
Based upon and subject to the foregoing, it is our opinion that, under
currently applicable U.S. federal income tax law, the Merger, when consummated
in accordance with the terms of the Merger Agreement, will constitute a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and, accordingly:
1. neither Peoples Heritage nor Banknorth will recognize any gain or loss
as a result of the Merger;
2. no gain or loss will be recognized by shareholders of Banknorth upon
the exchange of their Banknorth common stock solely for shares of
Peoples Heritage common stock pursuant to the Merger, except in respect
of cash received in lieu of a fractional share interest in Peoples
Heritage common stock;
3. the basis of the Peoples Heritage common stock received by a Banknorth
shareholder receiving solely Peoples Heritage common stock will be the
same as his or her basis in the Banknorth common stock surrendered in
exchange therefor, reduced by any amount allocable to a fractional
share interest for which cash is received (as described below); and
4. the holding period of the shares of Peoples Heritage common stock
received by a Banknorth shareholder receiving solely Peoples Heritage
common stock will include the period during which such Banknorth
shareholder held the Banknorth common stock surrendered in exchange
therefor, provided the surrendered Banknorth common stock was held by
such shareholder as a capital asset at the effective time of the
merger.
For federal income tax purposes, cash received by a holder of Banknorth
common stock in lieu of a fractional share interest in Peoples Heritage common
stock will be treated as received in redemption of the fractional share
interest, and gain or loss will be recognized for federal income tax purposes
measured by the difference between the amount of cash received and the portion
of the basis of the share of Banknorth common stock allocable to such fractional
share interest, if the deemed redemption meaningfully reduces the Banknorth
shareholder's interest in Peoples Heritage, taking into account the constructive
ownership rules of the Code. Such gain or loss should be long-term capital gain
or loss if such share of Banknorth common stock is held as a capital asset and
has been held for more than one year at the effective time of the Merger. A
common shareholder that owns an extremely small percentage of the Banknorth
common stock, exercises no control over the affairs of Peoples Heritage or
Banknorth and does not actually or constructively own any shares of Peoples
Heritage common stock other than those received in the Merger, will be treated
as experiencing a meaningful reduction in interest.
<PAGE>
Peoples Heritage Financial Group, Inc.
Banknorth Group, Inc.
January 25, 2000
Page 3
We express no opinion as to the United States federal income tax
consequences of the Merger to shareholders subject to special treatment under
United States federal income tax law (including, for example, foreign persons,
financial institutions, dealers in securities, traders in securities who elect
to apply a mark-to-market method of accounting, insurance companies, tax-exempt
entities, holders who acquired their shares of Banknorth common stock pursuant
to the exercise of an employee stock option or right or otherwise as
compensation and holders who hold Banknorth common stock as part of a "hedge,"
"straddle" or "conversion transaction"). In addition, no opinion is expressed
with respect to the tax consequences of the Merger under applicable foreign,
state or local laws or under any federal tax laws other than those pertaining to
the income tax.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "The Merger - Certain Federal Income Tax
Consequences" and elsewhere in the Prospectus/Joint Proxy Statement. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK, L.L.P.
By: /s/ Timothy B. Matz
----------------------------------
Timothy B. Matz, a Partner
<PAGE>
CONSULTING AND NONCOMPETITION AGREEMENT
Consulting and Noncompetition Agreement (the "Agreement"), dated as of
the __ day of ______ __, ____, between Banknorth Group, Inc. (the "Company") and
William H. Chadwick (the "Executive").
WITNESSETH:
WHEREAS, as of the date hereof, Banknorth Group, Inc. ("Old
Banknorth"), a multi-bank holding company with executive offices located in
Vermont, was merged with and into the Company in a transaction which resulted in
a change in the name of the Company from "Peoples Heritage Financial Group,
Inc." to "Banknorth Group, Inc." (the "Merger"), pursuant to an Agreement and
Plan of Merger (the "Merger Agreement"), dated as of June 1, 1999, between the
Company and Old Banknorth; and
WHEREAS, in March 1999 the Executive announced his intention to retire
as President and Chief Executive Officer of Old Banknorth but deferred his
retirement until consummation of the Merger after the Company and Old Banknorth
entered into the Merger Agreement; and
WHEREAS, the Merger will result in extension of the Company's banking
operations into the new banking markets of Vermont and New York and extension of
the Company's existing markets in New Hampshire and Massachusetts; and
WHEREAS, the Company desires to have the Executive provide, and the
Executive is willing to provide the Company with, consulting services to the
Company on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the parties hereto agree as
follows:
1. CONSULTANCY.
(a) During the two-year period following consummation of the Merger
(the "Consulting Period"), the Executive undertakes to provide his personal
advice and counsel to the Company regarding its operations, customer
relationships, growth and expansion opportunities and other business matters
(collectively, the "Consulting Services"), subject to the terms and conditions
which are set forth herein.
(i) In no event shall the Executive be required to provide
Consulting Services hereunder for more than 25 hours per week or 100 hours in
any calendar month during the Consulting Period.
<PAGE>
(ii) The Executive shall provide Consulting Services
commensurate with the Executive's prior experience as may be reasonably
requested by the Chief Executive Officer of the Company or his designee from
time to time and at mutually agreeable times. It is contemplated that the
Consulting Services will include, without limitation, monthly meetings between
the Executive and the Chief Executive Officer of the Company; efforts by the
Executive to enhance the Company's commercial lending activities in Vermont and
New York, including without limitation meeting with large commercial customers
of the Company located in these areas; attendance at certain public functions in
Vermont and New York on behalf of the Company and its banking subsidiaries;
attendance at certain meetings of the Board of Directors of the Company to
report on Vermont and New York; and attendance at certain functions of the
Company. Consulting Services may be provided in person, telephonically,
electronically or by correspondence to the extent appropriate under the
circumstances.
(iii) The Executive shall provide the Consulting Services in
the market areas of Old Banknorth and its banking subsidiaries prior to the
Merger, provided that the Executive may be required to provide Consulting
Services at the executive offices of the Company located in Portland, Maine up
to not more than two times per month during the Consulting Period.
(b) The Company shall reimburse the Executive or otherwise provide for
or pay for all reasonable expenses incurred by the Executive at the request of
the Company, subject to such reasonable documentation as may be requested by the
Company. If such expenses are paid in the first instance by the Executive, the
Company shall reimburse the Executive therefor upon receipt of such reasonable
documentation as may be requested by the Company.
(c) During the Consulting Period, the Executive shall be treated as an
independent contractor and shall not be deemed to be an employee of the Company
or any subsidiary or other affiliate of the Company for any purpose.
2. NON-COMPETE.
The Executive agrees that during the two-year period following
consummation of the Merger the Executive will not, directly or indirectly,
without the prior written consent of the Company, (i) become a director,
officer, employee, principal, agent or consultant of any insured depository
institution, trust company or parent holding company of any such institution or
company which has an office in Connecticut, Maine, Massachusetts, New Hampshire,
New York or Vermont and transacts business in any area in such states in which
the Company or any of its banking subsidiaries maintains offices, provided,
however, that this provision shall not prohibit the Executive from owning bonds,
preferred stock or up to five percent (5%) of the outstanding common stock of
any such entity if such common stock is publicly traded, (ii) solicit or induce,
or cause others to solicit or induce, any employee of the Company or any of its
subsidiaries to leave the employment of such entities or (iii) solicit any
customer of the Company or any of its subsidiaries other than in connection with
the provision of Consulting Services hereunder.
2
<PAGE>
3. CONFIDENTIALITY.
Except (i) in the course of providing Consulting Services hereunder or
(ii) as required by law or regulation (including without limitation in
connection with any judicial or administrative process or proceeding), the
Executive shall keep secret and confidential and shall not disclose to any third
party in any fashion or for any purpose whatsoever any information regarding the
Company or any of its subsidiaries which is (i) not available to the general
public and/or (ii) not generally known outside the Company, to which he has or
will have had access at any time during the course of his employment by Old
Banknorth or its subsidiaries or his consultancy with the Company, including,
without limitation, any such information relating to: business or operations;
plans, strategies, prospects or objectives; products, technology, processes or
specifications; research and development operations or plans; customers and
customer lists; distribution, sales, service, support and marketing practices
and operations; financial condition, results of operations and prospects;
operational strengths and weaknesses; and personnel and compensation policies
and procedures.
4. INJUNCTIVE RELIEF.
Without intending to limit the remedies available to the Company, the
Executive agrees that damages at law will be an insufficient remedy to the
Company in the event that the Executive violates any of the provisions of
Sections 2 or 3, and that the Company may apply for and, upon the requisite
showing, have injunctive relief in any court of competent jurisdiction to
restrain the breach or threatened breach of or otherwise to specifically enforce
any of the covenants contained in Sections 2 or 3.
5. RELEASE.
(a) For, and in consideration of the commitments made herein by the
Company, the Executive, for himself and for his heirs, successors and assigns,
does hereby release completely and forever discharge the Company and its
subsidiaries, affiliates, stockholders, attorneys, officers, directors, agents,
employees, successors and assigns, and any other party associated with the
Company (the "Released Parties"), to the fullest extent permitted by applicable
law, from any and all claims, rights, demands, actions, liabilities,
obligations, causes of action of any and all kind, nature and character
whatsoever, known or unknown, in any way connected with his employment by
Banknorth or any of its subsidiaries (including in each case predecessors
thereof), either as a director, officer or employee, or termination of such
employment. Notwithstanding the foregoing, the Executive does not release the
Company from any obligations of the Company to the Executive under (i) any
employee benefit plan or arrangement of Old Banknorth, whether or not referred
to in this Agreement, pursuant to which the Executive is entitled to any
post-retirement benefits or payments, (ii) Section 5.8 of the Merger Agreement
and (iii) this Agreement.
(b) For and in consideration of the commitments made herein by the
Executive, including without limitation the releases in paragraph (a) above, the
Company, for itself, and for its successors and assigns does hereby release
completely and forever discharge the Executive and his heirs,
3
<PAGE>
successors and assigns, to the fullest extent permitted by applicable law,
from any and all claims, rights, demands, actions, liabilities, obligations,
causes of action of any and all kind, nature and character whatsoever, known
or unknown, in any way connected with the Executive's employment by Old
Banknorth or any of its subsidiaries (including predecessors thereof), either
as a director, officer or employee. Notwithstanding anything in the foregoing
to the contrary, the Company does not release the Executive from claims
arising out of any breach by the Executive of (i) any law or regulation by
the Executive during the term of and related to his employment by Old
Banknorth or any of its subsidiaries (including predecessors thereof), either
as a director, officer or employee, or (ii) this Agreement.
6. PAYMENTS AND BENEFITS.
(a) In consideration of the obligations and agreements of the Executive
hereunder, the Company agrees to provide the following benefits to the
Executive:
(i) With respect to the Executive's obligations under
Section 1 hereof, the Company shall pay to the
Executive compensation during the Consulting Period
at a rate of $200,000 per year, payable in 24 equal
monthly installments commencing on the date of
consummation of the Merger and continuing on the same
day of each of the 23 succeeding months thereafter.
(ii) With respect to the Executive's noncompetition
obligations under Section 2 hereof, the Company shall
pay to the Executive an aggregate of $200,000 per
year, payable in four equal installments, commencing
on the date of consummation of the Merger and
continuing on the same day on each of the three
succeeding six month intervals thereafter.
(iii) The Company shall pay to the Executive supplemental
retirement benefits equal to the excess of (x) that
which he would have received as retirement benefits
under the Old Banknorth Retirement Income Plan (the
"Retirement Plan") and the Old Banknorth Supplemental
Employees Retirement Plan (the "SERP") had the
Executive continued his employment with Old Banknorth
for a two-year period following termination of his
employment at the annual rate of compensation in
effect immediately prior to the termination of
employment, plus the average of the cash bonuses paid
to the Executive by Old Banknorth for the three
calendar years immediately preceding the termination
of employment, over (y) the benefits actually payable
to the Executive under the Retirement Plan and the
SERP, with such supplemental retirement benefits to
be paid in the same form and in the same manner as
benefits are paid under the
4
<PAGE>
Retirement Plan. Nothing in this Section 6 shall be
deemed to limit or reduce any rights the Executive
may have under have under the terms of the
Retirement Plan or the SERP to select a method or
form of payment of benefits.
(iv) The Company agrees that (x) for purposes of
determining the amount of the annual retirement
benefit under the Agreement, dated as of July 1,
1991, between Old Banknorth (as successor to Howard
Bancorp) and the Executive (the "Howard SERP"), the
Executive shall be deemed to have terminated his
employment as President and Chief Executive Officer
of Old Banknorth as of December 1, 2001, with the
result that the Executive shall be entitled to the
maximum possible Annual Deferred Compensation Benefit
of $79,500 per year thereunder, and (y) payment of
benefits under the Howard SERP at the rate of $6,625
per month will commence on the first business day of
the month following consummation of the Merger.
(v) The Company agrees to arrange for the Executive's
continued participation (which by its terms shall
include coverage for The Executive's spouse) under
the health and dental assistance plans of Old
Banknorth or any successor plan(s) adopted by the
Company, for the period commencing on the date of
consummation of the Merger and ending on the earlier
of (i) with respect to the Executive, the date the
Executive attains age 65, and with respect to the
Executive's spouse, the date she attains age 65, and
(ii) the date, if any, the Executive obtains
full-time employment with another employer,
regardless of the level of health and dental
insurance benefits provided by such new employer, if
any. The Company and the Executive shall allocate the
cost of such coverage between them on the same basis
as such costs were allocated by Old Banknorth
immediately prior to completion of the Merger, with
respect to employees with at least 10 years of
service who retire after age 55 but before age 65.
(b) Payments to the Executive under this Section 6 may be paid by the
Company by check mailed to the address of the Executive set forth in Section 11
hereof or at such other address as the Executive may notify the Company in
accordance with the terms of such section. Notwithstanding anything in this
Agreement to the contrary, the Executive shall be entitled to continuation of
the benefits and payments specified in Sections 6(a)(iii), (iv) and (v)
notwithstanding the expiration or termination of this Agreement for any reason,
or any breach or purported breach of this Agreement by the Executive.
5
<PAGE>
(c) If any payment pursuant to this Section 6 is required to be made on
a day which is not a business day, payment shall be made on the first business
day thereafter, and no interest shall accrue on any such payment for the
intervening period. For purposes of this Agreement, the term "business day"
means any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of Maine are authorized by law, regulation or
executive order to remain closed.
(d) In the event of a Change in Control of the Company, (i) any
remaining payments due to the Executive pursuant to paragraph (a)(i) of this
Section 6 shall become immediately due and payable in one lump sum payment, and
(ii) the Executive shall not have any obligations under Section 2 of this
Agreement beyond the date of the Change in Control. A "Change in Control of the
Company" shall be deemed to have occurred: (i) if any "person," as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act")(other than the Company and any trustee or other fiduciary
holding securities under any employee benefit plan of the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then outstanding securities;
(ii) if at any time during the term of this Agreement, individuals who at the
beginning of such period constitute the Board of Directors, and any new director
whose election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board of
Directors; (iii) upon the consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation that
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of the Company outstanding
immediately after such merger or consolidation; or (iv) upon the complete
liquidation of the Company or the consummation of the sale or disposition by the
Company of all or substantially all of the Company's assets.
7. NATURE OF PAYMENT OBLIGATIONS.
(a) Except as otherwise provided in Section 7(b) and Section 8 hereof,
the Company's obligation to pay the Executive the benefits and payments provided
in Section 6 hereof shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any purported
termination of this Agreement, other than pursuant to Section 7(b) hereof,
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Executive or anyone else, and each and every such payment made
or benefit provided shall be final and the Company shall not seek to recover all
or any part of any such payment or benefit from the Executive or from whomsoever
may be entitled thereto for any reason whatsoever.
(b) Except as otherwise provided in Section 6(b) hereof, if the
Executive materially breaches any of his obligations hereunder, the Company may
terminate this Agreement by written
6
<PAGE>
notice of termination provided to the Executive, and thereafter the Executive
shall be entitled to no further benefits and payments under the terms of this
Agreement. In the event of the death of the Executive (i) the Executive's
spouse or other designated beneficiary shall be entitled to continued receipt
of benefits under the Retirement Plan and the SERP, in accordance with the
terms thereof and the benefit election made by the Executive as adjusted in
accordance with Section 6(a)(iii) of this Agreement, (ii) the Executive's
spouse shall continue to be entitled to the medical and dental benefits
provided under Section 6(a)(v) of this Agreement for the period specified
therein on the same terms (including coverages and cost allocations) as were
available to the Executive immediately prior to his death and (iii) the
estate and heirs of the Executive shall be entitled to no further payments
under Section 6(a)(i) or (ii) of this Agreement.
8. LIMITATION ON PAYMENTS.
(a) Notwithstanding anything in this Agreement to the contrary, in the
event that the Company, based upon the assertion of a deficiency by the Internal
Revenue Service against the Company or the Executive which the Company, after
consultation with the Company's outside legal counsel and/or independent public
accountants, believes has a high probability of success, determines that any
payment or distribution by the Company to or for the benefit of the Executive,
whether paid or payable (or distributed or distributable) pursuant to the terms
of this Agreement or otherwise (a "Payment"), is or would be nondeductible by
the Company for federal income tax purposes because of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), then the aggregate
present value of the amounts payable or distributable to or for the benefit of
the Executive pursuant to this Agreement (the "Agreement Payments") shall be
reduced (but not below zero) to the Reduced Amount. For purposes of this Section
8, the term "Reduced Amount" shall mean an amount expressed in present value
which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be nondeductible by the Company because of Section 280G
of the Code.
(b) If the Company determines pursuant to Section 8(a) that any Payment
is or would be nondeductible by the Company because of Section 280G of the Code,
then the Company shall promptly give the Executive notice to that effect and a
copy of the detailed calculation thereof and of the Reduced Amount, and the
Executive may then elect, in his sole discretion, which and how much of the
Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Agreement Payments equals the Reduced Amount) and
shall advise the Company in writing of his election within 15 days of his
receipt of notice. If no such election is made by the Executive within such
15-day period, then the Company may elect which and how much of the Agreement
Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Agreement Payments equals the Reduced Amount) and
shall notify the Executive promptly of such election.
(c) If the Company determines pursuant to Section 8(a) that any Payment
which has been made to the Executive is or would be nondeductible by the Company
because of Section 280G of the Code (an "Overpayment"), such Overpayment shall
be treated for all purposes as a loan to the
7
<PAGE>
Executive, which he shall repay to the Company, together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code, upon
demand by the Company.
(d) Determinations of present value for purposes of this Section 8
shall be determined in the manner set forth in Section
280G(d)(4) of the Code.
(e) All determinations made by the Company under this Section 8
shall be final and binding upon the Executive.
9. REPRESENTATION. The Company and the Executive represent and warrant
to each other that they have carefully read this Agreement and consulted with
respect thereto with their respective counsel and that each of them fully
understands the content of this Agreement and its legal effect. Each party
hereto also represents and warrants that this Agreement is a legal, valid and
binding obligation of such party which is enforceable against it in accordance
with its terms.
10. SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit of
and be binding upon the Executive and his heirs, successors and assigns, and
upon the Company, including any successor to the Company by merger or
consolidation or any other change in form or any other person or firm or
corporation to which all or substantially all of the assets and business of the
Company may be sold or otherwise transferred. This Agreement may not be assigned
by any party hereto without the consent of the other party.
11. NOTICES. Any communication to a party required or permitted under
this Agreement, including any notice, direction, designation, consent,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is delivered personally, or five (5) days
after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, addressed to such party at the address listed below or
at such other address as one such party may by written notice specify to the
other party or parties, as applicable:
If to the Executive:
William H. Chadwick
40 College Street, No. 703
Burlington, Vermont 05401
If to the Company:
Banknorth Group, Inc.
P.O. Box 9540
One Portland Square
Portland, Maine 04112-9540
Attention: President
8
<PAGE>
12. WITHHOLDING. The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
13. ENTIRE AGREEMENT; SEVERABILITY. This Agreement incorporates the
entire understanding among the parties relating to the subject matter hereof,
recites the sole consideration for the promises exchanged and supersedes any
prior agreements between the Company and the Executive with respect to the
subject matter hereof, provided that nothing contained herein shall affect any
obligations of the Company to the Executive under (i) the retirement plans or
arrangements referred to in Section 6(a)(iii) and (iv) hereof and (ii) Section
5.8 of the Merger Agreement. In reaching this Agreement, no party has relied
upon any representation or promise except those set forth herein. If any of the
terms or conditions of this Agreement shall be declared void or unenforceable by
any court or administrative body of competent jurisdiction, such term or
condition shall be deemed severable from the remainder of this Agreement, and
the other terms and conditions of this Agreement shall continue to be valid and
enforceable.
14. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
15. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
16. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Maine applicable to
agreements made and entirely to be performed within such jurisdiction.
17. HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and are not intended to qualify the meaning of any
section. Any reference to a section number shall refer to a section of this
Agreement, unless otherwise stated.
9
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have entered into
this Agreement as of the day and year first above written.
BANKNORTH GROUP, INC.
By:
--------------------------
William J. Ryan, Chairman,
President and Chief
Executive Officer
--------------------------
William H. Chadwick
10
<PAGE>
EXHIBIT 23(b)
CONSENTS OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Peoples Heritage Financial Group, Inc.
We consent to incorporation by reference in the Registration Statement on
Form S-4 of Peoples Heritage Financial Group, Inc. ("Peoples Heritage") of (i)
our report dated January 19, 1999, which appears in the Annual Report on Form
10-K for the year ended December 31, 1998 of Peoples Heritage, and (ii) our
report dated June 4, 1999, which appears in the Current Report on Form 8-K of
Peoples Heritage dated June 10, 1999, relating to the consolidated balance
sheets of Peoples Heritage as of December 31, 1998 and 1997 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows, for each of the years in the three-year period ended December 31, 1998,
and to the reference to our firm under the heading "Experts" in the
Prospectus/Joint Proxy Statement.
/s/ KPMG LLP
Boston, Massachusetts
January 25, 2000
The Board of Directors
Banknorth Group, Inc.
We consent to incorporation by reference in the Registration Statement
on Form S-4 of Peoples Heritage Financial Group, Inc. related to the merger
with Banknorth Group, Inc. ("Banknorth") of our report dated January 22, 1999
relating to the consolidated balance sheets of Banknorth Group, Inc. and
subsidiaries as of December 31, 1998 and 1997 and the related consolidated
statements of income, changes in shareholders' equity and cash flows, for
each of the years in the three-year period ended December 31, 1998, which
report appears in the 1998 Annual Report on Form 10-K of Banknorth, and to
the reference to our firm under the heading "Experts" in the Prospectus/Joint
Proxy Statement.
/s/ KPMG LLP
Albany, New York
January 25, 2000
<PAGE>
The Board of Directors
Banknorth Group, Inc.:
Re: Registration Statement filed by Peoples Heritage Financial
Group, Inc. related to the merger with Banknorth Group, Inc.
With respect to the subject Registration Statement on Form S-4, we acknowledge
our awareness of the use therein of our reports dated April 16, 1999, July 16,
1999 and October 22, 1999 related to our reviews of consolidated interim
financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not
considered part of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Securities Act of 1933.
/s/ KPMG LLP
Albany, New York
January 25, 2000
<PAGE>
EXHIBIT 23(c)
January 25, 2000
We hereby consent to the use in this Registration Statement on Form S-4 of
our opinion letter to the Board of Directors of Banknorth Group, Inc.
("Banknorth") included as Annex IV to the Prospectus/Joint Proxy Statement of
Peoples Heritage Financial Group, Inc. ("Peoples Heritage") and Banknorth
relating to the proposed merger between Peoples Heritage and Banknorth and
forming a part of such Registration Statement, as well as to all references
thereto and to our firm in such Prospectus/Joint Proxy Statement. In giving such
consent we do not admit that we come within the category of persons whose
consent is required under, and we do not admit that we are "experts" for the
purposes of, the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
SANDLER O'NEILL & PARTNERS, L.P.
By: /s/ Catherine Lawton
-----------------------
Name: Catherine Lawton
Title: Principal
<PAGE>
EXHIBIT 23(d)
January 25, 2000
We hereby consent to the use in this Registration Statement on Form S-4 of
our opinion letter to the Board of Directors of Peoples Heritage Financial
Group, Inc. ("Peoples Heritage") included as Annex V to the Prospectus/Joint
Proxy Statement of Peoples Heritage Financial Group, Inc. ("Peoples Heritage")
and Banknorth Group, Inc. ("Banknorth") relating to the proposed merger between
Peoples Heritage and Banknorth and forming a part of such Registration
Statement, as well as to all references thereto and to our firm in such
Prospectus/Joint Proxy Statement. In giving such consent we do not admit that we
come within the category of persons whose consent is required under, and we do
not admit that we are "experts" for the purposes of, the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
KEEFE, BRUYETTE & WOODS, INC.
By: /s/ Andrew M. Senchak
-------------------------
Name: Andrew M. Senchak
Title: Vice Chairman
<PAGE>
EXHIBIT 99(a)
/x/ PLEASE MARK VOTES AS IN THE EXAMPLE
REVOCABLE PROXY
BANKNORTH GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
MARCH 7, 2000
The undersigned, as a holder of common stock of Banknorth Group, Inc.
("Banknorth"), hereby appoints William H. Chadwick and Kathleen Hoisington as
Proxies, with the full power of substitution, to represent and to vote as
designated herein all of the shares of Banknorth common stock which the
undersigned is entitled to vote at the Special Meeting of Shareholders to be
held at the Clarion Hotel & Conference Center, 1117 Williston Road,
Burlington, Vermont 05403, on Tuesday, March 7, 2000, at 10:30 a.m., Eastern
Time, or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
Please be sure to sign and date this Proxy in the box below.
Date ________________
____________________________________ __________________________________
Shareholder sign above Co-holder (if any) sign above
<PAGE>
1. Proposal to adopt an Agreement and Plan of Merger, dated as of June 1,
1999, between Peoples Heritage Financial Group, Inc. ("Peoples
Heritage") and Banknorth Group, Inc. ("Banknorth"), as amended, which
provides, among other things, for (i) the merger of Banknorth with and
into Peoples Heritage under the name "Banknorth Group, Inc." and (ii)
the conversion of each share of Banknorth common stock outstanding
immediately prior to the merger (other than certain shares specified in
the Agreement and Plan of Merger) into the right to receive 1.825
shares of Peoples Heritage common stock, subject to possible adjustment
under certain circumstances, plus cash in lieu of any fractional share
interest.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion, upon any other matter that may properly come
before the Special Meeting of Shareholders or any adjournment or
adjournments thereof.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. / /
SHARES OF BANKNORTH COMMON STOCK WILL BE VOTED AS SPECIFIED. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL TO ADOPT AN
AGREEMENT AND PLAN OF MERGER, DATED AS OF JUNE 1, 1999, BETWEEN PEOPLES
HERITAGE FINANCIAL GROUP, INC. AND BANKNORTH, AS AMENDED. IF ANY OTHER MATTER
IS PROPERLY PRESENTED AT THE SPECIAL MEETING OF SHAREHOLDERS, THE PROXY WILL
BE VOTED IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS APPOINTED AS PROXIES.
THE BOARD OF DIRECTORS OF BANKNORTH RECOMMENDS A VOTE "FOR" APPROVAL
OF THE AGREEMENT AND PLAN OF MERGER.
IMPORTANT: Please sign your name exactly as it appears hereon. When shares are
held as joint tenants, either may sign. When signing as an attorney, executor,
administrator, trustee or guardian, add such title to your signature.
NOTE: If you receive more than one proxy card, please date and sign each card
and return all proxy cards in the enclosed envelope.
Detach above card, sign, date and mail in postage paid envelope.
BANKNORTH GROUP, INC.
PLEASE ACT PROMPTLY. SIGN, DATE AND MAIL YOUR PROXY CARD IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
<PAGE>
EXHIBIT 99(b)
PEOPLES HERITAGE FINANCIAL GROUP, INC.
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
MARCH 7, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of common stock of Peoples Heritage
Financial Group, Inc. ("Peoples Heritage"), hereby appoints William J. Ryan and
Peter J. Verrill as Proxies, with the full power of substitution, to represent
and to vote as designated on the reverse of this card all of the shares of
Peoples Heritage common stock which the undersigned is entitled to vote at the
Special Meeting of Shareholders to be held at the Portland Marriott Hotel, 200
Sable Oaks Drive, South Portland, Maine 04106, on Tuesday, March 7, 2000, at
10:30 a.m., Eastern Time, or any adjournment thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
SHARES OF PEOPLES HERITAGE COMMON STOCK WILL BE VOTED AS SPECIFIED.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ADOPT
AN AGREEMENT AND PLAN OF MERGER, DATED AS OF JUNE 1, 1999, BETWEEN PEOPLES
HERITAGE AND BANKNORTH GROUP, INC. , AS AMENDED. IF ANY OTHER MATTER IS PROPERLY
PRESENTED AT THE SPECIAL MEETING OF SHAREHOLDERS, THE PROXY WILL BE VOTED IN
ACCORDANCE WITH THE JUDGMENT OF THE PERSONS APPOINTED AS PROXIES.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE.
<PAGE>
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
---------------------
I plan to attend the
meeting
/ /
---------------------
1. Proposal to adopt an Agreement and Plan of Merger, dated as of June 1,
1999, between Peoples Heritage Financial Group, Inc. ("Peoples
Heritage") and Banknorth Group, Inc. ("Banknorth"), as amended, which
provides, among other things, for (i) the merger of Banknorth with and
into Peoples Heritage under the name of "Banknorth Group, Inc." and
(ii) the conversion of each share of Banknorth common stock outstanding
immediately prior to the merger (other than certain shares specified in
the Agreement and Plan of Merger) into the right to receive 1.825
shares of Peoples Heritage common stock, subject to possible adjustment
under certain circumstances, plus cash in lieu of any fractional share
interest.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion, upon any other matter that may properly come
before the Special Meeting of Shareholders or any adjournment or
adjournments thereof.
THE BOARD OF DIRECTORS OF PEOPLES HERITAGE RECOMMENDS A VOTE FOR
APPROVAL OF THE AGREEMENT AND PLAN OF MERGER. SUCH VOTES ARE HEREBY SOLICITED BY
THE BOARD OF DIRECTORS.
Dated:
--------------------------------------
Signature
-----------------------------------
Signature
-----------------------------------
(print name)
IMPORTANT: Please sign your name exactly as it appears hereon. When shares are
held as joint tenants, either may sign. When signing as an attorney, executor,
administrator, trustee or guardian, add such title to your signature.
NOTE: If you receive more than one proxy card, please date and sign each card
and return all proxy cards in the enclosed envelope.
<PAGE>
EXHIBIT 99(c)
February 1, 2000
To: Participants in the Thrift Incentive Plan of Peoples Heritage Financial
Group, Inc. and/or the Profit Sharing Employee Stock Ownership Plan of
Peoples Heritage Financial Group, Inc.
As described in the enclosed materials, your proxy as a shareholder of
Peoples Heritage Financial Group, Inc. is being solicited in connection with an
upcoming special meeting of shareholders of Peoples Heritage. At the special
meeting, you will be asked to consider and vote upon a proposal to approve an
agreement and plan of merger, dated as of June 1, 1999, between Peoples Heritage
and Banknorth Group, Inc., as amended, pursuant to which, among other things,
Banknorth will be merged with and into Peoples Heritage and the resulting
company will be known as "Banknorth Group, Inc." I hope you will take advantage
of the opportunity to direct, on a confidential basis, the manner in which
shares of Peoples Heritage common stock allocated to your accounts under the
Peoples Heritage thrift incentive plan and/or the Peoples Heritage profit
sharing employee stock ownership plan (the "plans") will be voted.
Enclosed with this letter is a prospectus/joint proxy statement which
describes the matter to be voted upon, a voting instruction ballot for each plan
in which you are a participant, which will permit you to vote the shares
allocated to your account under each such plan, and a stamped, pre-addressed
return envelope. After you have reviewed the prospectus/joint proxy statement, I
urge you to vote your shares in the plans by marking, dating, signing and
returning the enclosed voting instruction ballots in the envelope provided to
American Stock Transfer & Trust Company, our transfer agent. Your voting
instructions will remain completely confidential. Only our transfer agent will
have access to your ballots in order to certify the totals for the plans to
Peoples Heritage Bank, which acts as Trustee for the plans, for the purpose of
having those shares voted. No person associated with Peoples Heritage or Peoples
Heritage Bank will see the individual voting instructions.
I urge each of you to vote, as a means of participating in the governance
of the affairs of Peoples Heritage. If your voting instructions are not
received, the shares allocated to your accounts in the plans will be voted by
the Trustee in its discretion in accordance with the exercise of its fiduciary
duties. While I hope that you will vote in the manner recommended by the board
of directors of Peoples Heritage, the most important thing is that you vote in
whatever manner you deem appropriate. Please take a moment to do so.
Sincerely yours,
William J. Ryan
Chairman, President and
Chief Executive Officer
<PAGE>
PEOPLES HERITAGE FINANCIAL GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
MARCH 7, 2000
THIS BALLOT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of common stock of Peoples Heritage Financial
Group, Inc. ("Peoples Heritage") pursuant to Peoples Heritage's Profit Sharing
Employee Stock Ownership Plan (the "ESOP"), hereby instructs Peoples Heritage
Bank, as Trustee for the ESOP, to vote as designated on the reverse of this card
all of the shares of Peoples Heritage common stock which the undersigned holds
pursuant to the ESOP at the Special Meeting of Shareholders to be held at the
Portland Marriott Hotel, 200 Sable Oaks Drive, South Portland, Maine 04106, on
Tuesday, March 7, 2000, at 10:30 a.m., Eastern Time, or any adjournment thereof.
SHARES OF PEOPLES HERITAGE COMMON STOCK WILL BE VOTED AS SPECIFIED. IF YOU
RETURN THIS BALLOT PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, SHARES WILL BE
VOTED FOR THE PROPOSAL TO ADOPT AN AGREEMENT AND PLAN OF MERGER, DATED AS OF
JUNE 1, 1999, BETWEEN PEOPLES HERITAGE AND BANKNORTH GROUP, INC., AS AMENDED. IF
YOU DO NOT RETURN THIS BALLOT, SHARES HELD BY YOU PURSUANT TO THE ESOP WILL BE
VOTED BY THE TRUSTEE IN ITS DISCRETION IN ACCORDANCE WITH THE EXERCISE OF ITS
FIDUCIARY DUTIES.
IMPORTANT: PLEASE DATE AND SIGN THE BALLOT ON REVERSE SIDE.
<PAGE>
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
---------------------
I plan to attend the
meeting
/ /
---------------------
1. Proposal to adopt an Agreement and Plan of Merger, dated as of June 1,
1999, between Peoples Heritage Financial Group, Inc. ("Peoples
Heritage") and Banknorth Group, Inc. ("Banknorth"), as amended, which
provides, among other things, for (i) the merger of Banknorth with and
into Peoples Heritage under the name of "Banknorth Group, Inc." and
(ii) the conversion of each share of Banknorth common stock outstanding
immediately prior to the merger (other than certain shares specified in
the Agreement and Plan of Merger) into the right to receive 1.825
shares of Peoples Heritage common stock, subject to possible adjustment
under certain circumstances, plus cash in lieu of any fractional share
interest.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion, upon any other matter that may properly come
before the Special Meeting of Shareholders or any adjournment or
adjournments thereof.
THE BOARD OF DIRECTORS OF PEOPLES HERITAGE RECOMMENDS A VOTE FOR THE
PROPOSAL TO ADOPT THE AGREEMENT AND PLAN OF MERGER. SUCH VOTES ARE HEREBY
SOLICITED BY THE BOARD OF DIRECTORS.
Dated:
--------------------------------------
Signature
----------------------------------
Signature
----------------------------------
(print name)
IMPORTANT: Please sign your name exactly as it appears hereon. When shares are
held as joint tenants, either may sign. When signing as an attorney, executor,
administrator, trustee or guardian, add such title to your signature.
NOTE: If you receive more than one card, please date and sign each card and
return all cards in the enclosed envelope.
<PAGE>
PEOPLES HERITAGE FINANCIAL GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
MARCH 7, 2000
THIS BALLOT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of common stock of Peoples Heritage Financial
Group, Inc. ("Peoples Heritage") pursuant to Peoples Heritage's Thrift Incentive
Plan (the "TIP"), hereby instructs Peoples Heritage Bank, as Trustee for the
TIP, to vote as designated on the reverse of this card all of the shares of
Peoples Heritage common stock which the undersigned holds pursuant to the TIP at
the Special Meeting of Shareholders to be held at the Portland Marriott Hotel,
200 Sable Oaks Drive, South Portland, Maine 04106, on Tuesday, March 7, 2000, at
10:30 a.m., Eastern Time, or any adjournment thereof.
SHARES OF PEOPLES HERITAGE COMMON STOCK WILL BE VOTED AS SPECIFIED. IF YOU
RETURN THIS BALLOT PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, SHARES WILL BE
VOTED FOR THE PROPOSAL TO ADOPT AN AGREEMENT AND PLAN OF MERGER, DATED AS OF
JUNE 1, 1999, BETWEEN PEOPLES HERITAGE AND BANKNORTH GROUP, INC., AS AMENDED. IF
YOU DO NOT RETURN THIS BALLOT, SHARES HELD BY YOU PURSUANT TO THE TIP WILL BE
VOTED BY THE TRUSTEE IN ITS DISCRETION IN ACCORDANCE WITH THE EXERCISE OF ITS
FIDUCIARY DUTIES.
IMPORTANT: PLEASE DATE AND SIGN THE BALLOT ON REVERSE SIDE.
<PAGE>
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
---------------------
I plan to attend the
meeting
/ /
---------------------
1. Proposal to adopt an Agreement and Plan of Merger, dated as of June 1,
1999, between Peoples Heritage Financial Group, Inc. ("Peoples
Heritage") and Banknorth Group, Inc. ("Banknorth"), as amended, which
provides, among other things, for (i) the merger of Banknorth with and
into Peoples Heritage under the name of "Banknorth Group, Inc." and
(ii) the conversion of each share of Banknorth common stock outstanding
immediately prior to the merger (other than certain shares specified in
the Agreement and Plan of Merger) into the right to receive 1.825
shares of Peoples Heritage common stock, subject to possible adjustment
under certain circumstances, plus cash in lieu of any fractional share
interest.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion, upon any other matter that may properly come
before the Special Meeting of Shareholders or any adjournment or
adjournments thereof.
THE BOARD OF DIRECTORS OF PEOPLES HERITAGE RECOMMENDS A VOTE FOR THE
PROPOSAL TO ADOPT THE AGREEMENT AND PLAN OF MERGER. SUCH VOTES ARE HEREBY
SOLICITED BY THE BOARD OF DIRECTORS.
Dated:
---------------------------------------
Signature
------------------------------------
Signature
------------------------------------
(print name)
IMPORTANT: Please sign your name exactly as it appears hereon. When shares are
held as joint tenants, either may sign. When signing as an attorney, executor,
administrator, trustee or guardian, add such title to your signature.
NOTE: If you receive more than one card, please date and sign each card and
return all cards in the enclosed envelope.
<PAGE>
EXHIBIT 99(d)
CONSENT
Each of the undersigned hereby consents to being named as a prospective
director of Peoples Heritage Financial Group, Inc. (Peoples Heritage) in the
Registration Statement on Form S-4 filed by Peoples Heritage with the Securities
and Exchange Commission in connection with the proposed acquisition of Banknorth
Group, Inc., to which this Consent is an Exhibit, and in any amendments
(including post-effective amendments) thereto.
Date: January 25, 2000 /s/ Thomas J. Amidon
-----------------------------
Name: Thomas J. Amidon
Date: January 25, 2000 /s/ Susan C. Crampton
-----------------------------
Name: Susan C. Crampton
Date: January 25, 2000 /s/ George W. Dougan
-----------------------------
Name: George W. Dougan
Date: January 25, 2000 /s/ Luther F. Hackett
-----------------------------
Name: Luther F. Hackett
Date: January 25, 2000 /s/ Angelo P. Pizzagalli
-----------------------------
Name: Angelo P. Pizzagalli
Date: January 25, 2000 /s/ Patrick E. Welch
-----------------------------
Name: Patrick E. Welch
