<PAGE> 1
As filed with the Securities and Exchange Commission on June 13, 1997
Registration No. 333-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CFX CORPORATION
(Exact name of registrant as specified in charter)
New Hampshire 6712 02-0402421
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
102 Main Street
Keene, New Hampshire 03431
(603) 352-2502
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Gregg R. Tewksbury
Chief Financial Officer
CFX Corporation
102 Main Street
Keene, New Hampshire 03431
(603) 355-8607
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Steven Kaplan, Esq. Edward G. Young, Esq.
Arnold & Porter Hale & Dorr
555 12th Street, N.W. 60 State Street
Washington, DC 20008 Boston, Massachusetts 02109
(202) 942-5998 (617) 526-6000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of the Registration Statement.
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 [ ]
<PAGE> 2
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- --------------------------------------------------------------------------------
Proposed Proposed
Title of each maximum maximum Amount
class of securities Amount to be offering aggregate of regis-
to be registered registered price per offering tration
unit price fee
- --------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Common Stock
($0.66 2/3 Par Value) 6,400,000 $15.60(1) $99,840,000(1) $30,255(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
Computed in accordance with Rule 457(f)(1) on the basis of the average of high
and low prices of Common Stock of Portsmouth Bank Shares, Inc. on The Nasdaq
Stock Market on June 6, 1997 of $16.06, as adjusted to reflect the maximum
Portsmouth Exchange Ratio of 1.0294.
(2) $17,249.98 was previously paid in connection with the filing of proxy
materials with the Commission by CFX Corporation on April 17, 1997 pursuant to
Rule 14a-6(i)(4) under the Securities Exchange Act of 1934, as amended. $13,005
is paid herewith.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
PORTSMOUTH BANK SHARES, INC.
333 STATE STREET
PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 436-6630
June 18, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Portsmouth Bank Shares, Inc. ("Portsmouth") to be held on July 31, 1997 at 10:00
a.m., at Yoken's Restaurant and Conference Center, Route 1, Portsmouth, New
Hampshire 03801 (the "Special Meeting").
At the Special Meeting, stockholders will be asked to approve the Agreement
and Plan of Reorganization, dated as of February 13, 1997, by and among
Portsmouth, its wholly owned subsidiary Portsmouth Savings Bank ("Portsmouth
Savings"), CFX Corporation ("CFX") and CFX's wholly owned subsidiary CFX Bank
(the "Reorganization Agreement") and the related Plan of Share Exchange (the
"Plan of Exchange" and, together with the Reorganization Agreement, the
"Acquisition Agreement"). CFX, a New Hampshire corporation, is a registered bank
holding company with its principal place of business in Keene, New Hampshire.
If the Acquisition Agreement is approved and the acquisition of Portsmouth
by CFX (the "Acquisition") is consummated, each outstanding share of Portsmouth
Common Stock, other than shares as to which dissenters' rights have been
perfected and shares held by Portsmouth as treasury stock, will be converted
into the right to receive 0.9314 shares of CFX Common Stock, subject to
adjustment, as described below, in certain circumstances depending upon the
average closing price per share of CFX Common Stock on the American Stock
Exchange during the 10 trading-day period ending immediately prior to receipt of
the final required regulatory approval for the Acquisition (the "Average CFX
Trading Price").
The exchange ratio per share of Portsmouth Common Stock will be subject to
adjustment as follows: if the Average CFX Trading Price is equal to or less than
$17.375, but is greater than $15.70, the exchange ratio per share of Portsmouth
Common Stock will be the quotient obtained by dividing $16.1765 by the Average
CFX Trading Price. If the Average CFX Trading Price is equal to or less than
$15.70, the exchange ratio per share of Portsmouth Common Stock will be 1.0294.
If the Average CFX Trading Price is equal to or less than $14.20, Portsmouth may
terminate the Acquisition unless CFX agrees to issue additional shares of CFX
Common Stock such that the adjusted exchange ratio per share of Portsmouth
Common Stock is equal to the quotient obtained by dividing $14.6176 by the
Average CFX Trading Price. Tables illustrating the exchange ratio and the value
of CFX Common Stock to be received by Portsmouth stockholders are set forth in
the attached Proxy Statement-Prospectus.
The foregoing dollar amounts, Exchange Ratios and other numbers have been
restated to give effect to the 2% stock dividend that was paid by Portsmouth on
March 15, 1997. Such dividend did not increase or otherwise affect the aggregate
amount of CFX Common Stock to be distributed to holders of Portsmouth Common
Stock in connection with the Acquisition.
CFX's banking subsidiaries have a total of 42 offices, located primarily in
southwestern and central New Hampshire and the contiguous market of north
central Massachusetts, with total deposits of approximately $1.2 billion and
total assets of approximately $1.7 billion at March 31, 1997. Portsmouth Savings
conducts business through three offices located in southeastern New Hampshire,
with total deposits of approximately $194 million and total assets of
approximately $263 million at March 31, 1997. It is intended that Portsmouth
Savings will be operated as a division of CFX Bank following the Acquisition.
The Acquisition and the Acquisition Agreement are described in the
accompanying Proxy Statement-Prospectus, the forepart of which includes a
summary of the terms of the Acquisition and certain other information relating
to the proposed transaction. Consummation of the Acquisition is subject to
certain
<PAGE> 4
conditions, including the approval of the Acquisition Agreement by the holders
of a majority of Portsmouth's outstanding Common Stock and a majority of CFX's
outstanding Common Stock, as well as regulatory approvals. We urge you to read
the Proxy Statement-Prospectus carefully.
Portsmouth's Board of Directors (the "Portsmouth Board") has received the
opinion of its financial advisor, Tucker Anthony Incorporated ("Tucker
Anthony"), that the Acquisition Consideration (as defined in the Proxy
Statement-Prospectus) is fair to the stockholders of Portsmouth from a financial
point of view, and the Portsmouth Board has determined that the Acquisition
Agreement is in the best interest of Portsmouth stockholders and the various
other constituencies which Portsmouth serves, including depositors, borrowers,
employees and the Portsmouth community.
ACCORDINGLY, THE PORTSMOUTH BOARD HAS UNANIMOUSLY APPROVED THE ACQUISITION
AGREEMENT, THE ACQUISITION AND RELATED TRANSACTIONS, AND RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE ACQUISITION AGREEMENT AT THE SPECIAL MEETING.
Tucker Anthony's opinion is summarized in the Proxy Statement-Prospectus,
and the complete opinion is included as Appendix C to the Proxy
Statement-Prospectus. We urge you to read these items carefully.
YOUR VOTE IS IMPORTANT. FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE ACQUISITION AGREEMENT. You are urged to sign, date and mail the
enclosed proxy card promptly in the postage-prepaid envelope provided, whether
or not you plan to attend the Special Meeting. If you attend the Special
Meeting, you may vote in person even if you have already mailed your proxy card.
Portsmouth stock certificates should not be returned with the proxy and
should not be forwarded until you receive a letter of transmittal that will be
provided shortly after the Acquisition is consummated.
On behalf of the Portsmouth Board, thank you for your continued support. We
appreciate your interest in Portsmouth.
Sincerely yours,
<TABLE>
<S> <C>
/s/ Robert W. Simpson /s/ Harry R. Hart
ROBERT W. SIMPSON HARRY R. HART
Chairman of the Board President and Chief Executive Officer
</TABLE>
<PAGE> 5
PORTSMOUTH BANK SHARES INC.
333 STATE STREET
PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 436-6630
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 31, 1997
To the Stockholders of Portsmouth Bank Shares, Inc.
Notice is hereby given that a Special Meeting of the Stockholders of
Portsmouth Bank Shares, Inc. ("Portsmouth") will be held on July 31, 1997 at
10:00 a.m., local time, at Yoken's Restaurant and Conference Center, Route 1,
Portsmouth, New Hampshire 03801 for the purpose of considering and voting upon
the following matters:
1. A proposal to approve and adopt the Agreement and Plan of
Reorganization, dated as of February 13, 1997, by and among Portsmouth,
Portsmouth's wholly owned subsidiary Portsmouth Savings Bank, CFX
Corporation ("CFX") and CFX's wholly owned subsidiary CFX Bank (the
"Reorganization Agreement") and the related Plan of Share Exchange (the
"Plan of Exchange" and, together with the Reorganization Agreement, the
"Acquisition Agreement"), and each of the transactions contemplated
thereby, pursuant to which Acquisition Agreement all of the outstanding
capital stock of Portsmouth, par value $0.10 per share, would be acquired
by CFX, and shareholders of Portsmouth would receive shares of common stock
of CFX, par value $0.66 2/3 per share, all as more fully described in the
attached Proxy Statement-Prospectus. A copy of the Acquisition Agreement is
attached as Appendix A to the accompanying Proxy Statement-Prospectus and
the related Plan of Share Exchange attached thereto as Annex A.
2. Such other matter or matters as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on June 12, 1997 (the
"Record Date") are entitled to notice of and to vote at the Special Meeting. The
affirmative vote of the holders of a majority of the shares of Common Stock of
Portsmouth outstanding on the Record Date is required for approval of the
Acquisition Agreement.
The persons named as proxies may propose and vote for one or more
adjournments or postponements of the Special Meeting to permit further
solicitation of proxies in favor of the foregoing proposal.
If the proposal described in Item 1 above is approved by the stockholders
at the Special Meeting and effected by Portsmouth, stockholders of Portsmouth
who follow the procedures set forth in Sections 293-A:13.01 through
293-A:13.31 of the New Hampshire Revised Statutes Annotated will have
dissenters' rights of appraisal as therein provided.
A PROXY STATEMENT-PROSPECTUS IS SET FORTH ON THE FOLLOWING PAGES AND A
PROXY CARD IS ENCLOSED HEREWITH. TO ENSURE THAT YOUR VOTE IS COUNTED, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID
RETURN ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN
PERSON. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE
YOUR SHARES IN PERSON. HOWEVER, ATTENDANCE AT THE SPECIAL MEETING WILL NOT OF
ITSELF CONSTITUTE REVOCATION OF A PROXY. IF YOUR SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED
<PAGE> 6
ADDITIONAL DOCUMENTATION FROM THE HOLDER OF RECORD OF SUCH SHARES IN
ORDER TO VOTE PERSONALLY AT THE SPECIAL MEETING.
By Order of the Board of Directors
/s/ Mark E. Simpson
MARK E. SIMPSON
Secretary and Treasurer
Portsmouth, New Hampshire
June 18, 1997
<PAGE> 7
PORTSMOUTH BANK SHARES, INC.
------------------------
PROXY STATEMENT-PROSPECTUS
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 31, 1997
------------------------
INTRODUCTION
This Proxy Statement-Prospectus is being furnished to stockholders of
Portsmouth Bank Shares, Inc. ("Portsmouth") in connection with the solicitation
of proxies by the Board of Directors of Portsmouth (the "Portsmouth Board") for
use at the Special Meeting of Stockholders, and any adjournment thereof, to be
held at the time and place set forth in the accompanying notice (the "Special
Meeting"). It is anticipated that the mailing of this Proxy Statement-Prospectus
and the enclosed proxy card will commence on or about June 18, 1997.
At the Special Meeting, stockholders of Portsmouth will be asked to approve
an Agreement and Plan of Reorganization, dated as of February 13, 1997, by and
among Portsmouth, its wholly owned subsidiary, Portsmouth Savings Bank
("Portsmouth Savings"), CFX Corporation ("CFX"), and CFX's wholly owned
subsidiary, CFX Bank (the "Reorganization Agreement"), and a related Plan of
Share Exchange (the "Plan of Exchange" and, together with the Reorganization
Agreement, the "Acquisition Agreement"), providing for the acquisition (the
"Acquisition") by CFX pursuant to a vote of Portsmouth's stockholders, of all of
the issued and outstanding shares of Portsmouth Common Stock (as defined below).
The Acquisition is expected to be followed by the merger (the "Holding Company
Merger") of Portsmouth with and into CFX with CFX as the surviving corporation
(the "Surviving Corporation") and the merger of Portsmouth Savings with and into
CFX Bank (the "Bank Merger"). CFX is a New Hampshire corporation and a
registered bank holding company. The Acquisition Agreement is attached to this
Proxy Statement-Prospectus as Appendix A.
At the Effective Date (as defined below), each share of common stock, par
value $0.10 per share, of Portsmouth ("Portsmouth Common Stock") issued and
outstanding immediately prior to the Effective Date (each such share to include
an attached right issued pursuant to the Portsmouth Rights Agreement (as defined
below)) other than Dissenting Shares (as defined below) and except as otherwise
provided in the Acquisition Agreement, will be exchanged for an amount of common
stock, par value $0.66 2/3 per share, of CFX ("CFX Common Stock") equal to one
share multiplied by the appropriate Exchange Ratio (as defined below) and cash
in lieu of any fractional share of CFX Common Stock.
The number of shares of CFX Common Stock to be received for each share of
Portsmouth Common Stock (the "Exchange Ratio") will be a function of the average
closing price of CFX Common Stock on the American Stock Exchange ("AMEX") for
the ten consecutive trading days preceding receipt of the last regulatory
approval required for consummation of the Acquisition (the "Average CFX Trading
Price").
Each outstanding share of Portsmouth Common Stock will be exchanged for
0.9314 shares of CFX Common Stock if the Average CFX Trading Price is greater
than $17.375. If the Average CFX Trading Price is between $15.70 and $17.375,
the Exchange Ratio per share of Portsmouth Common Stock will be the quotient
obtained by dividing $16.1765 by the Average CFX Trading Price. If the Average
CFX Trading Price is less than $15.70, the Exchange Ratio per share of
Portsmouth Common Stock will be 1.0294. If the Average CFX Trading Price is
$14.20 or less, Portsmouth may terminate the Acquisition Agreement unless CFX
agrees to issue additional shares of CFX Common Stock such that the adjusted
Exchange Ratio per share of Portsmouth Common Stock is equal to the quotient
obtained by dividing $14.6176 by the Average CFX Trading Price (the "Cure
Ratio") but the Exchange Ratio will be equal to 1.0294 if the Average CFX
Trading Price is $14.20 or less and Portsmouth does not elect to terminate the
Acquisition. If Portsmouth does elect to terminate the Acquisition, CFX is not
required to agree to the Cure Ratio.
<PAGE> 8
The foregoing dollar amounts, Exchange Ratios and other numbers have been
restated to give effect to the 2% stock dividend that was paid by Portsmouth on
March 15, 1997. Such dividend did not increase or otherwise affect the aggregate
amount of CFX Common Stock to be distributed to holders of Portsmouth Common
Stock in connection with the Acquisition.
If the Average CFX Trading Price were to be equal to $18.50, the closing
price of CFX Common Stock on February 12, 1997 (the last trading day prior to
announcement of the proposed Acquisition), the aggregate consideration to be
paid in connection with the Acquisition would have a value of approximately $106
million.
The following table shows the Exchange Ratio at various Average CFX Trading
Prices, together with the Per Portsmouth Share Value in each case. The Per
Portsmouth Share Value is calculated by multiplying the Average CFX Trading
Price by the applicable Exchange Ratio, and represents the value of the CFX
Common Stock that would be received in the Acquisition for each share of
Portsmouth Common Stock based on the Average CFX Trading Price. Because the
Average CFX Trading Price is based on the trading prices of CFX Common Stock on
AMEX for the ten trading days prior to receipt of the last regulatory approval
necessary for consummation of the Acquisition, such price could be determined
several weeks prior to the Effective Date. The market price of CFX Common Stock
at the Effective Date could differ materially from the Average CFX Trading Price
used to determine the Exchange Ratio, and the actual value of the shares issued
in the Acquisition therefore could differ materially from the Per Portsmouth
Share Value.
<TABLE>
<CAPTION>
AVERAGE CFX PER PORTSMOUTH
TRADING PRICE EXCHANGE RATIO SHARE VALUE(1)
- ------------------ ----------------------- ------------------
<S> <C> <C>
More than $17.375 0.9314 $16.19 or more
$15.71 to $17.375 $16.1765 / Average CFX $16.18
Trading Price
$15.70 or less(1) 1.0294 $16.16 or less(1)
</TABLE>
- ---------------
(1) If the Average CFX Trading Price is $14.20 or less, Portsmouth by action of
its Board of Directors may, but need not, seek to terminate the Acquisition
Agreement by giving written notice to CFX prior to the third day preceding
the Closing Date (as defined below). Within two business days thereafter,
CFX may elect to increase the Exchange Ratio to the quotient obtained by
dividing $14.6176 by the Average CFX Trading Price, pursuant to the terms of
the Acquisition Agreement. If CFX makes such an election, the Acquisition
Agreement will not terminate and the Acquisition will be consummated at the
increased Exchange Ratio. In determining whether to elect to terminate the
Acquisition Agreement in these circumstances, the Portsmouth Board will,
consistent with its fiduciary duties, take into account all relevant facts
and circumstances existing at the time, including without limitation:
whether it believes that CFX is prepared to (i) adopt the revised Exchange
Ratio described above, (ii) acquiesce in the termination of the Acquisition
or (iii) seek to negotiate for a lesser increase in the Exchange Ratio; the
market for CFX Common Stock and bank stocks in general and the relative
value of the Portsmouth Common Stock in the market; and the advice of its
financial advisors and legal counsel. By approving the Acquisition
Agreement, the Portsmouth stockholders will be permitting the Portsmouth
Board to determine, in the exercise of its fiduciary duties and without any
further solicitation of the Portsmouth stockholders, whether or not to
proceed with the Acquisition if the Average CFX Trading Price during the
pricing period were $14.20 or less. See "THE PROPOSED ACQUISITION --
Closing; Effective Date; Termination."
For a more complete description of the Acquisition Agreement and the terms
of the Acquisition, see the table and graph depicting the pricing mechanism in
"SUMMARY -- The Proposed Acquisition" and the narrative description in "THE
PROPOSED ACQUISITION -- Terms of the Acquisition."
THE SHARES OF COMMON STOCK OF CFX CORPORATION TO BE ISSUED IN CONNECTION
WITH THE PROPOSED MERGER OF PORTSMOUTH WITH CFX CORPORATION ARE
2
<PAGE> 9
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER INSURER OR
GOVERNMENT AGENCY.
THE CFX COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE ACQUISITION HAS
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES AUTHORITY NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized.
This Proxy Statement-Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by this Proxy
Statement-Prospectus, in any jurisdiction, to any person to whom it is unlawful
to make such offer or solicitation of an offer in such jurisdiction. Neither the
delivery of this Proxy Statement-Prospectus nor any distribution of securities
made hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of CFX or Portsmouth since the date of this
Proxy Statement-Prospectus.
This Proxy Statement-Prospectus constitutes a prospectus of CFX for up to
6,400,000 shares of CFX Common Stock issuable in connection with the
Acquisition.
The date of this Proxy Statement-Prospectus is June 18, 1997.
3
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INTRODUCTION....................................................................... 1
AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE......................... 5
SUMMARY............................................................................ 7
CFX CORPORATION SELECTED HISTORICAL FINANCIAL
DATA............................................................................. 19
PORTSMOUTH BANK SHARES, INC. SELECTED HISTORICAL
FINANCIAL DATA................................................................... 20
CFX CORPORATION -- PORTSMOUTH BANK SHARES, INC. SELECTED PRO FORMA COMBINED
FINANCIAL DATA (UNAUDITED)....................................................... 21
MEETING INFORMATION................................................................ 22
Date, Place and Time.......................................................... 22
Record Date; Voting Rights.................................................... 22
Voting and Revocation of Proxies.............................................. 22
Solicitation of Proxies....................................................... 23
Beneficial Ownership.......................................................... 24
THE PROPOSED ACQUISITION........................................................... 25
Background of the Acquisition................................................. 25
Reasons for the Acquisition; Recommendation of the Board of Directors......... 27
Opinion of the Financial Advisor.............................................. 28
Terms of the Acquisition...................................................... 32
Surrender of Certificates..................................................... 34
Resale of CFX Common Stock.................................................... 35
Representations and Warranties; Conditions to the Acquisition; Waiver......... 36
Regulatory and Other Approvals................................................ 37
Business Pending the Acquisition.............................................. 38
Closing; Effective Date; Termination.......................................... 38
Management and Operations after the Acquisition............................... 39
Effect on Employees and Benefit Plans......................................... 40
Certain Federal Income Tax Consequences....................................... 42
Accounting Treatment.......................................................... 43
Stock Option Agreement........................................................ 43
Rights of Dissenting Stockholders............................................. 44
Certain Differences in the Rights of Stockholders............................. 46
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)........................... 50
CERTAIN REGULATORY CONSIDERATIONS.................................................. 57
LEGAL OPINIONS..................................................................... 60
EXPERTS............................................................................ 60
APPENDIX A -- AGREEMENT AND PLAN OF REORGANIZATION (INCLUDING RELATED PLAN OF SHARE
EXCHANGE AS ANNEX A)............................................................. A-1
APPENDIX B -- STOCK OPTION AGREEMENT............................................... B-1
APPENDIX C -- OPINION OF TUCKER ANTHONY INCORPORATED............................... C-1
APPENDIX D -- SECTIONS 293-A:13.01 THROUGH 293-A:13.31 OF THE
NEW HAMPSHIRE REVISED STATUTES ANNOTATED......................................... D-1
</TABLE>
4
<PAGE> 11
AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE
Portsmouth, CFX and Community Bankshares, Inc. ("Community") are each
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Proxy statements, reports and other information
concerning Portsmouth, CFX and Community can be inspected and copied at the
office of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's Regional Offices in New York (7
World Trade Center, Suite 1300, New York, New York 10048) and Chicago (CitiCorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661), and
copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a World Wide Web site (located at
http://www.sec.gov) which contains reports, proxy and information statements and
other information regarding Portsmouth, CFX and Community. Portsmouth Common
Stock and Community common stock are listed on the Nasdaq National Market (the
"Nasdaq NM"). Consequently, reports, proxy statements and other information
concerning Portsmouth and Community may also be inspected at the offices of the
Nasdaq Stock Market, Inc. at 1735 K Street, N.W., Washington, D.C. 20006. CFX
Common Stock is listed on the American Stock Exchange. Consequently, reports,
proxy statements and other information concerning CFX may also be inspected at
the offices of the American Stock Exchange, Inc., 86 Trinity Place, New York,
New York 10006.
CFX has filed a Registration Statement (the "Registration Statement") on
Form S-4 under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the securities to be issued in connection with the Acquisition. For
further information pertaining to the securities of CFX to which this Proxy
Statement-Prospectus relates, reference is made to the Registration Statement,
including the exhibits and schedules filed as a part thereof. This Proxy
Statement-Prospectus does not contain all the information set forth in the
Registration Statement and exhibits thereto which CFX has filed with the
Commission under the Securities Act, which Registration Statement and exhibits
thereto may be obtained from the Commission in the manner described above and to
which reference is hereby made. Although CFX and Portsmouth believe that all
material aspects of the Acquisition have been addressed herein, statements
contained in this Proxy Statement-Prospectus or in any document incorporated by
reference herein or in the Registration Statement are not necessarily complete,
and in each instance reference is made to the copy of such other documents filed
as exhibits to the Registration Statement, each such statement being qualified
in all respects by such reference.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
RELATING TO CFX, PORTSMOUTH AND COMMUNITY THAT ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN CERTAIN EXHIBITS
THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER OF PORTSMOUTH COMMON STOCK, TO WHOM THIS PROXY STATEMENT-PROSPECTUS IS
DELIVERED UPON WRITTEN OR ORAL REQUEST TO, IN THE CASE OF INFORMATION CONCERNING
CFX, CFX CORPORATION, 102 MAIN STREET, KEENE, NEW HAMPSHIRE 03431, ATTENTION:
GREGG R. TEWKSBURY, CHIEF FINANCIAL OFFICER (TELEPHONE: 603-352-2502), IN THE
CASE OF INFORMATION CONCERNING PORTSMOUTH, PORTSMOUTH BANK SHARES, INC., 333
STATE STREET, PORTSMOUTH, NEW HAMPSHIRE 03801, ATTENTION: MARK E. SIMPSON,
SECRETARY AND TREASURER (TELEPHONE: 603-436-6630) OR, IN THE CASE OF INFORMATION
CONCERNING COMMUNITY, COMMUNITY BANKSHARES, INC., 43 NORTH MAIN STREET, CONCORD,
NEW HAMPSHIRE 03301, ATTENTION: JOHN C. BAITY, CHIEF FINANCIAL OFFICER
(TELEPHONE: 603-224-1100). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY JULY 24, 1997.
5
<PAGE> 12
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed by CFX with the Commission are
incorporated by reference herein:
(1) CFX's Annual Report on Form 10-K for the year ended December 31,
1996, as amended by a filing on Form 10-K/A dated April 29, 1997;
(2) CFX's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997;
(3) CFX's Current Report on Form 8-K dated February 13, 1997; and
(4) the description of CFX Common Stock contained in a registration
statement on Form 8-A dated November 13, 1990 filed by CFX (then known as
Cheshire Financial Corporation).
The following documents previously filed by Portsmouth with the Commission
are incorporated by reference herein:
(1) Portsmouth's Annual Report on Form 10-K for the year ended
December 31, 1996;
(2) Portsmouth's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
(3) Portsmouth's Current Report on Form 8-K dated February 13, 1997;
and
(4) the description of Portsmouth's Shareholder Rights Plan contained
in Portsmouth's registration statement on Form 8-A filed on November 30,
1988.
Community Bankshares, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996 and its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, previously filed with the Commission, also are incorporated by
reference herein.
Also incorporated herein by reference are the following portions of
Portsmouth's Annual Report to Stockholders for the fiscal year ended December
31, 1996, which accompanies this Proxy Statement-Prospectus: (i) Market for the
Company's Common Stock and Related Stockholder Matters (page 1); (ii) the
Company's Business (pages 1 to 4); (iii) Selected Five-Year Financial Data (page
11); (iv) Management's Discussion and Analysis of Financial Condition and
Results of Operations (pages 5 to 10); and (v) Consolidated Financial Statements
and Notes thereto (pages 12 to 35).
In addition, all documents subsequently filed by CFX or Portsmouth with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference into this Proxy Statement-Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement-Prospectus to the
extent that a statement contained herein, or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement-Prospectus.
THIS PROXY STATEMENT-PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF
CFX FOLLOWING THE CONSUMMATION OF THE ACQUISITION. CFX has made, and may
continue to make, various forward-looking statements with respect to earnings
per share, cost savings related to acquisitions, credit quality and other
financial business matters for 1997 and, in certain instances, subsequent
periods. CFX cautions that these forward-looking statements are subject to
numerous assumptions, risks and uncertainties, and that statements for periods
subsequent to 1997 are subject to greater uncertainty because of the increased
likelihood of changes in underlying factors and assumptions. Actual results
could differ materially from forward-looking statements. In addition to those
factors disclosed by CFX in documents incorporated herein by reference and those
factors identified elsewhere herein, the following factors could cause actual
results to differ materially from such forward-looking statements: continued
pricing pressures on loan and deposit products, actions of competitors, changes
in economic
6
<PAGE> 13
conditions, the extent and timing of actions of the Federal Reserve Board,
continued customer disintermediation, customers' acceptance of CFX's products
and services and the extent and timing of legislative and regulatory actions and
reforms. CFX's forward-looking statements speak only as of the date on which
such statements are made. By making any forward-looking statements, CFX assumes
no duty to update them to reflect new, changing or unanticipated events or
circumstances.
SUMMARY
This summary is necessarily general and abbreviated and has been prepared
to assist stockholders in their review of this Proxy Statement-Prospectus. This
summary is not intended to be a complete explanation of the matters covered in
this Proxy Statement-Prospectus and is qualified in all respects by reference to
the more detailed information contained elsewhere in this Proxy
Statement-Prospectus, the Appendices hereto and the documents incorporated
herein by reference. Stockholders are urged to read this Proxy
Statement-Prospectus and the Appendices hereto in their entirety.
THE COMPANIES
CFX. CFX is a New Hampshire corporation registered under the Bank Holding
Company Act of 1956, as amended (the "BHCA"). As of March 31, 1997, CFX had
total consolidated assets of $1.7 billion and total stockholders' equity of $134
million. CFX's three banking subsidiaries are CFX Bank, headquartered in Keene,
New Hampshire, Safety Fund National Bank, headquartered in Fitchburg,
Massachusetts ("Safety Fund") and Orange Savings Bank, headquartered in Orange,
Massachusetts ("Orange Savings"). CFX Mortgage, Inc., CFX Bank's mortgage
banking subsidiary, services approximately $886 million in mortgage loans for
others. In addition, CFX Funding L.L.C., a 51% owned subsidiary of CFX Bank that
engages in the facilitation of lease financing and rated securitizations,
services over $108 million in leases for others. Through its subsidiary banks,
CFX operates 42 full service offices, two loan production offices and 68
automated teller and remote service banking locations in New Hampshire and north
central Massachusetts, and operates a trust division with $371 million in assets
under management.
On March 24, 1997, CFX and CFX Bank entered into a definitive agreement
with Community and Community's two subsidiary banks, Concord Savings Bank, of
Concord, New Hampshire ("Concord Savings"), and Centerpoint Bank, of Bedford,
New Hampshire (with Concord Savings, the "Community Banks"), pursuant to which
Community would be merged with and into CFX and the Community Banks would be
merged with and into CFX Bank (the mergers of Community with and into CFX and
the Community Banks with and into CFX Bank constituting the "Community
Acquisition"). As of March 31, 1997, Community reported total assets of
approximately $581 million and stockholders' equity of approximately $41
million. Through the Community Banks, Community operates 11 offices in
Merrimack, Hillsborough, Belknap and Rockingham Counties, New Hampshire. Under
this definitive agreement, CFX would issue up to 6,400,000 shares of CFX Common
Stock in the aggregate for approximately 2,465,238 outstanding shares of
Community common stock. CFX expects the Community Acquisition to close in the
second half of 1997. Historical financial information regarding Community is
included in documents incorporated by reference. See "AVAILABLE INFORMATION;
DOCUMENTS INCORPORATED BY REFERENCE." Pro forma financial information giving
effect to the Acquisition and the Community Acquisition is included elsewhere
herein. See " -- Comparative Per Share Data" and "PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION (UNAUDITED)."
From time to time, CFX investigates and holds discussions and negotiations
in connection with possible transactions with other banks and financial service
entities. At the date hereof, CFX has not entered into any agreements or
understandings with respect to any significant transactions of the type referred
to above except for the transactions described herein. If required under
applicable law or AMEX policy, any such transactions would be subject to
regulatory approval and the approval of stockholders.
The principal executive offices of CFX are located at 102 Main Street,
Keene, New Hampshire 03431. Its telephone number is (603) 352-2502. For
additional information concerning the business of CFX and its financial
condition, reference should be made to the CFX documents incorporated herein by
reference. See
7
<PAGE> 14
"INFORMATION REGARDING CFX" and "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED
BY REFERENCE."
Portsmouth. Portsmouth is a New Hampshire corporation registered as a bank
holding company under the BHCA. As of March 31, 1997, Portsmouth had total
consolidated assets of $263 million and total stockholders' equity of $66
million. Portsmouth's banking subsidiary Portsmouth Savings Bank ("Portsmouth
Savings") has three full service offices located in southeastern New Hampshire.
The principal executive offices of Portsmouth are located at 333 State
Street, Portsmouth, New Hampshire 03801. Its telephone number is (603) 436-6630.
For additional information concerning the business of Portsmouth and its
financial condition, see the 1996 Portsmouth Annual Report to Stockholders that
accompanies this Proxy Statement-Prospectus, "INFORMATION REGARDING PORTSMOUTH"
and "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE."
[MAP OF COUNTIES]
THE SPECIAL MEETING
The Special Meeting of Stockholders of Portsmouth will be held on July 31,
1997, at 10:00 a.m. Eastern Daylight Time, at Yoken's Restaurant and Conference
Center, Route 1, Portsmouth, New Hampshire 03801. Only holders of record of
Portsmouth Common Stock at the close of business on June 12, 1997 (the "Record
Date") will be entitled to notice of and to vote at such Special Meeting. At
such date, 5,901,310 shares of Portsmouth Common Stock were outstanding and
entitled to vote. For additional information with respect to the Special Meeting
and the voting rights of stockholders, see "MEETING INFORMATION."
THE PROPOSED ACQUISITION
At the Effective Date, CFX will acquire all of the outstanding capital
stock of Portsmouth. It is expected that, immediately thereafter, Portsmouth
will be merged with and into CFX, whereupon the separate
8
<PAGE> 15
existence of Portsmouth will cease. CFX, as the surviving entity in these
transactions, will continue unaffected and unimpaired by such transactions. It
is expected that, upon consummation of the Acquisition, Portsmouth Savings will
be merged with and into CFX Bank, a wholly owned subsidiary of CFX, after which
Portsmouth Savings will be operated as a division of CFX Bank.
At the Effective Date, each share of Portsmouth Common Stock issued and
outstanding immediately prior to the Effective Date (each such share to include
an attached right issued pursuant to the Stockholder Rights Acquisition
Agreement adopted by Portsmouth in 1988 (the "Portsmouth Rights Agreement")),
other than Dissenting Shares and except as otherwise provided in the Acquisition
Agreement, will be exchanged for an amount of CFX Common Stock equal to one
share multiplied by the appropriate Exchange Ratio and cash in lieu of any
fractional share of CFX Common Stock.
The Exchange Ratio will be 0.9314 if the Average CFX Trading Price is
greater than $17.375. If the Average CFX Trading Price is between $15.70 and
$17.375, the Exchange Ratio will be the quotient obtained by dividing $16.1765
by the Average CFX Trading Price. If the Average CFX Trading Price is less than
$15.70, the Exchange Ratio per share of Portsmouth Common Stock will be 1.0294.
If the Average CFX Trading Price is $14.20 or less, Portsmouth may terminate the
Acquisition unless CFX agrees to issue additional shares of CFX Common Stock
such that the adjusted Exchange Ratio per share of Portsmouth Common Stock is
equal to the quotient obtained by dividing $14.6176 by the Average CFX Trading
Price (heretofore defined as the "Cure Ratio"), but the Exchange Ratio will be
greater than 1.0294 if the Average CFX Trading Price is $14.20 or less and
Portsmouth does not elect to terminate the Acquisition. If Portsmouth does elect
to terminate the Acquisition, CFX is not required to agree to the Cure Ratio.
The Acquisition Agreement provides the means of determining the Exchange
Ratio at every Average CFX Trading Price. This pricing mechanism can be depicted
in the following tabular form and in the following graph:
<TABLE>
<CAPTION>
AVERAGE CFX PER PORTSMOUTH
TRADING PRICE EXCHANGE RATIO SHARE VALUE
- ------------------ ----------------------- ------------------
<S> <C> <C>
More than $17.375 0.9314 $16.19 or more
$15.71 to $17.375 $16.1765 / Average CFX $16.18
Trading Price
$15.70 or less(1) 1.0294 $16.16 or less(1)
</TABLE>
- ---------------
(1) If the Average CFX Trading Price is $14.20 or less, Portsmouth by action of
its Board of Directors may, but need not, seek to terminate the Acquisition
Agreement by giving written notice to CFX prior to the third day preceding
the Closing Date (as defined below). Within two business days thereafter,
CFX may elect to increase the Exchange Ratio to the quotient obtained by
dividing $14.6176 by the Average CFX Trading Price, pursuant to the terms of
the Acquisition Agreement. If CFX makes such an election, the Acquisition
Agreement will not terminate and the Acquisition will be consummated at the
increased Exchange Ratio. In determining whether to elect to terminate the
Acquisition Agreement in these circumstances, the Portsmouth Board will,
consistent with its fiduciary duties, take into account all relevant facts
and circumstances existing at the time, including without limitation:
whether it believes that CFX is prepared to (i) adopt the revised Exchange
Ratio described above, (ii) acquiesce in the termination of the Acquisition
or (iii) seek to negotiate for a lesser increase in the Exchange Ratio; the
market for CFX Common Stock and bank stocks in general and the relative
value of the Portsmouth Common Stock in the market; and the advice of its
financial advisors and legal counsel. By approving the Acquisition
Agreement, the Portsmouth stockholders will be permitting the Portsmouth
Board to determine, in the exercise of its fiduciary duties and without any
further solicitation of the Portsmouth stockholders, whether or not to
proceed with the Acquisition if the Average CFX Trading Price during the
pricing period were $14.20 or less. See "THE PROPOSED ACQUISITION --
Closing; Effective Date; Termination."
9
<PAGE> 16
[AVERAGE CFX TRADING PRICE GRAPH]
The foregoing dollar amounts, Exchange Ratios and other numbers have been
restated to give effect to the 2% stock dividend that was paid by Portsmouth on
March 15, 1997. Such dividend did not increase or otherwise affect the total
amount of CFX Common Stock to be distributed to holders of Portsmouth Common
Stock in connection with the Acquisition.
REASONS FOR THE ACQUISITION; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Portsmouth Board has unanimously adopted a resolution approving the
Acquisition Agreement and unanimously recommends approval and adoption of the
Acquisition Agreement by Portsmouth's stockholders. The Portsmouth Board
believes in its business judgment that the terms of the Acquisition Agreement
are fair and in the best interests of Portsmouth and its stockholders and that
the Exchange Ratio is fair and reasonable to the stockholders of Portsmouth. The
terms of the Acquisition Agreement, including the Exchange Ratio, were reached
on the basis of arms' length negotiations between Portsmouth and CFX. In the
course of reaching its decision to approve the Acquisition Agreement, the
Portsmouth Board consulted with Hale and Dorr LLP, its legal advisor, regarding
the legal terms of the Acquisition Agreement and the Portsmouth Board's
obligations in its consideration thereof, and with Tucker Anthony Incorporated
("Tucker Anthony"), its financial advisor, regarding the financial terms and the
fairness, from a financial point of view, of the Exchange Ratio in the proposed
Acquisition. See "THE PROPOSED ACQUISITION -- Reasons for the Acquisition;
Recommendation of the Board of Directors" and "-- Opinion of the Financial
Advisor."
OPINION OF THE FINANCIAL ADVISOR
Tucker Anthony has rendered written opinions to the Portsmouth Board, dated
February 12, 1997 and as of the date of this Proxy Statement-Prospectus, to the
effect that, as of such date, the consideration to be received by Portsmouth's
stockholders pursuant to the Acquisition Agreement is fair, from a financial
point of view, to the holders of Portsmouth Common Stock. The full text of the
opinion of Tucker Anthony as of the date of this Proxy Statement-Prospectus is
attached hereto as Appendix C to this Proxy Statement-Prospectus. The February
12, 1997 opinion is substantially identical to the opinion attached hereto.
Portsmouth stockholders 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 Tucker Anthony in
connection therewith. Tucker Anthony's opinions are directed only to the
consideration to be paid in the Acquisition and do not constitute a
recommendation to any Portsmouth stockholder as to
10
<PAGE> 17
how such stockholder should vote at the Special Meeting. See "THE PROPOSED
ACQUISITION -- Opinion of Financial Advisor" and Appendix C to this Proxy
Statement-Prospectus.
EFFECTIVE DATE OF THE ACQUISITION
CFX and Portsmouth each anticipate that the Effective Date will occur, and
the Acquisition will be consummated, in the third quarter of 1997. However,
consummation of the Acquisition could be delayed and there can be no assurances
as to if or when the Acquisition will be consummated. See "THE PROPOSED
ACQUISITION -- Closing; Effective Date; Termination."
SURRENDER OF CERTIFICATES; RESALE OF CFX COMMON STOCK
Within five business days after the Effective Date, notice will be mailed
to holders of Portsmouth Common Stock regarding the manner in which their
certificates representing shares of such Portsmouth Common Stock will be
exchanged for certificates representing shares of CFX Common Stock and cash in
lieu of fractional shares. Stockholders should not send in their certificates
until they receive further instructions. The shares of CFX Common Stock issuable
to holders of Portsmouth Common Stock may be traded freely, subject to certain
restrictions in the case of stockholders who are deemed to be affiliates of
Portsmouth or CFX under applicable securities laws. See "THE PROPOSED
ACQUISITION -- Surrender of Certificates" and "-- Resale of CFX Common Stock."
MANAGEMENT AND OPERATIONS AFTER THE ACQUISITION
Following the Acquisition and the Community Acquisition, the directors of
CFX will consist of (i) those persons serving as directors of CFX immediately
prior to the Effective Date, (ii) three persons serving as directors of
Portsmouth, and (iii) subject to consummation of the Community Acquisition,
three persons serving as directors of Community. In addition, two persons
serving as directors of Portsmouth Savings will be elected to the Board of
Trustees of CFX Bank.
Pursuant to the terms of the Acquisition Agreement, Timothy J. Connors,
Mark E. Simpson and Robert W. Simpson, who currently serve on the Portsmouth
Board, have been designated to serve on the CFX Board following consummation of
the Acquisition. In addition, Harry P. Jarvis and Mark E. Simpson, who currently
serve as directors of Portsmouth Savings, have been designated to serve as
trustees of CFX Bank. Furthermore, in connection with the Community Acquisition,
Douglas Crichfield, the President and Chief Executive Officer and a director of
Community and Concord Savings, has been designated by Community to serve as a
director of CFX and of CFX Bank following the Community Acquisition, and will
become an Executive Vice President of CFX and the President and Chief Executive
Officer of CFX Bank. In addition, John N. Buxton and Seth A. Resnicoff have been
designated to serve as directors of CFX, and Robert A. Hill and Lucia T.
Kittredge have been designated to serve as trustees of CFX Bank. Messrs. Buxton,
Resnicoff and Hill and Ms. Kittredge currently serve as directors of Community.
See "THE PROPOSED ACQUISITION -- Management and Operations After the
Acquisition."
Information regarding the current directors of CFX, the Portsmouth
directors who have been designated to serve on the CFX Board and the Community
directors who have been designated to serve on the CFX Board is incorporated by
reference from, respectively, CFX's Annual Report on Form 10-K/A, Portsmouth's
Annual Report on Form 10-K and Community's Annual Report on Form 10-K, each for
the year ended December 31, 1996. See "AVAILABLE INFORMATION; DOCUMENTS
INCORPORATED BY REFERENCE."
EFFECT ON EMPLOYEES AND BENEFIT PLANS
The Acquisition Agreement provides for the assumption by CFX of employment
contracts that Portsmouth (and/or Portsmouth Savings) currently has with five of
its executive officers, Mark E. Simpson, Rodney D. Pridham, William H. Little,
Donald H. Sargent and John J. Pratt, Jr. Pursuant to those employment contracts,
each of the officers would be entitled to receive severance benefits if he is
terminated without cause or resigns for good reason within five years following
a change in control (as such terms are defined in the contracts). The
Acquisition constitutes a change in control under the contracts. The severance
11
<PAGE> 18
benefits payable to such persons would be equal to between 1.00 and 2.99 times
their respective average annual compensation (as so defined), payable in a lump
sum and not offset by any wages earned from other employment. The Acquisition
Agreement also contains provisions relating to, among other things, employee
benefits, including the extension of CFX's employee severance benefits to
Portsmouth's employees, indemnification of directors and officers and
maintenance of directors' and officers' liability insurance after the
Acquisition. See "THE PROPOSED ACQUISITION -- Effect on Employees and Benefit
Plans."
CONDITIONS; AMENDMENT; TERMINATION
Consummation of the Acquisition is subject to satisfaction of a number of
conditions, including among other things:
(1) the approval of the Acquisition Agreement and related documents
(the "Transaction Documents") by the stockholders of CFX and Portsmouth
(the approval of the Transaction Documents by CFX stockholders will be
solicited at the Annual Meeting of Stockholders of CFX scheduled to be held
on July 30, 1997);
(2) the receipt of all necessary regulatory approvals, the expiration
of all applicable waiting periods, and the satisfaction of all regulatory
conditions to such approvals (CFX may abandon the Acquisition if any
regulatory approvals contain any condition or requirement not reasonably
foreseen as of the date of the Transaction Documents that, in the
reasonable good faith opinion of CFX Board of Directors (the "CFX Board")
materially and adversely affects the anticipated economic and business
benefits of the Acquisition to CFX);
(3) the effectiveness under the Securities Act of a registration
statement covering the issuance of the CFX Common Stock in connection with
the Acquisition, and the absence of any proceeding by the Commission to
suspend such effectiveness;
(4) the receipt of all necessary state securities or "Blue Sky"
permits or authorizations;
(5) the receipt of tax opinions satisfactory to CFX and Portsmouth;
(6) the receipt of all necessary and material consents and waivers;
(7) the absence of any order, decree or injunction of any court or
government agency that enjoins or prohibits the consummation of the
Acquisition; and
(8) the approval for listing on the AMEX, subject to official notice
of issuance, of shares of CFX Common Stock to be issued in the Acquisition.
In addition, as a condition to the obligations of CFX and CFX Bank to
consummate the Acquisition, no event may occur that would preclude the
Acquisition from being accounted for as a pooling-of-interests. The Acquisition
is not conditioned upon the closing of the Community Acquisition.
While the underlying Transaction Documents permit the relevant parties to
waive any or all conditions to consummation of the Acquisition (other than any
required stockholder or regulatory approval), the nature of the conditions
precedent described above that may be waived is that they are requirements under
applicable law or otherwise are such that Portsmouth does not anticipate waiving
such conditions or consummating the Acquisition in the event that any such
condition is not satisfied. Furthermore, the Transaction Documents may be
amended at any time, by mutual written agreement of the parties, except that,
after approval of the Transaction Documents by Portsmouth's stockholders, no
such modification shall alter or change the amount or kind of consideration to
be received by such stockholders pursuant to the Plan of Exchange or which
adversely effects the tax treatment to Portsmouth's stockholders as the result
of the receipt of such consideration. See "THE PROPOSED ACQUISITION --
Representations and Warranties; Conditions to the Acquisition; Waiver."
In addition, the Acquisition Agreement may be terminated by either CFX or
Portsmouth, either before or after stockholder approval, in the event of a
material breach, failure of a material condition, or certain other
circumstances. Portsmouth may also terminate the Acquisition Agreement if the
Average CFX Trading Price
12
<PAGE> 19
is below a certain price and CFX does not elect to increase the Exchange Ratio
to the Cure Ratio which produces a designated Per Portsmouth Share Value. See
"THE PROPOSED ACQUISITION -- Closing; Effective Date; Termination."
VOTE REQUIRED
The Acquisition must be approved by the affirmative vote of the holders of
at least a majority of the shares of Portsmouth Common Stock outstanding and
entitled to vote thereon. Directors and officers of Portsmouth and affiliates of
such persons had sole or shared voting power with respect to 396,248 shares of
Portsmouth Common Stock, representing 6.71% of the Portsmouth Common Stock
outstanding as of the Record Date. CFX has entered into agreements ("Voting
Agreements") with three members of the Portsmouth Board, who together have the
right to vote 5.21% of the Portsmouth Common Stock, whereby each such person has
agreed to vote all shares of Portsmouth Common Stock that he is entitled to vote
in favor of the Acquisition Agreement. See "MEETING INFORMATION -- Voting and
Revocation of Proxies."
REGULATORY AND OTHER APPROVALS
CFX has received prior approval of the Bank Merger from the Federal Deposit
Insurance Corporation (the "FDIC") under the Bank Merger Act and from the New
Hampshire Bank Commissioner (the "Commissioner") pursuant to Chapter 388 or
other applicable sections of the New Hampshire Revised Statutes Annotated (the
"NHRSA"). CFX has also filed an application with the Massachusetts Board of Bank
Incorporation for prior approval of the Holding Company Merger. CFX has received
a waiver from the Board of Governors of the Federal Reserve System (the "Federal
Reserve") of the Federal Reserve approval requirements under Section 3 of the
BHCA. See "THE PROPOSED ACQUISITION -- Regulatory and Other Approvals."
STOCK OPTION AGREEMENT
In connection with execution of the Acquisition Agreement, Portsmouth and
CFX executed a Stock Option Agreement (the "Stock Option Agreement") pursuant to
which Portsmouth granted CFX an option (the "Option") to purchase up to
1,164,840 authorized but unissued shares of Portsmouth Common Stock
(constituting approximately 19.99% of the shares of Portsmouth Common Stock
outstanding on the date of grant, adjusted to give effect to the 2% stock
dividend paid by Portsmouth on March 15, 1997) at a price of $15.44 share, such
number of shares and exercise price being subject to further adjustment under
certain circumstances. The Option is exercisable only upon the occurrence and
continuation of certain events that could jeopardize consummation of the
Acquisition pursuant to the terms of the Acquisition Agreement. See "THE
PROPOSED ACQUISITION -- Stock Option Agreement" and the text of the Stock Option
Agreement, attached hereto as Appendix B.
Portsmouth has agreed that it will not solicit or initiate inquiries or
proposals with respect to any acquisition or purchase of all or a substantial
portion of the assets or a substantial equity interest in, Portsmouth or
Portsmouth Savings (any of the foregoing being referred to as an "Acquisition
Transaction"). Portsmouth has also agreed that it will, as soon as practicable,
communicate to CFX the terms of any proposal, discussion, negotiation or inquiry
relating to an Acquisition Transaction which it may receive in respect of any
such transaction. See "THE PROPOSED ACQUISITION -- Business Pending the
Acquisition."
13
<PAGE> 20
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
the Acquisition to stockholders of Portsmouth. A more extensive summary is set
forth under the heading "THE PROPOSED ACQUISITION -- Certain Federal Income Tax
Consequences." Each of Portsmouth's stockholders should read in full the
detailed description of the material federal income tax consequences under that
heading. Moreover, because of the complexities of the federal income tax laws
and because the tax consequences may vary depending upon a stockholder's
individual circumstances or tax status, stockholders are strongly encouraged to
consult with their personal tax advisors with respect to the specific tax
consequences of the Acquisition to them, including the tax consequences of
applicable federal, state, local, foreign or other laws.
CFX and Portsmouth have received an opinion from Arnold & Porter concerning
certain federal income tax consequences of the Acquisition. CFX and Portsmouth
have provided Arnold & Porter with the facts, representations and assumptions on
which Arnold & Porter relied in rendering its opinion, which information is
consistent with the state of facts that CFX and Portsmouth believe will be
existing as of the Effective Date. Based on such facts, representations and
assumptions, Arnold & Porter has opined that, among other things, the
Acquisition, when consummated in accordance with the Acquisition Agreement and
certain related agreements, either will constitute or will be treated as part of
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Under either analysis, no gain or loss
will be recognized by the stockholders of Portsmouth who exchange all of their
Portsmouth Common Stock solely for CFX Common Stock pursuant to the Acquisition
(except to the extent that cash is received in lieu of the issuance of
fractional shares of CFX Common Stock).
Additional federal income tax consequences of the Acquisition, including
the federal income tax consequences of exercising dissenters' rights and
receiving cash in lieu of a fractional share interest in CFX Common Stock, are
discussed under the heading "THE PROPOSED ACQUISITION -- Certain Federal Income
Tax Consequences."
ACCOUNTING TREATMENT
The parties to the Acquisition Agreement expect the Acquisition to be
accounted for as a pooling-of-interests under generally accepted accounting
principles. The ability to account for the Acquisition as a pooling-of-interests
is a condition to the Acquisition. See "THE PROPOSED ACQUISITION -- Terms of the
Acquisition," "-- Closing; Effective Date; Termination" and "-- Accounting
Treatment."
CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS
Upon completion of the Acquisition, stockholders of Portsmouth will
automatically become stockholders of CFX and their rights as such will be
governed by CFX's Articles of Incorporation and By-laws rather than by
Portsmouth's Articles of Incorporation, as amended, and By-laws. The rights of
stockholders of CFX are different in certain respects from the rights of
stockholders of Portsmouth although both companies are New Hampshire
corporations. See "THE PROPOSED ACQUISITION -- Certain Differences in the Rights
of Stockholders."
DISSENTERS' RIGHTS
Under New Hampshire law, holders of Portsmouth Common Stock have the right
to dissent from the Acquisition and receive payment equal to the "fair value" of
their shares upon compliance with applicable statutory provisions, the full text
of which is attached as Appendix D to this Proxy Statement-Prospectus. See "THE
PROPOSED ACQUISITION -- Rights of Dissenting Stockholders."
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<PAGE> 21
MARKETS AND MARKET PRICES
CFX Common Stock is listed and traded on the AMEX under the symbol "CFX."
Portsmouth Common Stock is listed and traded on the Nasdaq National Market under
the symbol "POBS." The following table shows the market value per share for each
of CFX and Portsmouth and the Portsmouth Equivalent Per Share (as defined below)
at the dates set forth below:
Market value per common share:
<TABLE>
<CAPTION>
CLOSING SALES PRICE
-----------------------
CFX PORTSMOUTH PORTSMOUTH
COMMON COMMON EQUIVALENT
STOCK STOCK PER SHARE(1)
------ ------------ ------------
<S> <C> <C> <C>
February 12, 1997(2).................................... $18.50 $15.44 $17.23
June 11, 1997(3)........................................ $18.25 $16.13 $17.00
</TABLE>
- ---------------
(1) The equivalent market value per share of Portsmouth Common Stock represents
the closing sales price of CFX Common Stock on the dates reported multiplied
by an Exchange Ratio of 0.9314. The Exchange Ratio would differ if the
Average CFX Trading Price were below $17.375. See "THE PROPOSED ACQUISITION
-- Terms of the Acquisition."
(2) The business day immediately preceding the public announcement of the
signing of the Acquisition Agreement.
(3) The business day immediately preceding the Record Date.
The table below sets forth high and low sales prices for CFX Common Stock
as quoted on the AMEX and sets forth for Portsmouth Common Stock high and low
closing sales prices as quoted on the Nasdaq NM, in all cases as adjusted for
stock splits and stock dividends. The table below also sets forth the cash
dividends declared for the periods indicated, as adjusted for stock splits and
stock dividends:
<TABLE>
<CAPTION>
CFX(1) PORTSMOUTH
----------------------------- ------------------------------
QUARTER ENDED HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
- ---------------------------------------------------------- ------ ------ --------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
June 30, 1997 (through June 11, 1997)................. 18.375 15.50 0.2200 16.375 13.875 0.1500
March 31, 1997........................................ 18.5 15.125 0.2200 16.00 13.4844 0.1500
1996
December 31, 1996..................................... 16.625 13.625 0.2095 14.875 12.625 0.3922
September 30, 1996.................................... 15.25 11.625 0.1905 13.75 12.375 0.1471
June 30, 1996......................................... 14.375 12.25 (2) 14.50 12.75 0.1471
March 31, 1996........................................ 15.375 12.875 0.1714 15.25 13.5 0.1471
1995
December 31, 1995..................................... 16.625 13.25 0.3266 14.875 13.00 0.3845
September 30, 1995.................................... 16.5 13.50 0.1451 13.75 11.125 0.125
June 30, 1995......................................... 15.375 11.00 0.1451 11.75 10.50 0.125
March 31, 1995........................................ 11.75 9.50 0.1391 11.75 10.75 0.1153
</TABLE>
- ---------------
(1) Stock prices and dividends have been restated to reflect CFX's 5% Common
Stock dividend declared on December 10, 1996.
(2) The dividend for the second quarter of 1996 was omitted in order for CFX's
acquisition of SFNB and its parent company and Milford to be accounted for
as pooling-of-interests transactions.
No assurance can be given as to what the Average CFX Trading Price will be
when and if the Acquisition is consummated. Stockholders of Portsmouth are
advised to obtain current market quotations for CFX Common Stock.
The amount of future dividends paid by CFX will be determined in light of
CFX's results of operations, financial condition, regulatory constraints and
other factors deemed relevant by the CFX Board. In order to comply with
technical financial accounting rules related to the payment of special dividends
preceding a business combination, the CFX Board determined to omit CFX's regular
cash dividend for the second quarter
15
<PAGE> 22
of 1996. Omission of the second quarter dividend in an amount equal to the
special dividend paid by CFX in January 1996 was necessary to permit CFX to
account for an acquisition as a pooling transaction. See "THE PROPOSED
ACQUISITION -- Accounting Treatment." CFX resumed normal dividends during the
third quarter of 1996. CFX's ability to maintain dividend payments in the future
also could be affected by the level of core earnings, economic conditions,
credit quality, regulatory policies, capital needs, growth objectives, the
ability of bank and nonbank subsidiaries to pay upstream dividends to CFX and
other relevant factors. The funds available to CFX for the payment of dividends
are cash and cash equivalents held at the holding company level, interest and
dividends earned on investments, dividends paid to CFX by its subsidiaries and
borrowings. See "CERTAIN REGULATORY CONSIDERATIONS -- Restrictions on Payment of
Dividends."
COMPARATIVE PER SHARE DATA
The following table sets forth at the dates and for the periods indicated
(i) historical consolidated per share data for CFX Common Stock and Portsmouth
Common Stock, (ii) pro forma combined per share data for CFX Common Stock (with
Portsmouth only), (iii) pro forma combined per share data for CFX Common Stock
(with Portsmouth and Community), (iv) equivalent per share data for Portsmouth
Common Stock reflecting consummation of the Acquisition only and (v) equivalent
per share data for Portsmouth Common Stock reflecting consummation of the
Acquisition and the Community Acquisition. The table presents pro forma
information at an Exchange Ratio of 1.0294.
The CFX pro forma data (with Portsmouth only) represents the effect of the
Acquisition on a share of CFX Common Stock. The Portsmouth equivalent pro forma
data represents the CFX pro forma data (with Portsmouth only) multiplied by a
minimum Exchange Ratio of .9314 and a maximum Exchange Ratio of 1.0294 and
thereby reflects the effect of the Acquisition on a share of Portsmouth Common
Stock.
The CFX pro forma combined data (with Portsmouth and Community) represents
the effect of the Acquisition and the Community Acquisition on a share of CFX
Common Stock. The Portsmouth equivalent pro forma data (assuming the Acquisition
and the Community Acquisition) represents the CFX pro forma combined data (with
Portsmouth and Community) multiplied by the applicable Exchange Ratio of a
minimum Exchange Ratio of .9314 and a maximum Exchange Ratio of 1.0294 and
thereby reflects the effect of the Acquisition and the Community Acquisition on
a share of Portsmouth Common Stock. The Community equivalent pro forma data
(assuming the Acquisition and the Community Acquisition) represents the CFX pro
forma combined data (with Portsmouth and Community) multiplied by a Community
minimum Exchange Ratio of 2.0 and a maximum Exchange Ratio of 2.2, and thereby
reflects the effect of the Acquisition and the Community Acquisition on a share
of Community Common Stock. Earnings per share data is based on net earnings
before cumulative effects on changes in accounting principles for all companies.
The information is derived from the historical financial statements of CFX
and Community, including the related notes thereto, incorporated by reference in
this Proxy Statement-Prospectus, and the historical financial statements of
Portsmouth, including the related notes thereto, appearing elsewhere herein, and
the pro forma combined financial information giving effect to the Acquisition
and the Community Acquisition, appearing elsewhere herein, and should be read in
conjunction with such information. The pro forma data is presented for
comparative purposes only and is not necessarily indicative of the combined
financial position or results of operations that would have been realized had
the Acquisition and the Community Acquisition been consummated during the
periods or as of the dates for which the pro forma data is presented or which
will be attained in the future. The following pro forma income statement data
and balance sheet data have been presented as if the Acquisition and the
Community Acquisition had occurred at the beginning of the earliest period
presented. See "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE,"
"PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)" and the 1996
Portsmouth Annual Report to Stockholders that accompanies this Proxy
Statement-Prospectus. Furthermore, there can be no assurance that the Average
CFX Trading Price will be such that the Exchange Ratio would be 0.9314. See "THE
PROPOSED ACQUISITION -- Terms of the Acquisition."
16
<PAGE> 23
CFX CORPORATION -- PORTSMOUTH BANK SHARES, INC. -- COMMUNITY BANKSHARES, INC.
COMPARATIVE PER SHARE DATA
MINIMUM EXCHANGE RATIO
<TABLE>
<CAPTION>
CFX
PRO FORMA
COMBINED
WITH
CFX PORTSMOUTH PORTSMOUTH
HISTORICAL HISTORICAL(1) ONLY(2)
---------- ------------- ----------
<S> <C> <C> <C>
Earnings Per Common Share
Quarter Ended March 31,
1997................................................................ $ 0.36 $ 0.26 $ 0.34
1996................................................................ $ 0.28 $ 0.25 $ 0.28
Year Ended December 31,
1996................................................................ $ 0.99 $ 0.98 $ 1.01
1995................................................................ $ 0.89 $ 0.99 $ 0.94
1994................................................................ $ 0.58 $ 0.96 $ 0.72
Dividends Declared Per Common Share
Quarter Ended March 31,
1997................................................................ $ 0.22 $ 0.15 $ 0.22
1996................................................................ $ 0.17 $ 0.15 $ 0.17
Year Ended December 31,
1996................................................................ $ 0.55 $ 0.83 $ 0.55
1995................................................................ $ 0.50 $ 0.76 $ 0.50
1994................................................................ $ 0.31 $ 0.71 $ 0.31
Book Value Per Common Share
March 31, 1997...................................................... $10.25 $ 11.25 $10.79
December 31, 1997................................................... $10.24 $ 11.34 $10.81
<CAPTION>
CFX
PRO FORMA PORTSMOUTH
COMBINED EQUIVALENT
WITH PRO FORMA
PORTSMOUTH PORTSMOUTH CFX
EQUIVALENT AND PORTSMOUTH
PRO FORMA(3) COMMUNITY(4) COMMUNITY(5)
------------ ------------ ------------
<S> <C> <C> <C>
Earnings Per Common Share
Quarter Ended March 31,
1997................................................................ $ 0.32 $ 0.32 $ 0.30
1996................................................................ $ 0.26 $ 0.27 $ 0.25
Year Ended December 31,
1996................................................................ $ 0.94 $ 1.01 $ 0.94
1995................................................................ $ 0.88 $ 0.92 $ 0.86
1994................................................................ $ 0.67 $ 0.73 $ 0.68
Dividends Declared Per Common Share
Quarter Ended March 31,
1997................................................................ $ 0.20 $ 0.22 $ 0.20
1996................................................................ $ 0.16 $ 0.17 $ 0.16
Year Ended December 31,
1996................................................................ $ 0.51 $ 0.55 $ 0.51
1995................................................................ $ 0.47 $ 0.50 $ 0.47
1994................................................................ $ 0.29 $ 0.31 $ 0.29
Book Value Per Common Share
March 31, 1997...................................................... $10.05 $10.29 $ 9.58
December 31, 1997................................................... $10.07 $10.29 $ 9.58
</TABLE>
- ---------------
(1) The historical per share data for Portsmouth has been restated to reflect
the 2% stock dividend paid on March 15, 1997.
(2) The pro forma per share data gives effect to the Acquisition but does not
reflect anticipated expenses and nonrecurring charges which may result from
the Acquisition. The pro forma information presented does not reflect
anticipated acquisition and integration costs, nor does it reflect potential
savings or revenue enhancements resulting from the Acquisition. CFX pro
forma dividends per share represent CFX historical dividends per share.
(3) The equivalent pro forma per share data for Portsmouth represents the pro
forma combined data for CFX (CFX and Portsmouth only) multiplied by an
Exchange Ratio of .9314.
(4) The pro forma per share data gives effect to the Acquisition and the
Community Acquisition but does not reflect anticipated expenses and
nonrecurring charges which may result from the Acquisition and the Community
Acquisition. The pro forma information presented does not reflect
anticipated acquisition and integration costs, nor does it reflect potential
savings or revenue enhancements resulting from the Acquisition and the
Community Acquisition. See "PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)." CFX pro forma dividends per share represent CFX historical
dividends per share.
(5) The equivalent pro forma per share data for Portsmouth represents the pro
forma combined data for CFX (CFX, Portsmouth and Community) multiplied by an
Exchange Ratio of .9314.
17
<PAGE> 24
CFX CORPORATION -- PORTSMOUTH BANK SHARES, INC. -- COMMUNITY BANKSHARES, INC.
COMPARATIVE PER SHARE DATA
MAXIMUM EXCHANGE RATIO
<TABLE>
<CAPTION>
CFX
PRO FORMA
COMBINED
WITH
CFX PORTSMOUTH PORTSMOUTH
HISTORICAL HISTORICAL(1) ONLY(2)
---------- ------------- ----------
<S> <C> <C> <C>
Earnings Per Common Share
Quarter Ended March 31,
1997.................................................................................... $ 0.36 $ 0.26 $ 0.33
1996.................................................................................... $ 0.28 $ 0.25 $ 0.27
Year Ended December 31,
1996.................................................................................... $ 0.99 $ 0.98 $ 0.97
1995.................................................................................... $ 0.89 $ 0.99 $ 0.91
1994.................................................................................... $ 0.58 $ 0.96 $ 0.70
Dividends Declared Per Common Share
Quarter Ended March 31,
1997.................................................................................... $ 0.22 $ 0.15 $ 0.22
1996.................................................................................... $ 0.17 $ 0.15 $ 0.17
Year Ended December 31,
1996.................................................................................... $ 0.55 $ 0.83 $ 0.55
1995.................................................................................... $ 0.50 $ 0.76 $ 0.50
1994.................................................................................... $ 0.31 $ 0.71 $ 0.31
Book Value Per Common Share
March 31, 1997.......................................................................... $10.25 $ 11.25 $10.47
December 31, 1996....................................................................... $10.24 $ 11.34 $10.49
<CAPTION>
CFX
PRO FORMA PORTSMOUTH
COMBINED EQUIVALENT
WITH PRO FORMA
PORTSMOUTH PORTSMOUTH CFX
EQUIVALENT AND PORTSMOUTH
PRO FORMA(3) COMMUNITY(4) COMMUNITY(5)
------------ ------------ ------------
<S> <C> <C> <C>
Earnings Per Common Share
Quarter Ended March 31,
1997.................................................................................... $ 0.34 $ 0.31 $ 0.32
1996.................................................................................... $ 0.28 $ 0.26 $ 0.26
Year Ended December 31,
1996.................................................................................... $ 1.00 $ 0.96 $ 0.99
1995.................................................................................... $ 0.94 $ 0.88 $ 0.91
1994.................................................................................... $ 0.72 $ 0.69 $ 0.71
Dividends Declared Per Common Share
Quarter Ended March 31,
1997.................................................................................... $ 0.23 $ 0.22 $ 0.23
1996.................................................................................... $ 0.18 $ 0.17 $ 0.18
Year Ended December 31,
1996.................................................................................... $ 0.57 $ 0.55 $ 0.57
1995.................................................................................... $ 0.51 $ 0.50 $ 0.51
1994.................................................................................... $ 0.32 $ 0.31 $ 0.32
Book Value Per Common Share
March 31, 1997.......................................................................... $10.78 $ 9.84 $10.13
December 31, 1996....................................................................... $10.80 $ 9.84 $10.13
</TABLE>
- ---------------
(1) The historical per share data for Portsmouth has been restated to reflect
the 2% stock dividend paid on March 15, 1997.
(2) The pro forma per share data gives effect to the Acquisition but does not
reflect anticipated expenses and nonrecurring charges which may result from
the Acquisition. The pro forma information presented does not reflect
anticipated acquisition and integration costs, nor does it reflect potential
savings or revenue enhancements resulting from the Acquisition. CFX pro
forma dividends per share represent CFX historical dividends per share.
(3) The equivalent pro forma per share data for Portsmouth represents the pro
forma combined data for CFX (CFX and Portsmouth only) multiplied by an
Exchange Ratio of 1.0294.
(4) The pro forma per share data gives effect to the Acquisition and the
Community Acquisition but does not reflect anticipated expenses and
nonrecurring charges which may result from the Acquisition and the Community
Acquisition. The pro forma information presented does not reflect
anticipated acquisition and integration costs, nor does it reflect potential
savings or revenue enhancements resulting from the Acquisition and the
Community Acquisition. See "PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)." CFX pro forma dividends per share represent CFX historical
dividends per share.
(5) The equivalent pro forma per share data for Portsmouth represents the pro
forma combined data for CFX (CFX, Portsmouth and Community) multiplied by an
Exchange Ratio of 1.0294.
18
<PAGE> 25
CFX CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data, excluding average balance
and net interest margin data, for the five years ended December 31, 1996 is
derived from the audited consolidated financial statements of CFX. The financial
data for the three-month periods ended March 31, 1997 and 1996 are derived from
unaudited financial statements. The data should be read in conjunction with the
consolidated financial statements, related notes and other financial information
incorporated by reference. See "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY
REFERENCE" and "PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)."
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS AT OR FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
------------------------ ------------------------
1997 1996 1996 1995(1)
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Interest and dividend income.............................................. $ 29,503 $ 25,740 $ 108,425 $ 96,389
Interest expense.......................................................... 14,499 12,039 51,566 44,363
---------- ---------- ---------- ----------
Net interest and dividend income.......................................... 15,004 13,701 56,859 52,026
Provision for loan and lease losses....................................... 702 905 2,935 3,037
---------- ---------- ---------- ----------
Net interest and dividend income after provision for loan and lease
losses.................................................................. 14,302 12,796 53,924 48,989
Other income.............................................................. 4,372 3,832 16,827 14,311
Other expense............................................................. 11,974 11,577 51,370 46,202
---------- ---------- ---------- ----------
Income before income taxes................................................ 6,700 5,051 19,381 17,098
Income taxes.............................................................. 1,958 1,496 6,740 5,760
---------- ---------- ---------- ----------
Net income................................................................ 4,742 3,555 12,641 11,338
Preferred stock dividends................................................. -- -- -- 89
---------- ---------- ---------- ----------
Net income available to common stock...................................... $ 4,742 $ 3,555 $ 12,641 $ 11,249
========== ========== ========== ==========
Weighted average common shares outstanding................................ 13,014 12,714 12,823 12,701
========== ========== ========== ==========
ENDING BALANCE SHEET DATA:
Total assets.............................................................. $1,744,449 $1,415,507 $1,547,092 $1,344,880
Investments............................................................... 415,002 360,844 278,191 311,814
Net loans and leases...................................................... 1,134,997 932,011 1,102,424 911,981
Allowance for loan and lease losses....................................... 15,661 15,322 15,740 15,449
Foreclosed real estate.................................................... 1,806 1,364 2,223 1,186
Deposits.................................................................. 1,223,530 1,119,270 1,157,207 1,056,824
Borrowed funds............................................................ 343,216 149,130 242,455 146,826
Total shareholders' equity................................................ 133,819 127,948 132,953 127,032
Common shares outstanding................................................. 13,050 12,778 12,981 12,683
PER SHARE DATA AND OTHER SELECTED RATIOS:
Common earnings per share................................................. $ 0.36 $ 0.28 $ 0.99 $ 0.89
Dividends declared per common share....................................... $ 0.22 $ 0.17 $ 0.55 $ 0.50
Common dividend payout ratio.............................................. 61.11% 60.71% 55.56% 56.18%
Common shareholders' equity per share..................................... $ 10.25 $ 10.01 $ 10.24 $ 10.02
Total shareholders' equity to assets at period end........................ 7.67% 9.04% 8.59% 9.45%
Average total shareholders' equity to average total assets................ 8.40% 9.65% 8.94% 9.45%
Return on average assets.................................................. 1.19% 1.03% 0.86% 0.86%
Return on average common shareholders' equity............................. 14.14% 10.62% 9.58% 9.17%
Net interest margin....................................................... 4.15% 4.31% 4.24% 4.36%
<CAPTION>
AT OR FOR THE YEARS
ENDED DECEMBER 31,
------------------------
1994(1) 1993(1)(2) 1992(1)
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <<C> <C> <C>
RESULTS OF OPERATIONS DATA:
Interest and dividend income.............................................. $ 81,637 $ 79,076 $ 89,770
Interest expense.......................................................... 33,639 32,598 44,361
---------- ---------- ----------
Net interest and dividend income.......................................... 47,998 46,478 45,409
Provision for loan and lease losses....................................... 2,697 11,608 6,728
---------- ---------- ----------
Net interest and dividend income after provision for loan and lease
losses.................................................................. 45,301 34,870 38,681
Other income.............................................................. 11,079 11,672 7,509
Other expense............................................................. 44,864 41,715 37,579
---------- ---------- ----------
Income before income taxes................................................ 11,516 4,827 8,611
Income taxes.............................................................. 4,272 630 3,355
---------- ---------- ----------
Net income................................................................ 7,244 4,197 5,256
Preferred stock dividends................................................. 268 270 270
---------- ---------- ----------
Net income available to common stock...................................... $ 6,976 $ 3,927 $ 4,986
========== ========== ==========
Weighted average common shares outstanding................................ 12,052 11,661 11,909
========== ========== ==========
ENDING BALANCE SHEET DATA:
Total assets.............................................................. $1,267,113 $1,218,394 $1,152,323
Investments............................................................... 308,241 369,297 290,752
Net loans and leases...................................................... 828,355 731,738 749,447
Allowance for loan and lease losses....................................... 14,401 16,168 12,639
Foreclosed real estate.................................................... 2,599 4,110 20,182
Deposits.................................................................. 999,217 974,694 1,006,977
Borrowed funds............................................................ 139,496 82,623 20,421
Total shareholders' equity................................................ 118,918 117,327 115,627
Common shares outstanding................................................. 12,185 11,661 11,960
PER SHARE DATA AND OTHER SELECTED RATIOS:
Common earnings per share................................................. $ 0.58 $ 0.34 $ 0.42
Dividends declared per common share....................................... $ 0.31 $ 0.27 $ 0.25
Common dividend payout ratio.............................................. 53.45% 79.41% 59.52%
Common shareholders' equity per share..................................... $ 9.74 $ 9.77 $ 9.38
Total shareholders' equity to assets at period end........................ 9.38% 9.63% 10.03%
Average total shareholders' equity to average total assets................ 9.35% 10.22% 10.05%
Return on average assets.................................................. 0.56% 0.34% 0.43%
Return on average common shareholders' equity............................. 6.12% 3.43% 4.53%
Net interest margin....................................................... 4.27% 4.41% 4.27%
</TABLE>
- ---------------
(1) Prior period financial data has been restated to reflect the 1996
pooling-of-interests with The Safety Fund Corporation and Milford
Co/operative Bank and CFX's 5% stock dividend declared on December 10, 1996.
(2) On September 1, 1993, CFX acquired the remaining 52.4% of Colonial Mortgage,
Inc. ("Colonial") (renamed CFX Mortgage, Inc.). Previously, CFX owned 47.6%
of Colonial and, as a result of the purchase, Colonial became a wholly-owned
subsidiary. The transaction was accounted for by the purchase method of
accounting.
19
<PAGE> 26
PORTSMOUTH BANK SHARES, INC.
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data, excluding average balance
and net interest margin data, at or for the five years ended December 31, 1996,
is derived from the audited consolidated financial statements of Portsmouth Bank
Shares, Inc. The same data at or for the three-month periods ended March 31,
1997 and 1996 are derived from unaudited consolidated financial statements. The
data should be read in conjunction with the consolidated financial statements,
related notes and other financial information incorporated by reference in this
Proxy Statement-Prospectus. See "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED
BY REFERENCE."
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS AT OR FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
--------------------- -------------------
1997 1996 1996
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Interest and dividend income....................................................... $ 4,580 $ 4,499 $ 18,302
Interest expense................................................................... 1,995 2,008 8,259
-------- -------- --------
Net interest and dividend income................................................... 2,585 2,491 10,043
Provision for loan and lease losses................................................ -- -- --
-------- -------- --------
Net interest and dividend income after provision for loan and lease losses......... 2,585 2,491 10,043
Other income....................................................................... 242 534 1,888
Other expense...................................................................... 888 921 3,527
-------- -------- --------
Income before income taxes and cumulative effect of change in accounting
principle........................................................................ 1,939 2,104 8,404
Income taxes....................................................................... 431 643 2,447
-------- -------- --------
Net income before cumulative effect of change in accounting principle.............. 1,508 1,461 5,957
Cumulative effect of change in accounting principle................................ -- -- --
-------- -------- --------
Net income......................................................................... 1,508 1,461 5,957
Preferred stock dividends.......................................................... -- -- --
-------- -------- --------
Net income available to common stock............................................... $ 1,508 $ 1,461 $ 5,957
======== ======== ========
Weighted average common shares outstanding(2)...................................... 5,843 5,852 6,074
======== ======== ========
ENDING BALANCE SHEET DATA:
Total assets....................................................................... $262,921 $267,428 $271,569
Investments........................................................................ 152,954 173,468 159,286
Net loans and leases............................................................... 97,279 82,202 100,042
Allowance for loan and lease losses................................................ 688 687 687
Foreclosed real estate............................................................. 100 236 100
Deposits........................................................................... 194,090 196,298 198,148
Borrowed funds..................................................................... -- -- --
Total shareholders' equity......................................................... 66,066 66,992 66,077
Common shares outstanding(2)....................................................... 5,872 5,852 5,825
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings per common and common equivalent shares(2)................................ $ 0.26 $ 0.25 $ 0.98
Dividends declared per common share(2)............................................. $ 0.15 $ 0.15 $ 0.83
Common dividend payout ratio....................................................... 57.69% 60.00% 84.69%
Common shareholders' equity per share(2)........................................... $ 11.25 $ 11.46 $ 11.34
Total shareholders' equity to assets at period end................................. 25.13% 25.05% 24.33%
Average total shareholders' equity to average assets............................... 24.56% 24.55% 24.25%
Return on average assets........................................................... 2.32% 2.25% 2.25%
Return on average common shareholders' equity...................................... 9.44% 9.15% 9.28%
Net interest margin................................................................ 4.07% 3.95% 3.93%
<CAPTION>
AT OR FOR THE
THREE MONTHS AT OR FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
--------------------- -------------------
1995 1994 1993(1) 1992
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Interest and dividend income....................................................... $ 18,546 $ 17,956 $ 19,164 $ 20,509
Interest expense................................................................... 7,684 6,247 7,467 10,565
-------- -------- -------- --------
Net interest and dividend income................................................... 10,862 11,709 11,697 9,944
Provision for loan and lease losses................................................ -- -- 71 201
-------- -------- -------- --------
Net interest and dividend income after provision for loan and lease losses......... 10,862 11,709 11,626 9,743
Other income....................................................................... 1,226 503 750 764
Other expense...................................................................... 3,608 4,035 4,208 4,654
-------- -------- -------- --------
Income before income taxes and cumulative effect of change in accounting
principle........................................................................ 8,480 8,177 8,168 5,853
Income taxes....................................................................... 2,439 2,305 1,952 1,385
-------- -------- -------- --------
Net income before cumulative effect of change in accounting principle.............. 6,041 5,872 6,216 4,468
Cumulative effect of change in accounting principle................................ -- -- (77) --
-------- -------- -------- --------
Net income......................................................................... 6,041 5,872 6,139 4,468
Preferred stock dividends.......................................................... -- -- -- --
-------- -------- -------- --------
Net income available to common stock............................................... $ 6,041 $ 5,872 $ 6,139 $ 4,468
======== ======== ======== ========
Weighted average common shares outstanding(2)...................................... 6,082 6,121 5,940 5,803
======== ======== ======== ========
ENDING BALANCE SHEET DATA:
Total assets....................................................................... $267,272 $261,155 $276,339 $293,956
Investments........................................................................ 178,892 164,039 183,361 186,605
Net loans and leases............................................................... 76,451 78,684 79,291 93,088
Allowance for loan and lease losses................................................ 727 767 807 843
Foreclosed real estate............................................................. 668 948 1,039 1,500
Deposits........................................................................... 195,570 195,396 210,519 230,890
Borrowed funds..................................................................... -- -- -- --
Total shareholders' equity......................................................... 67,776 62,715 62,228 59,656
Common shares outstanding(2)....................................................... 5,735 5,683 5,733 5,580
PER SHARE DATA AND OTHER SELECTED RATIOS:
Earnings per common and common equivalent shares(2)................................ $ 0.99 $ 0.96 $ 1.03 $ 0.77
Dividends declared per common share(2)............................................. $ 0.75 $ 0.71 $ 0.86 $ 0.70
Common dividend payout ratio....................................................... 75.76% 73.96% 83.50% 90.91%
Common shareholders' equity per share(2)........................................... $ 11.81 $ 11.04 $ 10.85 $ 10.69
Total shareholders' equity to assets at period end................................. 25.36% 24.01% 22.52% 20.29%
Average total shareholders' equity to average assets............................... 24.15% 23.03% 21.06% 20.26%
Return on average assets........................................................... 2.31% 2.18% 2.14% 1.57%
Return on average common shareholders' equity...................................... 9.58% 9.21% 9.85% 7.76%
Net interest margin................................................................ 4.32% 4.52% 4.28% 3.78%
</TABLE>
- ---------------
(1) Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," was adopted by Portsmouth effective January 1, 1993. The cumulative
effect of the change in accounting principle on years prior to 1993 was to
increase 1993 net income available to Portsmouth Common Stock by $77,000, or
$.01 per share.
(2) Common share data has been restated to give retroactive effect to the 2%
common stock dividend paid on March 15, 1997.
20
<PAGE> 27
CFX CORPORATION -- PORTSMOUTH BANK SHARES, INC.
SELECTED PRO FORMA COMBINED FINANCIAL DATA (UNAUDITED)
The following table sets forth certain unaudited pro forma combined
financial data for CFX after giving effect to the Acquisition and certain pro
forma adjustments using a maximum Exchange Ratio of 1.0294 as if the Acquisition
had been accounted for as a pooling-of-interests. All pro forma balance sheets
have been prepared as if the acquisitions had been consummated as of March 31,
1997, and all pro forma income statements have been prepared as if the
acquisitions had been consummated as of the beginning of the earliest period
presented. The actual Exchange Ratio will depend on the market price of CFX
Common Stock during a valuation period in the ten days preceding the receipt of
the last regulatory approval for consummation of the Portsmouth Acquisition. See
"THE PROPOSED ACQUISITION -- Terms of the Acquisition." This information should
be read in conjunction with the historical financial statements of CFX and
Portsmouth, related notes and other financial information incorporated by
reference herein or included elsewhere in this Proxy Statement -- Prospectus.
The pro forma consolidated financial statements may not be indicative of the
financial position or results that actually would have occurred had the
Acquisition been consummated on the dates indicated, or which will be attained
in the future. See "PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)"
and "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE."
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS AT OR FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
----------------------- ------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Interest and dividend income................. $ 34,083 $ 30,239 $ 126,727 $ 114,935 $ 99,593
Interest expense............................. 16,494 14,047 59,825 52,047 39,886
---------- ---------- ---------- ---------- ----------
Net interest and dividend income............. 17,589 16,192 66,902 62,888 59,707
Provision for loan and lease losses.......... 702 905 2,935 3,037 2,697
---------- ---------- ---------- ---------- ----------
Net interest and dividend income after
provision for loan and lease losses........ 16,887 15,287 63,967 59,851 57,010
Other income................................. 4,614 4,366 18,715 15,537 11,582
Other expense................................ 12,862 12,498 54,897 49,810 48,899
---------- ---------- ---------- ---------- ----------
Income before income taxes................... 8,639 7,155 27,785 25,578 19,693
Income taxes................................. 2,389 2,139 9,187 8,199 6,577
---------- ---------- ---------- ---------- ----------
Net income................................... 6,250 5,016 18,598 17,379 13,116
Preferred stock dividends.................... -- -- -- 89 268
---------- ---------- ---------- ---------- ----------
Net income available to common stock......... $ 6,250 $ 5,016 $ 18,598 $ 17,290 $ 12,848
========== ========== ========== ========== ==========
Weighted average common shares outstanding... 19,029 18,738 19,076 18,962 18,353
========== ========== ========== ========== ==========
ENDING BALANCE SHEET DATA:
Total assets................................. $2,007,370 $1,682,935 $1,818,661 $1,612,152 $1,528,268
Investments.................................. 567,956 534,312 437,477 490,706 472,280
Net loans and leases......................... 1,232,276 1,014,213 1,202,466 988,432 907,039
Allowance for loan and lease losses.......... 16,349 16,009 16,427 16,176 15,168
Foreclosed real estate....................... 1,906 1,600 2,323 1,854 3,547
Deposits..................................... 1,417,620 1,315,568 1,355,355 1,252,394 1,194,613
Borrowed funds............................... 343,216 149,130 242,455 146,826 139,496
Total shareholders' equity................... 199,885 194,940 199,030 194,808 181,633
Common shares outstanding.................... 19,095 18,802 18,978 18,587 18,036
PER SHARE DATA AND OTHER SELECTED
RATIOS:
Common earnings per share.................... $ 0.33 $ 0.27 $ 0.97 $ 0.91 $ 0.70
Common shareholders' equity
per share.................................. $ 10.47 $ 10.37 $ 10.49 $ 10.48 $ 10.07
Total shareholders' equity to assets at
period end................................. 9.96% 11.58% 10.94% 12.08% 11.88%
Average total shareholders' equity to average
total assets............................... 10.67% 12.01% 11.27% 13.60% 11.77%
Return on average assets..................... 1.35% 1.22% 1.07% 1.26% 0.84%
Return on average common
shareholders' equity....................... 12.63% 10.15% 9.48% 9.25% 7.15%
Net interest margin.......................... 4.15% 4.26% 4.19% 4.35% 4.32%
</TABLE>
21
<PAGE> 28
MEETING INFORMATION
DATE, PLACE AND TIME
The Special Meeting of Stockholders of Portsmouth will be held at Yoken's
Restaurant and Conference Center, Route 1, Portsmouth, New Hampshire on July 31,
1997, at 10:00 a.m. local time.
RECORD DATE; VOTING RIGHTS
The close of business on June 12, 1997 has been fixed as the record date
for the determination of stockholders of Portsmouth entitled to receive notice
of and to vote at the Special Meeting. The holders of each of the 5,901,310
shares of Portsmouth Common Stock outstanding on the Record Date will be
entitled to one vote for each share held of record upon each matter properly
submitted at the Special Meeting. At such date, there were approximately 1,042
stockholders of record. Under Portsmouth's Articles of Organization, the
presence, in person or by proxy, of the holders of a majority of the outstanding
shares of Portsmouth Common Stock entitled to vote at the Special Meeting is
necessary to constitute a quorum for the transaction of any item of business at
the Special Meeting.
The Acquisition must be approved by the affirmative vote of the holders of
at least a majority of the shares of Portsmouth Common Stock outstanding and
entitled to vote thereon.
VOTING AND REVOCATION OF PROXIES
Shares of Portsmouth Common Stock represented by a proxy properly signed
and returned will be voted at the Special Meeting in accordance with the
instructions thereon. If a proxy is signed and returned without indicating any
voting instructions, the shares of Portsmouth Common Stock represented by such
proxy will be voted FOR approval of the Acquisition Agreement and, on other
matters presented for a vote, as determined by a majority of the Portsmouth
Board or, in the absence of such determination, in accordance with the judgment
of the persons acting under the proxy.
The presence of a stockholder at the Special Meeting will not automatically
revoke such stockholder's proxy. However, stockholders may revoke a proxy at any
time prior to its exercise by filing with the Secretary of Portsmouth a written
notice of revocation, by delivering to Portsmouth a duly executed proxy bearing
a later date or by attending the Special Meeting and voting in person. Written
notices of revoked proxies may be directed to: Mark E. Simpson, Secretary,
Portsmouth Bank Shares, Inc., 333 State Street, Portsmouth, NH 03801.
Under the New Hampshire Business Corporation Act of 1993, shares of
Portsmouth Common Stock may take action on a matter at the Special Meeting only
if a quorum of those shares exists with respect to that matter. Once a share of
Portsmouth Common Stock is represented for any purpose at the Special Meeting,
it is deemed to be present for quorum purposes for the remainder of the meeting.
Accordingly, shares of Portsmouth Common Stock represented by executed proxies
received by Portsmouth will be counted for purposes of establishing a quorum at
the Special Meeting with respect to all proposals, even if they are voted only
on a specific proposal. Votes withheld by nominee recordholders who did not
receive specific instructions from the beneficial owners of such shares will not
be treated as votes cast or as shares present or represented. Under the rules of
the New York Stock Exchange, brokers who hold shares in street name for
customers who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such customers in favor of the approval
of the Acquisition Agreement without specific instructions from such customers.
Accordingly, the failure of such customers to provide instructions with respect
to their shares of Portsmouth Common Stock to their broker will have the effect
of such shares not being voted and therefore will have the same effect as votes
against the Acquisition Agreement. Such instances, if any, are referred to as
broker non-votes.
The Portsmouth Board is not aware of any other business to be acted upon at
the Special Meeting other than as described herein. It is not anticipated that
other matters will be brought before the Special Meeting. If, however, other
matters are duly brought before the Special Meeting, or any adjournment thereof,
the persons appointed as proxies will have discretion to vote or act thereon as
determined by a majority of the
22
<PAGE> 29
Portsmouth Board or, in the absence of such determination, according to their
best judgment. The persons named as proxies by a stockholder may propose and
vote for one or more adjournments or postponements of the Special Meeting to
permit another solicitation of proxies in favor of the Acquisition Agreement. No
proxy which is voted against the proposal to approve the Acquisition Agreement
will be voted in favor of any such adjournment or postponement.
In connection with the Acquisition, three members of the Portsmouth Board
have entered into Voting Agreements to vote all of the shares of Portsmouth
Common Stock they are entitled to vote with respect thereto at the Special
Meeting in favor of the Acquisition Agreement. The number of shares of
Portsmouth Common Stock which such directors are entitled to vote as of June 2,
1997 is 307,261 (5.21% of Portsmouth Common Stock outstanding as of June 2,
1997). Additionally, each such person has agreed not to transfer or otherwise
dispose of his shares of Portsmouth Common Stock or to pledge or otherwise
encumber any additional shares of Portsmouth Common Stock prior to stockholder
approval of the Acquisition Agreement or termination of the Acquisition
Agreement pursuant to the terms thereof. Each such person has also agreed in his
capacity as a stockholder not to take any action that would substantially impair
the prospects of completing the Acquisition pursuant to the Acquisition
Agreement. Assuming that directors and executive officers of Portsmouth and
their respective affiliates, holding an aggregate of 396,248 shares of
outstanding Portsmouth Common Stock (6.71%) as of June 2, 1997, vote their
shares in favor of the Acquisition Agreement, the affirmative vote of holders of
approximately 2,554,408 additional shares of Portsmouth Common Stock (43.29%)
will be required in order for the Acquisition Agreement to obtain approval by a
majority of the outstanding shares of Portsmouth Common Stock. See "-- Record
Date; Voting Rights."
SOLICITATION OF PROXIES
In addition to the solicitation of proxies by mail, Portsmouth, through its
directors, officers and regular employees, may also solicit proxies personally,
by telephone or by telecopy. Portsmouth will also request persons, firms and
corporations holding shares in their names or in the names of their nominees,
which are beneficially owned by others, to send proxy material to and obtain
proxies from such beneficial owners and will reimburse such holders for their
reasonable expenses in doing so. Portsmouth has retained Corporate Investor
Communications, Inc. to assist in the solicitation of proxies. Portsmouth will
pay Corporate Investor Communications, Inc. a fee of $4,000 for its services,
plus reimbursement for its out-of-pocket costs. Brokerage houses, nominees,
fiduciaries and other custodians have been requested to forward proxy materials
to beneficial owners of Portsmouth Common Stock and, upon request, will be
reimbursed by Portsmouth for the expenses incurred by them. Portsmouth will bear
the expenses in connection with the solicitation of proxies, except that CFX and
Portsmouth will share the expenses associated with the printing and mailing of
this Proxy Statement-Prospectus and all filings with the Commission in
connection therewith.
23
<PAGE> 30
BENEFICIAL OWNERSHIP
The following table sets forth the shareholdings as of June 2, 1997 of (i)
each person who was known by Portsmouth to be the beneficial owner of more than
five percent of the outstanding Portsmouth Common Stock and (ii) each executive
officer and director of Portsmouth.
<TABLE>
<CAPTION>
SHARES OF
NAME AND ADDRESS STOCK BENEFICIALLY PERCENTAGE OF
OF BENEFICIAL OWNER OWNED(1) STOCK OUTSTANDING
----------------------------------------------- ------------------ -----------------
<S> <C> <C>
Robert W. Simpson(2)........................... 372,291(3) 6.13
Rodney D. Pridham(2)........................... 53,832(4) *
William H. Little(2)........................... 38,268(5) *
Donald H. Sargent(2)........................... 36,418(6) *
John J. Pratt, Jr.(2).......................... 3,600(7) *
Timothy J. Connors(2).......................... 5,524 *
Harry R. Hart(2)............................... 30,423(8) *
Harry P. Jarvis(2)............................. 61,684 1.05
Kevin MacLeod(2)............................... 9,838 *
Mark E. Simpson(2)............................. 61,700(9) 1.04
Duane L. Jellison.............................. 1,020 *
All directors and executive officers as a group
(11 Persons)................................. 674,598(10) 10.92
Ram Trust Services, Inc........................ 391,101(11) 6.66
45 Exchange Street
Portland, ME 04101
Brandes Investment Partners, Inc............... 314,727(12) 5.36
12750 High Bluff Drive, Suite 420
San Diego, CA 92130
</TABLE>
- ---------------
(1) Except as otherwise specifically noted, the number of shares stated as being
owned beneficially includes shares believed to be held beneficially by
spouses and minor children; however, the inclusion of such shares in this
Proxy Statement-Prospectus does not constitute an admission that the named
stockholders are direct or indirect beneficial owners of such shares.
(2) Each of these persons has a business address c/o Portsmouth Bank Shares,
Inc., 333 State Street, Portsmouth, New Hampshire 03801.
(3) Includes 173,723 shares of Portsmouth Common Stock deemed beneficially owned
as of June 2, 1997 which the director has the right to acquire under options
previously granted pursuant to Portsmouth's 1987 Stock Option and
Appreciation Rights Plan.
(4) Includes 26,683 shares of Portsmouth Common Stock deemed beneficially owned
as of June 2, 1997 which the executive officer has the right to acquire
under options previously granted pursuant to Portsmouth's 1987 Stock Option
and Appreciation Rights Plan and 6,391 shares deemed beneficially owned
which have been allocated to the executive officer and are fully vested
under the Portsmouth's Employee Stock Ownership Plan.
(5) Includes 18,069 shares of Portsmouth Common Stock deemed beneficially owned
as of June 2, 1997 which the executive officer has the right to acquire
under options previously granted pursuant to Portsmouth's 1987 Stock Option
and Appreciation Rights Plan and 6,151 shares deemed beneficially owned
which have been allocated to the executive officer and are fully vested
under Portsmouth's Employee Stock Ownership Plan.
24
<PAGE> 31
(6) Includes 4,956 shares of Portsmouth Common Stock deemed beneficially owned
as of June 2, 1997 which have been allocated to the executive officer and
are fully vested under Portsmouth's Employee Stock Ownership Plan.
(7) Includes 62 shares of Portsmouth Common Stock deemed beneficially owned as
of June 2, 1997 which have been allocated to the executive officer and are
accruing under Portsmouth's Employee Stock Ownership Plan.
(8) Includes 17,127 shares of Portsmouth Common Stock deemed beneficially owned
as of June 2, 1997 which the director and executive officer has the right
to acquire under options previously granted pursuant to Portsmouth's 1987
Stock Option and Appreciation Rights Plan and 4,193 shares deemed
beneficially owned which have been allocated to the nominee and are fully
vested under Portsmouth's Employee Stock Ownership Plan.
(9) Includes 39,748 shares of Portsmouth Common Stock deemed beneficially owned
as of June 2, 1997 which the director and executive officer has the right
to acquire under options previously granted pursuant to Portsmouth's 1987
Stock Option and Appreciation Rights Plan and 6,812 shares deemed
beneficially owned which have been allocated to the nominee and are fully
vested under Portsmouth's Employee Stock Ownership Plan.
(10) Includes 275,350 shares subject to outstanding stock options held by 5
executive officers and directors of Portsmouth pursuant to its 1987 Stock
Option and Appreciation Rights Plan and 28,565 shares deemed beneficially
owned which have been allocated to the executive officers of Portsmouth
pursuant to its Employee Stock Ownership Plan.
(11) Ram Trust Services, Inc., a registered investment advisor, has sole voting
and dispositive power over a total of 391,101 shares held by its clients.
(12) Brandes Investment Partners, Inc., a registered investment advisor, has
sole voting and dispositive power over 1,323 shares and has shared
dispositive power over an additional 313,404 shares.
* Less than 1% of outstanding Portsmouth Common Stock
THE PROPOSED ACQUISITION
This section of the Proxy Statement-Prospectus describes material aspects
of the Acquisition. The following description does not purport to be complete
and is qualified in its entirety by reference to the Acquisition Agreement,
which is attached as Appendix A to this Proxy Statement-Prospectus and is
incorporated herein by reference. All stockholders are urged to read the
Acquisition Agreement carefully and in its entirety.
BACKGROUND OF THE ACQUISITION
For several years CFX has been actively following a business strategy that
calls for supplementing its internal growth with carefully selected
acquisitions. Since early 1995, it has acquired four banks located in New
Hampshire and Massachusetts. In pursuing this acquisition strategy, CFX's
management, with assistance from its financial advisors, has been continuously
evaluating acquisition opportunities both in New Hampshire and in adjacent
market areas.
Since December 1995, Portsmouth has retained Tucker Anthony to assist the
Portsmouth Board in comprehensively analyzing and periodically reviewing
Portsmouth's strategic alternatives for maximizing long-term stockholder value.
These alternatives have included the continuation of independent operations,
growth through acquisitions, participation in merger-of-equals transactions, and
being acquired for cash and/or stock. Since December 1995, representatives of
Tucker Anthony have periodically made detailed presentations to management and
the Portsmouth Board describing changing conditions in the mergers and
acquisitions ("M&A") market and Portsmouth's strengths and weaknesses either as
a potential acquiror or acquiree.
25
<PAGE> 32
Concurrently, management has provided to the Portsmouth Board its views
regarding Portsmouth's operations as an independent bank.
At the request of the Portsmouth Board, Tucker Anthony had contact with
approximately seven financial institutions believed to have a strategic interest
in expanding in New England as well as the financial and other capacity to do
so, including certain New Hampshire-based institutions that might have been
expected to have a particular strategic interest and the operating ability to
derive synergistic benefits from such an acquisition. Between December, 1995 and
February, 1997, certain of these institutions from time to time contacted
representatives of Portsmouth or Tucker Anthony and Tucker Anthony contacted
selected institutions which did not contact Portsmouth or Tucker Anthony. Any
expressions of interest were preliminary and inconclusive, and no agreements or
understandings concerning any transaction were reached. None of these financial
institutions indicated to Portsmouth or Tucker Anthony a definite interest in
offering to acquire Portsmouth at a price, or on terms, superior or comparable
to the price and terms offered by CFX. Among the institutions with which
Portsmouth had inconclusive discussions was CFX, during 1995 and 1996.
In December 1995, following an inquiry from CFX's management, Peter J.
Baxter, President and Chief Executive Officer of CFX, met with Robert W.
Simpson, Chairman of the Board of Portsmouth, to discuss, on a preliminary
basis, the possibility of a combination of the two companies. Although no
agreements or understandings concerning such a possible combination were reached
at that meeting, both parties agreed that there was sufficient mutual interest
in a possible combination of the two companies to continue the discussions. CFX
later discontinued merger discussions because of other CFX merger talks coming
to fruition. Mr. Baxter and Mr. Simpson agreed to stay in contact with each
other for possible further negotiations.
In August 1996, CFX again expressed interest in acquiring Portsmouth but
Portsmouth's management determined that discussions would not be resumed at the
purchase price proposed by CFX.
Discussions were reopened in December 1996 and took place in earnest
between January 2, 1997 and February 12, 1997. During this period, senior
management and the Boards of Directors of CFX and Portsmouth continued their
evaluation of the potential combination of the two companies and, with the
assistance of their respective financial advisors, continued discussions of the
possible structure and pricing of an acquisition of Portsmouth by CFX.
At a Portsmouth Board meeting held on February 12, 1997, representatives of
Tucker Anthony made a comprehensive presentation with regard to the matters
discussed under "-- Opinion of the Financial Advisor," including Portsmouth's
estimated value as an acquisition candidate. Discussion also focused on M&A
market conditions for financial institutions in New England, the possibility of
receiving other offers, and the terms of CFX's proposal. The directors
considered, in particular, structural issues such as the all-stock nature of the
transaction; pooling accounting; tax-deferred treatment; the operation of
Portsmouth Savings as a division within CFX Bank; the timetable for the
transaction; the likelihood of obtaining regulatory approvals; the social and
economic effects of the proposed Acquisition on Portsmouth's depositors,
borrowers and employees and the Greater Portsmouth community generally; and
factors affecting CFX's future earnings potential and potentially influencing
future market values for the CFX stock to be received by Portsmouth stockholders
in such a transaction. Tucker Anthony updated the Portsmouth Board in regard to
the status of the ongoing discussions with CFX. Legal counsel described the key
provisions of the documents that had been or were being negotiated or which had
been left open pending Portsmouth Board review. The directors considered and
stated their views in regard to these issues. Portsmouth's independent public
accountants and members of management presented the results of their due
diligence review of CFX. The Portsmouth Board concluded that CFX's proposal was
generally satisfactory and authorized Mr. Simpson, with the assistance of Tucker
Anthony and Hale and Dorr LLP, to conduct final discussions and report back to
the Portsmouth Board the next day.
At the February 13, 1997 Portsmouth Board Meeting, the Portsmouth Board
reviewed once more with legal counsel the CFX proposal. Tucker Anthony reviewed
its previous financial analysis of the Acquisition consideration, after which it
advised the Portsmouth Board orally, and rendered its written opinion to the
effect that, in its opinion, and based on facts known to Tucker Anthony at that
time, the consideration to be paid in the Acquisition was fair, from a financial
point of view, to Portsmouth's stockholders as of that date.
26
<PAGE> 33
The Portsmouth Board then unanimously approved the Acquisition Agreement and
related agreements, and authorized Portsmouth's officers to sign them on behalf
of Portsmouth.
The two companies executed the Acquisition Agreement and related documents,
as authorized, on February 13, 1997.
REASONS FOR THE ACQUISITION; RECOMMENDATION OF THE BOARD OF DIRECTORS
In reaching its determination to approve and adopt the Acquisition
Agreement and the transactions contemplated thereby, the Portsmouth Board
considered a number of factors, including, without limitation, the following:
(1) its belief that a combination of the financial, human and
operational resources of CFX and Portsmouth and their respective bank
subsidiaries will produce a strong, high quality institution that will be
better able to compete within its territory and take advantage of
cross-selling opportunities and economies of scale;
(2) the geographic concentration of CFX's branch network in
southwestern and central New Hampshire and the contiguous market of north
central Massachusetts, the complementary nature of such concentration to
Portsmouth's geographic concentration in southeastern New Hampshire and the
effect such complementary nature would have on the combined enterprise's
ability to prosper in its banking market;
(3) its belief, based on the analysis of and presentations to the
Portsmouth Board by Tucker Anthony of Portsmouth's strategic alternatives,
that the Acquisition represents an attractive strategic alternative to
Portsmouth for increasing the profitability of its operations and enhancing
stockholder value;
(4) the opinion of Tucker Anthony as to the fairness from a financial
point of view of the Acquisition consideration to Portsmouth and its
stockholders (see "-- Opinion of the Financial Advisor");
(5) its analysis of the structure and terms of the Acquisition,
including tax-tree treatment for Portsmouth stockholders and the
consideration that the Exchange Ratio will be adjusted in favor of
Portsmouth's stockholders if the Average CFX Trading Price is significantly
less than the closing price of CFX Common Stock on the date of the
Acquisition Agreement but will not be adjusted in favor of CFX despite any
increases in such price; and
(6) its assessment of the social and economic effects of the
Acquisition on the constituencies which Portsmouth and Portsmouth Savings
serve, including depositors, borrowers, the Portsmouth community generally
and the employees of Portsmouth and Portsmouth Savings.
The Portsmouth Board did not assign any particular weights to any of the
factors mentioned above.
The Portsmouth Board was also mindful of the fact that, on December 31,
1996, Portsmouth had a greater portion of its total assets (38.78%) in
investment securities than CFX (17.97%) and correspondingly smaller portions of
its total assets in commercial loans (4.96%, as compared with 8.97%) and
commercial real estate loans (6.23%, as compared with 9.24%). Commercial loans
and commercial real estate loans are subject to various uncertainties not
associated with investment securities or residential mortgage loans.
Furthermore, commercial loans and commercial real estate loans tend to respond
differently to changes in prevailing interest rates than either investment
securities or residential mortgage loans. Portsmouth stockholders should be
aware that the combined bank will have a different asset mix, different interest
sensitivity and a different risk profile from Portsmouth. For further
information concerning the asset portfolios and interest rate experience of CFX
and Portsmouth, see "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY
REFERENCE," "PORTSMOUTH BANK SHARES, INC. SELECTED HISTORICAL FINANCIAL DATA"
and the information contained in the form of Portsmouth's Annual Report to
Stockholders for the fiscal year ended December 31, 1996 accompanying this Proxy
Statement-Prospectus.
27
<PAGE> 34
FOR THE REASONS DESCRIBED ABOVE, THE PORTSMOUTH BOARD HAS DETERMINED THE
ACQUISITION TO BE FAIR TO AND IN THE BEST INTERESTS OF PORTSMOUTH AND ITS
STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED THE ACQUISITION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ACQUISITION. ACCORDINGLY, THE
PORTSMOUTH BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE ACQUISITION AGREEMENT.
OPINION OF THE FINANCIAL ADVISOR
Tucker Anthony was retained by Portsmouth in December 1995 for the purposes
described under "-- Background of the Acquisition," including the provision of
financial advice and consultation, the development of information with respect
to the valuation of Portsmouth, the evaluation of any proposal that might be
received, and, if appropriate, the rendering of a fairness opinion in connection
with a proposal. In connection with its services, Tucker Anthony was
subsequently authorized by Portsmouth to solicit, and did solicit, certain
potential purchasers of Portsmouth and was directed to provide, and did provide,
information concerning Portsmouth to certain third parties requesting such
information which were believed capable of making a viable proposal to acquire
Portsmouth and which had executed a confidentiality agreement. As described
above, these contacts were inconclusive and did not result in an agreement to
acquire Portsmouth until CFX and Portsmouth entered into the Acquisition
Agreement.
Portsmouth selected Tucker Anthony for a number of reasons, including its
familiarity with Portsmouth, other New England financial institutions and their
respective businesses. Portsmouth also considered Tucker Anthony's experience
and reputation in the area of valuation and financial advisory work generally,
and in relation to financial institutions specifically. Tucker Anthony is a
nationally recognized investment banking firm and is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, private placements
and valuations for corporate and other purposes. Tucker Anthony makes a market
in Portsmouth Common Stock. From time to time, Tucker Anthony and its affiliates
may hold long or short positions in Portsmouth Common Stock.
Tucker Anthony has rendered written opinions to the Portsmouth Board to the
effect that, as of February 12, 1997 and as of the date of this Proxy
Statement-Prospectus, the consideration per share of Portsmouth Common Stock in
shares of CFX Common Stock to be received in the Acquisition is fair, from a
financial point of view, to the holders of Portsmouth Common Stock. THE FULL
TEXT OF THE FAIRNESS OPINION DATED AS OF THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS, SETTING FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON THE REVIEW UNDERTAKEN BY TUCKER
ANTHONY, IS INCLUDED AS APPENDIX C TO THIS PROXY STATEMENT-PROSPECTUS. HOLDERS
OF PORTSMOUTH COMMON STOCK ARE URGED TO READ THE FAIRNESS OPINION IN ITS
ENTIRETY. This opinion is directed to the Portsmouth Board and does not
constitute a recommendation to any holder of Portsmouth Common Stock as to how
such stockholder should vote at the Special Meeting. Tucker Anthony has advised
the Portsmouth Board that it does not believe any person other than the
Portsmouth Board has the legal right to rely on the opinion and, absent any
controlling precedent, would resist any assertion otherwise. In the absence of
applicable state law authority, the ability of a stockholder to rely on Tucker
Anthony's opinion would be resolved by a court of competent jurisdiction.
Resolution of the question of a stockholder's ability to rely on Tucker
Anthony's opinion will have no effect on the rights and responsibilities of the
Portsmouth Board under applicable state law or on the rights and
responsibilities of either Tucker Anthony or the Portsmouth Board under the
federal securities laws. The February 12, 1997 opinion is substantially
identical to the opinion attached hereto as Appendix C.
As compensation for its services as financial advisor, including issuance
of the two opinions, Portsmouth has agreed to pay Tucker Anthony a fee
equivalent to 0.85% of the Transaction Amount, as defined in Tucker Anthony's
letter of engagement, of which amount $200,000 has been paid as of the date
hereof and the balance is payable at the closing of the Acquisition. The amount
of the fee may vary from approximately $735,000 or less if the Average CFX
Trading Price is $12.50 or less and Portsmouth does not seek to terminate the
Acquisition Agreement to $1,100,000 or more if the Average CFX Trading Price is
$20.00 or more.
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<PAGE> 35
Portsmouth has also agreed to reimburse Tucker Anthony for its out-of-pocket
expenses and to indemnify Tucker Anthony against certain liabilities arising out
of its services as financial advisor.
In connection with rendering its opinion dated February 12, 1997, and
updated as of the date of this Proxy Statement-Prospectus, Tucker Anthony
performed a variety of financial analyses, including those summarized below. The
summary set forth below, which has been provided by Tucker Anthony, does not
purport to be a complete description of the analyses performed by Tucker Anthony
in this regard.
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 summary description.
Accordingly, notwithstanding the separate factors summarized above, Tucker
Anthony 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 of such analyses or factors, could create an incomplete view of
the evaluation process underlying Tucker Anthony's opinion. In addition, Tucker
Anthony may have used the various analyses for different purposes and may have
deemed various assumptions more or less probable than other assumptions, so that
the ranges of valuations resulting from any particular analysis described above
should not be taken to be Tucker Anthony's view of the actual value of
Portsmouth. The fact that any specific analysis has been referred to in the
summary above is not meant to indicate that such analysis was given more weight
than any other analyses.
In performing its analyses, Tucker Anthony made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond Portsmouth's and CFX's control. The
analyses performed by Tucker Anthony are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than those suggested by such analyses. Such analyses were prepared
solely as a part of Tucker Anthony's analysis of the fairness of the
consideration to be received by the holders of the Portsmouth Common Stock, from
a financial point of view, and were provided to the Portsmouth Board in
connection with the delivery of Tucker Anthony's opinion. The analyses do not
purport to be appraisals or to reflect the prices at which Portsmouth 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, Tucker
Anthony's opinion is just one of the many factors taken into consideration by
the Portsmouth Board (see "-- Background of the Acquisition" and "-- Reasons for
the Acquisition; Recommendation of the Board of Directors").
No limitations were imposed by the Portsmouth Board upon Tucker Anthony
with respect to the investigations made or procedures followed by Tucker Anthony
in its review and analysis. In its review and analysis and in arriving at its
opinions, Tucker Anthony assumed and relied upon the accuracy and completeness
of all the financial information publicly available or provided to it by CFX and
Portsmouth, and did not attempt to verify any of such information. Tucker
Anthony assumed (i) that the financial projections of CFX and Portsmouth
provided to it with respect to the results of operations likely to be achieved
by each company were prepared on a basis reflecting the best currently available
estimates and reasonable judgments of CFX's and Portsmouth's management and
advisors as to future financial performance and results, and (ii) that such
forecasts and estimates would be realized in the amounts and in the time periods
estimated. Tucker Anthony also assumed, without independent verification, that
the current and projected aggregate reserves for possible loan losses for CFX
and Portsmouth were adequate to cover such losses. Tucker Anthony did not make
or obtain any independent evaluations or appraisals of any assets or liabilities
of CFX, Portsmouth or any of their respective subsidiaries nor did it verify any
of CFX's or Portsmouth's books or records or review any individual loan credit
files.
Tucker Anthony made a presentation to the Portsmouth Board on February 12,
1997 and rendered a written opinion to the Portsmouth Board just prior to the
execution and public announcement of the Acquisition Agreement. Set forth below
is a brief summary of the report presented to the Portsmouth Board on February
12, 1997. In connection with its opinion dated as of the date of this Proxy
Statement-Prospectus, Tucker Anthony performed procedures to update certain
analyses and reviewed the assumptions on which
29
<PAGE> 36
such analyses were based and the factors considered in connection therewith and
concluded that its updated analyses were consistent with its prior analyses.
Historical Financial Performance. Tucker Anthony examined the financial
performance of both Portsmouth and CFX over the period starting December 31,
1991 and ending September 30, 1996. The analysis of historical performance
showed among other things that: (i) the compound annual growth rate in total
assets during the period was -2.0% for Portsmouth and 19.2% for CFX, (ii) the
compound annual growth rate in net loans during the period was -1.9% for
Portsmouth and 18.2% for CFX, (iii) the compound annual growth rate in total
deposits during the period was -3.6% for Portsmouth and 16.1% for CFX, (iv) the
equity to asset ratio as of September 30, 1996 was 24.9% for Portsmouth and 8.5%
for CFX, (v) the loan to deposit ratio as of September 30, 1996 was 45.4% for
Portsmouth and 91.4% for CFX, (vi) the latest twelve months net interest margin
was 4.02% for Portsmouth and 4.23% for CFX, (vii) the latest twelve months
return on average assets was 2.19% for Portsmouth and 0.72% for CFX, and (viii)
the latest twelve months return on average equity was 9.00% for Portsmouth and
8.90% for CFX.
Stock Trading Analysis. For the one and three year periods ended February
7, 1997, Tucker Anthony examined the historical trading prices, volume,
price/book value and price/earnings multiples of Portsmouth's and CFX's common
stock, and compared the historical trading prices of Portsmouth's and CFX's
common stock in relation to movements in certain stock indices, specifically the
Standard & Poor's Savings and Loan Index and Regional Bank Index, as well as an
index of the Reference Thrifts (as defined below) and a broader index of New
England financial institutions. Tucker Anthony also analyzed and compared the
historical trading prices, price/book value and price/earnings multiples of
Portsmouth and CFX to certain other publicly traded financial institutions
deemed to be comparable or otherwise relevant as described below.
Analysis of Selected Publicly Traded Reference Financial Institutions.
Tucker Anthony compared the selected financial data and financial ratios of
Portsmouth and CFX to the corresponding data and ratios of certain publicly
traded thrift institutions located in northeastern New England with total assets
between $160 million and $1.2 billion. The "Reference Thrifts" included the
following thrift institutions: Andover Bancorp, Central Co-Op Bank, Community
Bankshares, First Essex Bancorp, Ipswich Savings Bank, Lawrence Savings Bank,
Massbank, New Hampshire Thrift Bancshares, Northeast Bancorp, Primary Bank and
Warren Bancorp. The Reference Thrifts, as a group, exhibited certain
characteristics -- including asset size, geographic proximity and business risk
- -- similar to those exhibited by Portsmouth and CFX.
The analysis of the selected Reference Thrifts showed among other things
that: (i) the ratio of Portsmouth's and CFX's net loans to assets were 33.5% and
68.8% as of September 30, 1996, respectively, compared to an average of 62.5%
for the Reference Thrifts; (ii) the ratio of Portsmouth's and CFX's non-
performing assets to total loans plus other real estate owned were 0.9% and
1.1%, respectively, compared to an average of 1.8% for the Reference Thrifts;
(iii) the ratio of Portsmouth's and CFX's non-performing assets to the sum of
shareholders' equity and loan loss reserves were 1.2% and 7.8%, respectively,
compared to an average of 13.7% for the Reference Thrifts; (iv) the ratio of
Portsmouth's and CFX's equity to total assets were 24.9% and 8.5%, respectively,
compared to an average of 7.95% for the Reference Thrifts; (v) the latest twelve
months return on assets for Portsmouth and CFX were 2.19% and 0.72%,
respectively, compared to an average of 1.01% for the Reference Thrifts; (vi)
the latest twelve months return on equity for Portsmouth and CFX were 9.00% and
8.90%, respectively, compared to an average of 13.00% for the Reference Thrifts;
(vii) as of February 7, 1997, the ratio of Portsmouth's and CFX's market price
to their book value per common share were 136.1% and 165.9%, respectively,
compared to an average of 136.8% for the Reference Thrifts; and (viii) as of
February 11, 1997, the latest quarter annualized dividend yield excluding
special cash dividends and stock dividends for Portsmouth and CFX were 3.8% and
4.5%, respectively, as compared to an average of 2.7% for the Reference Thrifts.
Analysis of Selected Comparable Merger and Acquisition Transactions.
Tucker Anthony reviewed and performed analysis on 85 unassisted acquisitions of
thrift institutions in the northeastern United States (the "Reference
Transactions") announced between January 1, 1993 and February 7, 1997, comparing
the target financial institutions' asset quality, capital structure,
profitability and asset, loan and deposit growth rates to Portsmouth's current
results of operations and financial condition. Because of the extraordinary
nature of
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<PAGE> 37
Portsmouth's capital base relative to most other financial institutions, Tucker
Anthony also analyzed the terms of the proposed transaction and the terms of the
Reference Transactions on an adjusted 8.0% book value basis. This analysis
reviews transaction statistics of premiums paid over a theoretical book value
based on adjusting the aggregate transaction value on a dollar-for-dollar basis
for differentials between actual book value and the theoretical book value
calculated at 8.0% of total assets. Excluding the highest and lowest ratios, the
target financial institutions involved in the Reference Transactions had an
average return on assets for the latest twelve months prior to announcement date
of 0.83% and an average return on equity for the latest twelve months prior to
announcement date of 9.00%, as compared to 2.21% and 8.90%, respectively, for
Portsmouth.
Set forth below is a summary of the information presented to the Portsmouth
Board with respect to the Reference Transactions and a percentile ranking of the
CFX offer based on the CFX closing stock price of $18.50 per share on February
11, 1997.
<TABLE>
<CAPTION>
RECENT NORTHEAST
TRANSACTIONS
--------------------------
CFX CFX OFFER
OFFER MEDIAN PERCENTILE
----- ------ ----------
<S> <C> <C> <C>
Price/Book Value(a)(b)........................................... 159% 153% 58%
Price/Adjusted 8%
Book Value(a)(b)............................................... 278% 164% 100%
Price/Earnings(a)(b)............................................. 17.6x 14.6x 70%
Price to Market Price(a)(b)...................................... 112% 127% 27%
</TABLE>
- ---------------
(a) Estimated value of $17.375 per Portsmouth share based on CFX closing price
of $18.50 on February 11, 1997, prior to giving effect to Portsmouth's 2%
stock dividend paid on March 15, 1997.
(b) Based on market price 1 week prior to announcement.
Discounted Cash Flow Analysis. Tucker Anthony developed a discounted cash
flow analysis through the fiscal year ended December 31, 2001 designed to
compare the present value, under certain assumptions, that would be attained if
Portsmouth remained independent through the year 2001 or was acquired in the
year 2001 by a larger financial institution, with the value of the CFX offer.
For the purpose of the analysis Tucker Anthony made reference to financial
forecasts and projections prepared by Portsmouth management (the "Base Case").
The projections assumed, among other things, that Portsmouth would dividend out
all excess capital above 9.0% of assets at the beginning of 1998. The
projections also assume that Portsmouth could achieve annual growth in average
assets of 3.0%, could maintain a net interest margin of 4.1%, and would be able
to achieve an operating expense to assets ratio of 1.0% (compared with a ratio
of 1.46% over the five years ended December 31, 1996). Tucker Anthony noted that
for the five fiscal years ended December 31, 1996, total assets declined by an
average of 1.6% per year and total loans declined by an average of 3.5% per
year.
In addition to the Base Case, Tucker Anthony reviewed Base Case financial
forecasts and projections revised to assume variations in net interest margin
(the "Stress Test Scenario"). The Stress Test Scenario was based on increases in
net interest margin of 10 and 20 basis points as well as reductions in net
interest margin of 10 and 20 basis points.
The projected cash flows of Portsmouth were comprised of the dividends per
share paid in fiscal years ended December 31, 1997 through 2001 plus the
terminal value of Portsmouth common stock at fiscal year end 2001 calculated as
described below. The cash flows were discounted at a range of rates from 11.0%
to 15.0%. Based upon Tucker Anthony's experience and judgment, Tucker Anthony
believes that holders of Portsmouth common stock would typically seek returns
within the indicated range of discount rates, in view of Portsmouth's operating
projections, historical performance, financial condition and market
capitalization, among other matters.
In estimating the appropriate terminal value of Portsmouth at fiscal year
end 2001, Tucker Anthony used methods based on multiples of earnings. Tucker
Anthony applied to the fiscal year December 31, 2001 price/earnings multiples in
range of 9.0x to 15.0x. The low end of the range of multiples reflected the
bottom of an estimated future trading range for Portsmouth as an independent
entity, while the high end of the ranges
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<PAGE> 38
of multiples were more indicative of the top of an estimated range assuming a
future sale of Portsmouth to a larger financial institution. Acquisition and
trading multiples from time to time fluctuate considerably, and no assurance can
be made that future acquisition or trading multiples will be comparable to
historical levels.
The values derived in the discounted cash flow analysis Base Case ranged
from $12.10 per Portsmouth share (prior to giving effect to the 2% stock
dividend paid by Portsmouth on March 15, 1997; $11.86 after giving effect to
such stock dividend) using a discount rate of 15% and an earnings terminal value
multiple of 9.0x to $16.52 (pre-dividend; $16.20 post-dividend) per Portsmouth
share using a discount rate of 11% and an earnings terminal value multiple of
15.0x. In the Stress Test Scenario, the upside case (adjusting the net interest
margin 20 basis points above management projections) derived values ranging from
$12.46 (pre-dividend; $12.22 post-dividend) per Portsmouth share using a
discount rate of 15% and an earnings terminal value multiple of 9.0x to $17.14
(pre-dividend; $16.80 post-dividend) per Portsmouth share using a discount rate
of 11% and an earnings terminal value multiple of 15.0x, and the downside case
(adjusting the net interest margin 20 basis points below management projections)
derived values ranging from $11.73 (pre-dividend; $11.50 post-dividend) per
Portsmouth share using a discount rate of 15% and an earnings terminal value
multiple of 9.0x to $15.91 (pre-dividend; $15.60 post-dividend) per Portsmouth
share using a discount rate of 11% and an earnings terminal value multiple of
15.0x.
In connection with its opinion dated as of the date of this Proxy
Statement-Prospectus, Tucker Anthony performed procedures to update certain
analysis and reviewed the assumptions on which such analyses were based and the
factors considered in connection therewith.
The summary of the Tucker Anthony opinion set forth above provides a
description of the main elements of Tucker Anthony's presentation to the
Portsmouth Board on February 12, 1997. It does not purport to be a complete
description of the presentation of Tucker Anthony to the Portsmouth Board or of
the analyses of Tucker Anthony. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Tucker
Anthony believes that its analyses and the summary set forth above must be
considered as a whole and that selecting portions of its analyses, without
considering all analyses, or selecting part of the above summary, without
considering all factors and analyses, would create an incomplete view of the
procedures underlying the analyses set forth in the Tucker Anthony presentation
and opinion. In addition, the ranges of valuations resulting from any particular
analyses described above should not be taken to be Tucker Anthony's actual value
of Portsmouth. The fact that any specific analysis has been referred to in this
summary above is not meant to indicate that such analysis was given more weight
than any other analyses.
TERMS OF THE ACQUISITION
In accordance with the terms of the Acquisition Agreement and applicable
New Hampshire law, CFX's proposed acquisition of Portsmouth will involve a share
exchange, a holding company merger and a bank merger. In the initial step, CFX
will acquire all the outstanding shares of capital stock of Portsmouth, par
value $0.10 per share, including each attached right ("Right") issued pursuant
to the Portsmouth Rights Agreement, through an exchange (the "Share Exchange")
of shares of CFX Common Stock, par value $0.66 2/3 per share, for the issued and
outstanding shares of Portsmouth Common Stock pursuant to a Plan of Share
Exchange (the "Plan of Exchange") to be adopted by the holders of Portsmouth
Common Stock at the Special Meeting. Immediately following the Share Exchange,
Portsmouth will be merged (the "Holding Company Merger") with and into CFX,
pursuant to a merger agreement or plan of merger in a form to be specified by
CFX and immediately thereafter Portsmouth Bank will be merged with and into CFX
Bank pursuant to an Agreement and Plan of Merger substantially in the form
agreed upon by the parties concurrently with execution of the Acquisition
Agreement.
At the Effective Date, each share of Portsmouth Common Stock issued and
outstanding immediately prior to the Effective Date, other than Dissenting
Shares and except as otherwise provided in the Acquisition Agreement, will be
exchanged (together with its attached Right) for an amount of CFX Common Stock
equal to one share multiplied by the appropriate Exchange Ratio (rounded to the
nearest four decimal places) and cash in lieu of any fractional share of CFX
Common Stock.
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The Exchange Ratio will be a function of the Average CFX Trading Price. The
Average CFX Trading Price is based on the sale price of CFX Common Stock on the
AMEX as reported in The Wall Street Journal for the ten consecutive trading days
ending on the business day before the date on which the last regulatory approval
necessary for the consummation of the Acquisition is obtained, and thus could be
determined several weeks prior to the Effective Date. The market price of CFX
Common Stock at the Effective Date could therefore differ materially from the
Average CFX Trading Price used to determine the Exchange Ratio.
The Exchange Ratio will be:
(1) 0.9314, if the Average CFX Trading Price is greater than $17.375;
(2) $16.1765 / the Average CFX Trading Price, if the CFX Price is greater
than $15.70 and is no greater than $17.375; or
(3) 1.0294, if the Average CFX Trading Price is no greater than $15.70;
provided, however, that the Exchange Ratio shall be $14.6176 / the Average CFX
Trading Price if the Average CFX Trading Price is $14.20 or less, Portsmouth has
elected to terminate the Acquisition Agreement unless CFX elects to increase the
Exchange Ratio, and CFX has elected to increase the Exchange Ratio to the Cure
Ratio in accordance with the terms of the Acquisition Agreement. In determining
whether to elect to terminate the Acquisition Agreement if the Average CFX
Trading Price is $14.20 or less, the Portsmouth Board will, consistent with its
fiduciary duties, take into account all relevant facts and circumstances
existing at the time, including without limitation: whether it believes that CFX
is prepared to (i) adopt the revised Exchange Ratio described above, (ii)
acquiesce in the termination of the Acquisition or (iii) seek to negotiate for a
lesser increase in the Exchange Ratio; the market for CFX Common Stock and bank
stocks in general and the relative value of the Portsmouth Common Stock in the
market; and the advice of its financial advisors and legal counsel. By approving
the Acquisition Agreement, the Portsmouth stockholders will be permitting the
Portsmouth Board to determine, in the exercise of its fiduciary duties and
without any further solicitation of the Portsmouth stockholders, whether or not
to proceed with the Acquisition if the Average CFX Trading Price during the
pricing period were $14.20 or less.
The following table shows the Exchange Ratio at various Average CFX Trading
Prices, together with the Per Portsmouth Share Value in each case. As used
herein, the Per Portsmouth Share Value is calculated by multiplying the Average
CFX Trading Price by the applicable Exchange Ratio, and represents the value of
the CFX Common Stock that would be received in the Acquisition for each share of
Portsmouth Common Stock based on the Average CFX Trading Price.
<TABLE>
<CAPTION>
AVERAGE CFX
TRADING EXCHANGE RATIO PER PORTSMOUTH
PRICE (CFX SHARES) SHARE VALUE
- ------------ --------------- ---------------
<S> <C> <C>
$21.50 0.9314 $ 20.03
$20.50 0.9314 $ 19.09
$19.50 0.9314 $ 18.16
$18.50 0.9314 $ 17.23
$17.50 0.9314 $ 16.30
$16.50 0.9804 $ 16.18
$15.50 1.0294 $ 15.96
$14.50 1.0294 $ 14.93
</TABLE>
<TABLE>
<CAPTION>
If Portsmouth elects to terminate the
Acquisition but CFX elects to pay the Cure
If Portsmouth does not elect Ratio and thereby keep the Acquisition
to terminate the Acquisition: Agreement in effect:
AVERAGE CFX EXCHANGE RATIO PER PORTSMOUTH ADJUSTED EXCHANGE RATIO PER PORTSMOUTH
CLOSING PRICE (CFX SHARES) SHARE VALUE (CFX SHARES) SHARE VALUE
- ------------- --------------- ---------------- ------------------------- ----------------
<S> <C> <C> <C> <C>
$13.50 1.0294 $13.90 1.0828 $14.62
$12.50 1.0294 $12.87 1.1694 $14.62
</TABLE>
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<PAGE> 40
[PORTSMOUTH PER SHARE VALUE CHART]
Any cash payment in lieu of fractional shares will be in an amount equal to
such fraction multiplied by the reported closing sale price of CFX Common Stock
on the AMEX as reported in The Wall Street Journal for the last business day
preceding the date of the Effective Date.
Portsmouth has adopted a Revised 1987 Stock Option and Appreciation Rights
Plan (the "Portsmouth Stock Option Plan"). At the Effective Date, outstanding
obligations under the Portsmouth Stock Option Plan will be assumed by CFX and,
except as provided in the Plan of Exchange, each stock option outstanding under
the Portsmouth Stock Option Plan will become the right to receive, upon payment
of the exercise price, the number of shares of CFX Common Stock equal to the
Exchange Ratio multiplied by the number of shares of Portsmouth Common Stock
subject to such options. As of February 28, 1997, there were 329,988 shares of
Portsmouth Common Stock reserved for issuance pursuant to exercise of
outstanding options under the Portsmouth Stock Option Plan (333,018 shares
giving effect to the 2% stock dividend paid on March 15, 1997).
In the event that, between February 13, 1997 and the Effective Date, the
outstanding shares of CFX Common Stock or Portsmouth Common Stock shall have
been increased, decreased or changed into or exchanged for a different number of
kind of shares or securities by reorganization, recapitalization,
reclassification, stock split or other like changes in the capitalization of CFX
or Portsmouth, or if a stock dividend is declared on CFX Common Stock or
Portsmouth Common Stock with a record date within such period, then an
appropriate and proportionate adjustment shall be made in the number and kind of
shares of CFX Common Stock to be thereafter delivered pursuant to the Plan of
Exchange, the dollar amounts and the Exchange Ratio. Such adjustments, resulting
from a 2% stock dividend paid by Portsmouth on March 15, 1997, have been
reflected in this Proxy Statement-Prospectus. The 2% stock dividend did not
increase or otherwise affect the aggregate amount of CFX Common Stock to be
issued to Portsmouth stockholders in the Share Exchange.
SURRENDER OF CERTIFICATES
Within five business days after the Effective Date, an exchange agent
appointed by CFX (the "Exchange Agent") will mail to each record holder of
Portsmouth Common Stock a notice of consummation of the Share Exchange and a
form of transmittal letter pursuant to which each such holder shall exchange its
Portsmouth
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<PAGE> 41
Common Stock certificates for the certificates representing CFX Common Stock and
the cash in lieu of fractional shares, if any, for which the Portsmouth Common
Stock will have been exchanged as result of the Acquisition. Upon surrender of
their Portsmouth Common Stock certificates, such holders will receive a
certificate for the number of whole shares of CFX Common Stock to which they are
entitled and a check representing the amount paid in lieu of issuing any
fractional share. Until so exchanged, the holder of a certificate representing
Portsmouth Common Stock outstanding immediately prior to the Effective Date
shall have no rights with respect to such Portsmouth Common Stock except to
surrender such certificate in exchange for a CFX Common Stock certificate and
cash in lieu of any fractional share. No dividends or other distributions with
respect to CFX Common Stock declared after the Effective Date will be made to
holders of unsurrendered Portsmouth Common Stock certificates until the holder
thereof surrenders such certificates. STOCKHOLDERS SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE FURTHER INSTRUCTIONS.
RESALE OF CFX COMMON STOCK
The shares of CFX Common Stock issuable to stockholders of Portsmouth upon
consummation of the Acquisition have been registered under the Securities Act.
It is anticipated, and it is a condition to each of the parties' obligations to
effect the Acquisition, that such shares will be approved for listing, upon
official notice of issuance, on the AMEX. Such shares may be traded freely by
those stockholders not deemed to be affiliates of Portsmouth or CFX as that term
is defined under the Securities Act. The term "affiliate" generally means each
person who controls, is controlled by or is under common control with, or is a
member of a group that controls, is controlled by or is under common control
with, Portsmouth or CFX, and for purposes hereof could be deemed to include all
executive officers, directors and 10% stockholders of Portsmouth or CFX.
Rule 145 promulgated by the Commission under the Securities Act will
restrict the sale of CFX Common Stock received in the Acquisition and
beneficially owned by those stockholders who are deemed to be affiliates of
Portsmouth and certain of their family members and related interests. Such
affiliates, provided they are not affiliates of CFX at or following the
Effective Date, may publicly resell CFX Common Stock received by them in the
Acquisition subject to certain limitations, principally as to, among other
things, the number of shares sold in any 90-day period and the manner of sale,
during the 12 months following the Effective Date. After such period, such
affiliates may resell their shares without restriction so long as there is
adequate current public information with respect to CFX as required by Rule 145.
Persons who become affiliates of CFX prior to, at or after the Effective Date
may publicly resell the CFX Common Stock received by them in the Acquisition
subject to similar limitations and subject to certain filing requirements
specified in Rule 144. Affiliates also would be permitted to resell CFX Common
Stock received in the Acquisition pursuant to an effective registration
statement under the Securities Act or another available exemption from the
Securities Act registration requirements. This Proxy Statement-Prospectus does
not cover any resales of CFX Common Stock received in the Acquisition by persons
who may be deemed to be affiliates of CFX or Portsmouth.
In addition, since the Acquisition is to be accounted for as a
pooling-of-interests, shares of CFX Common Stock and Portsmouth Common Stock
held by affiliates of either company will not be transferable during the period
beginning 30 days prior to the Effective Date and ending when financial results
covering at least 30 days of post-merger combined operations of CFX and
Portsmouth have been published, in order to satisfy certain requirements of the
Commission in transactions to be accounted for using pooling-of-interests
accounting treatment. Under the Acquisition Agreement, CFX has agreed to use its
best efforts to publish no later than 25 days after the end of the first
calendar quarter in which there are at least 30 days of post-Acquisition
combined operations (which may be the calendar quarter in which the Effective
Date occurs) combined sales and net income figures as contemplated by and in
accordance with the Commission's Accounting Series Release No. 135.
CFX and Portsmouth shall use all reasonable efforts to cause those persons
who may be deemed to be affiliates of Portsmouth or CFX to deliver to the other
party, as soon as practicable after the date of the Acquisition Agreement, and
prior to the Special Meeting (and, in the case of affiliates of Portsmouth, no
later than 30 days prior to the Effective Date), a written agreement providing
that such person will not sell, pledge, transfer or otherwise dispose of any
shares of CFX Common Stock or Portsmouth Common Stock for the
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<PAGE> 42
period beginning 30 days prior to the Acquisition and ending on the publication
of financial results covering at least 30 days of combined operations of CFX and
Portsmouth and in compliance with the Securities Act and the rules and
regulations promulgated thereunder. It is anticipated that each director and
executive officer of Portsmouth and CFX will execute such an agreement.
Certificates of Portsmouth Common Stock surrendered for exchange pursuant to the
Acquisition by any person deemed to be an affiliate shall not be exchanged for
certificates representing shares of CFX Common Stock until CFX has received from
that person the written agreement described in this paragraph.
REPRESENTATIONS AND WARRANTIES; CONDITIONS TO THE ACQUISITION; WAIVER
The Acquisition Agreement contains representations and warranties by
Portsmouth and CFX regarding various customary legal, regulatory, financial and
business matters. Except as otherwise provided in the Acquisition Agreement,
these representations and warranties will not survive the Closing Date.
The obligations of CFX and Portsmouth to consummate the Acquisition are
conditioned upon, among other things:
(1) the approval of the Transaction Documents by the stockholders of
CFX and Portsmouth;
(2) the receipt of all necessary regulatory approvals, the expiration
of all applicable waiting periods, and the satisfaction of all regulatory
conditions to such approvals (CFX may abandon the Acquisition if any
regulatory approvals contain any condition or requirement not reasonably
foreseen as of the date of the Transaction Documents that, in the
reasonable good faith opinion of the CFX Board materially and adversely
affects the anticipated economic and business benefits of the Acquisition
to CFX);
(3) the effectiveness under the Securities Act of a registration
statement covering the issuance of the CFX Common Stock in connection with
the Acquisition, and the absence of any proceeding by the Commission to
suspend such effectiveness;
(4) the receipt of all necessary state securities or "Blue Sky"
permits or authorizations;
(5) the receipt of tax opinions satisfactory to CFX and Portsmouth;
(6) the receipt of all necessary and material consents and waivers;
(7) the absence of any order, decree or injunction of any court or
government agency that enjoins or prohibits the consummation of the
Acquisition; and
(8) the approval for listing on the AMEX, subject to official notice
of issuance, of shares of CFX Common Stock to be issued in the Acquisition.
In addition, as a condition to the obligations of CFX and CFX Bank to
consummate the Acquisition, no event may occur that would preclude the
Acquisition from being accounted for as a pooling-of-interests. The Acquisition
is not conditioned upon the closing of the Community Acquisition.
The Acquisition Agreement provides that, except with respect to any
required stockholder or regulatory approval, CFX and Portsmouth may at any time
(whether before or after approval of the Transaction Documents by the
stockholders of CFX and Portsmouth), in a writing signed by an executive officer
of each of CFX and Portsmouth, extend the time for the performance of the
obligations of CFX and Portsmouth and waive (i) any inaccuracies in the
representations and warranties contained in the Transaction Documents, (ii)
compliance with any of the covenants, undertakings or agreements of CFX or
Portsmouth, or satisfaction of any of the conditions precedent to CFX's or
Portsmouth's obligations contained in the Transaction Documents or (iii) the
performance by CFX or Portsmouth of any of CFX's or Portsmouth's obligations;
provided that after approval of the Acquisition by the stockholders of
Portsmouth, no such modification shall alter or change the amount or kind of
consideration to be received by the stockholders of Portsmouth pursuant to the
Plan of Exchange or which adversely affect the tax treatment to Portsmouth's
stockholders as the result of the receipt of such consideration. However,
certain conditions to consummation of the Acquisition cannot be waived as a
matter of law, including the existence of an effective registration statement or
exemption therefrom, the
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absence of a government order enjoining or prohibiting consummation of the
Acquisition and the receipt of all required "Blue Sky" permits or other
authorizations.
REGULATORY AND OTHER APPROVALS
Consummation of the Acquisition is subject to prior receipt of all required
approvals and consents to the Share Exchange, the Holding Company Merger and the
Bank Merger by all applicable federal and state regulatory authorities. In order
to consummate the Share Exchange, the Holding Company Merger and the Bank
Merger, CFX, Portsmouth, CFX Bank and/or Portsmouth Savings must obtain the
prior consent and approval, as applicable, of the FDIC and the Commissioner, and
approval from the Federal Reserve or a waiver from the Federal Reserve of the
obligation to seek such approval.
The Bank Merger is subject to approval by the FDIC under the Bank Merger
Act provisions of the Federal Deposit Insurance Act (the "BMA"). Such approval
has been received and the requisite waiting period, during which time the United
States Department of Justice ("DOJ") may challenge the Acquisition on antitrust
grounds, has expired.
The Share Exchange and the Holding Company Merger are subject to the prior
approval of the Federal Reserve under the BHCA. CFX has received from the
Federal Reserve a waiver of this requirement.
The Commissioner must approve the Bank Merger under relevant provisions of
the New Hampshire Revised Statutes Annotated (the "NHRSA") and regulations
promulgated thereunder. CFX has received the required approval from the
Commissioner under the NHRSA.
Although the shares issuable upon exercise of the Option represent 19.9% of
the Portsmouth Common Stock that would be outstanding immediately prior to such
exercise, CFX may not acquire more than 5% of the Portsmouth Common Stock,
pursuant to the exercise of the Option or otherwise, without prior approval of
the Federal Reserve. See "THE PROPOSED ACQUISITION -- Stock Option Agreement"
and the text of the Stock Option Agreement, attached hereto as Appendix B.
Because CFX controls subsidiary banks in Massachusetts, Chapter 167A of the
Massachusetts General Laws requires prior approval of the Holding Company Merger
by the Massachusetts Board of Bank Incorporation (the "MBBI"). An application
for prior approval of the Holding Company Merger was filed with the MBBI on May
15, 1997. Approval of this application would be based upon the MBBI's
determination that the proposed transaction does not unreasonably affect
competition among Massachusetts banking institutions and that it promotes public
convenience and advantage. In making such a determination, the MBBI must
consider, among other things and to the extent applicable, a showing of net
benefits, including initial capital investment, job creation plans, consumer and
business services and commitments to maintain and open branch offices within a
bank's statutorily delineated local community.
To the extent that the foregoing information describes statutes and
regulations, it is qualified in its entirety by reference to the particular
statutes and regulations and the regulations promulgated under such statutes.
The parties have received the foregoing regulatory approvals, except for
that of the MBBI. The Acquisition will not proceed in the absence of such
required approval. There can be no assurance that the MBBI will grant its
approval to the Acquisition, and if granted, there can be no assurance as to the
date of such grant, that such grant will not be conditioned upon matters that
would cause the CFX Board to abandon the Acquisition, or that no action will be
brought by DOJ challenging the Acquisition. See "-- Representations and
Warranties; Conditions to the Acquisition; Waiver" and "-- Closing; Effective
Date; Termination."
CFX and Portsmouth are not aware of any other governmental approvals or
actions that are required for consummation of the Acquisition except as
described above. Should any such approval or action be required, it is presently
contemplated that such approval or action would be sought. There can be no
assurance that any such approval or action, if needed, could be obtained, would
not delay consummation of the Acquisition and would not be conditioned in a
manner that would cause CFX to abandon the Acquisition.
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BUSINESS PENDING THE ACQUISITION
Under the terms of the Acquisition Agreement, each of CFX, Portsmouth and
their respective subsidiaries generally is prohibited from taking any action
that materially affects the ability of CFX or Portsmouth to obtain any necessary
governmental approvals, materially increases the period of time necessary to
obtain such approvals, materially affects its ability to perform its covenants
and agreements under the Acquisition Agreement, disqualifies the Acquisition as
a pooling-of-interests for accounting purposes or a tax-free reorganization
within the meaning of Section 368(a) of the Code, or results in the
representations and warranties of CFX and Portsmouth in the Acquisition
Agreement not being true and correct on the date of the Acquisition Agreement or
on the Closing Date.
Portsmouth and Portsmouth Savings are also required to use their respective
reasonable best efforts to preserve their respective properties, business and
relationships with customers, employees and other persons. In addition, without
CFX's prior consent or as expressly contemplated or permitted by the Transaction
Documents, Portsmouth and Portsmouth Savings may not declare or pay any
dividends or other distributions on capital stock beyond specified limits,
increase compensation or fringe benefits of directors, officers or employees
beyond customary limits, or take certain other actions as described in the
Acquisition Agreement.
Portsmouth has agreed that it shall not (and shall not authorize or permit
its officers, directors, agents and affiliates to) solicit or initiate any
inquiries or proposals concerning any Acquisition Transaction other than the
Acquisition. Portsmouth must notify CFX as soon as practicable if any such
inquiries or proposals are received by Portsmouth, or if Portsmouth or any
officer, director, agent or affiliate is requested to or does furnish any
confidential information relating to, or participates in any negotiations or
discussions concerning, any Acquisition Transaction.
CLOSING; EFFECTIVE DATE; TERMINATION
The Acquisition shall be consummated at a closing to be held on the first
business day that is at least 20 calendar days after the date on which the last
of all required approvals for the Acquisition have been obtained and the last of
all required waiting periods under such approvals has expired, or at such other
place, date and time as the parties may mutually agree upon (the "Closing
Date"), with the Acquisition to be consummated in such order and after such
intermediate steps as CFX may specify, so long as such manner of consummation
does not materially impede or delay receipt of approvals referred to in the
Acquisition Agreement, alter the consideration to be delivered to Portsmouth's
stockholders or adversely affect the tax treatment to Portsmouth's stockholders.
The Acquisition shall be effective at the time and on the date specified in the
certificate or articles of merger or share exchange to be filed with the
appropriate New Hampshire state authorities as contemplated by the Transaction
Documents. The term "Effective Date" shall mean the effective time and date of
the Share Exchange specified in the articles of share exchange to be filed with
the appropriate New Hampshire state authorities as contemplated by the Plan of
Exchange.
CFX and Portsmouth each anticipates that the Acquisition will be
consummated in the third quarter of 1997. However, consummation could be delayed
as a result of delays in obtaining the necessary governmental and regulatory
approvals or if any other condition to consummation of the Acquisition is not
satisfied. There can be no assurance as to if or when such approvals will be
obtained or that the Acquisition will be consummated. See "-- Regulatory and
Other Approvals."
The Transaction Documents (other than the Stock Option Agreement, which
shall be governed by the terms thereof) may be terminated, whether before or
after approval by the stockholders of CFX and Portsmouth: (i) at any time at or
prior to the Effective Date, by the mutual written agreement of CFX and
Portsmouth; (ii) at any time on or prior to the Closing Date, by either
Portsmouth or CFX in the event of a material breach by the other party of any
agreement contained in the Transaction Documents, or any representation or
warranty contained in the Acquisition Agreement, after notice and an opportunity
to cure; (iii) at the election of either Portsmouth or CFX in the event that the
Closing Date does not occur on or before February 13, 1998, or such later date
as the parties have agreed to in writing, subject to extension in certain
circumstances; (iv) at any time, by any party if the stockholders of CFX or
Portsmouth fail to approve the Acquisition; (v) at any time, by any party if the
Acquisition is disapproved by a relevant regulatory
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<PAGE> 45
authority; or (vi) by Portsmouth, if the Average CFX Trading Price is below
$14.21 per share and CFX elects not to adjust the Exchange Ratio to the Cure
Ratio as provided in the Acquisition Agreement. See "-- Terms of the
Acquisition."
MANAGEMENT AND OPERATIONS AFTER THE ACQUISITION
Following the Acquisition and the Community Acquisition, the directors of
CFX will consist of (i) those persons serving as directors of CFX immediately
prior to the Effective Date, (ii) three persons serving as directors of
Portsmouth, and (iii) subject to consummation of the Community Acquisition,
three persons serving as directors of Community. In addition, two persons
serving as directors of Portsmouth Savings will be elected to the Board of
Trustees of CFX Bank.
CFX and Portsmouth intend that, following the consummation of the Holding
Company Merger, Portsmouth Savings shall be merged with and into CFX Bank,
pursuant to the provisions of, and with the effect provided in, Title 35 of the
NHRSA. Thereafter, the business of Portsmouth Savings will be operated as a
division of CFX Bank. Prior to or at the Effective Date, two directors of
Portsmouth, including Mark E. Simpson, the current President and Chief Operating
Officer of Portsmouth Savings, to be designated by Portsmouth, after
consultation with and the consent of CFX and CFX Bank (which consent shall not
be unreasonably withheld), will be elected to the Board of Trustees of CFX Bank
effective upon the Effective Date and shall be nominated for re-election, if at
all, pursuant to CFX Bank's then existing policies and procedures. At that time,
Mark E. Simpson also will become President of Portsmouth Savings, a division of
CFX Bank.
Pursuant to the terms of the Acquisition Agreement, Timothy J. Connors,
Mark E. Simpson and Robert W. Simpson, who currently serve on the Portsmouth
Board, have been designated to serve on the CFX Board following consummation of
the Acquisition. In addition, Harry P. Jarvis and Mark E. Simpson, who currently
serve as directors of Portsmouth Savings, have been designated to serve as
trustees of CFX Bank. Furthermore, in connection with the Community Acquisition,
Douglas Crichfield, the President and Chief Executive Officer and a director of
Community and Concord Savings, has been designated by Community to serve as a
director of CFX and of CFX Bank following the Community Acquisition, and will
become an Executive Vice President of CFX and the President and Chief Executive
Officer of CFX Bank. In addition, John N. Buxton and Seth A. Resnicoff have been
designated to serve as directors of CFX, and Robert A. Hill and Lucia T.
Kittredge have been designated to serve as trustees of CFX Bank. Messrs. Buxton,
Resnicoff and Hill and Ms. Kittredge currently serve as directors of Community.
See "THE PROPOSED ACQUISITION -- Management and Operations After the
Acquisition."
Information regarding the current directors of CFX, the Portsmouth
directors who have been designated to serve on the CFX Board and the Community
directors who have been designated to serve on the CFX Board is incorporated by
reference from, respectively, CFX's Annual Report on Form 10-K/A, Portsmouth's
Annual Report on Form 10-K and Community's Annual Report on Form 10-K, each for
the year ended December 31, 1996. See "AVAILABLE INFORMATION; DOCUMENTS
INCORPORATED BY REFERENCE."
The combination of CFX Bank, Portsmouth Savings and the Community Banks is
intended to provide a broader base of services available from all bank offices,
new or expanded products and services and customers should receive access to
substantial commercial and consumer lending facilities. Additionally, through
the use of cutting edge technologies, such as check and document imaging,
automated work flow, telebanking, debit and smart cards, electronic bulletin
board and automated loan underwriting and credit scoring, CFX intends to provide
customers faster and more efficient services at competitive prices. The
consolidation of support functions such as accounting, administration, data
processing, investments, marketing and mortgage loan servicing is intended to
produce economies of scale that will ultimately be passed on to customers in
improved efficiency and service.
CFX estimates cost savings during the first full year of operations after
consummation of the Acquisition and the Community Acquisition (the
"Acquisitions") through reductions of non-interest expense of approximately $5.0
million in the case of the Community Acquisition (representing approximately 30%
of
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Community's non-interest expense) and $826,000 in the case of the Acquisition
(representing approximately 25% of Portsmouth's non-interest expense).
CFX also estimates that it will incur expenses and nonrecurring charges on
an after-tax basis of approximately $4.8 million in the case of the Community
Acquisition and $2.9 million in the case of the Acquisition. The one-time
after-tax charges of the transactions pertain to the following areas: data
processing $1,400,000; and personnel, $1,398,000. Data processing costs consist
primarily of write-offs due to duplication of computer hardware, software,
telecommunications equipment, and certain conversion related expenses. Personnel
costs consist primarily of charges related to employee severance and employment
outplacement assistance. Other costs include investment banking fees, legal and
accounting fees, due diligence costs, proxy registration/filing fees and
printing and mailing costs. A significant portion of other costs are capitalized
for tax purposes and, therefore, are not tax deductible. CFX management
continues to review all these costs. There can be no assurance that such costs
will not exceed the amounts described above. It is anticipated that
substantially all of these charges will be recognized upon consummation of the
Acquisitions and will be paid in 1997 or 1998.
To further illustrate the potential impact of the Acquisitions, CFX has
made certain forward-looking earnings estimates based on various factors and
assumptions, including, among others, additional leveraging of Portsmouth's
equity by acquiring $300 million of loans and investments and the estimated
reductions in expenses described above. In this regard, when all efficiencies
are realized through the integration of Community and Portsmouth into CFX, a
total of $5.8 million of pre-tax non-interest expense savings is expected to be
realized. These savings, combined with various leverage activities previously
described, are expected to improve return on average assets, return on average
equity and earnings per share.
CFX's earnings estimates are based on many factors and assumptions,
including economic and business conditions as well as management's strategies.
These factors are subject to change and many of them are beyond CFX's control.
There will be differences between estimates and actual results and these
differences could be material. These estimates are necessarily speculative in
nature and no assurance can be given that they will be realized. This forward
looking information has been presented for illustrative purposes in connection
with this Proxy Statement-Prospectus. Accordingly, CFX does not intend to update
these estimates. See "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY
REFERENCE."
EFFECT ON EMPLOYEES AND BENEFIT PLANS
Employees. At the Effective Date, all employees of Portsmouth and
Portsmouth Savings shall become employees of CFX or a subsidiary of CFX, as
determined by CFX, with employee benefits which in the aggregate are no less
favorable than those generally afforded to other employees of CFX or CFX's
subsidiaries holding similar positions, subject to the terms and conditions
under which those employee benefits are made available to such employees and to
certain other provisions of the Acquisition Agreement. The parties are working
to identify operational efficiencies that may be obtained through the
consolidation of the entities in the Acquisition. It is anticipated that some
positions may be eliminated following the Effective Date and CFX is not under
any continuing obligation with respect to the employment of any specific
employee of Portsmouth and Portsmouth Savings other than five officers whose
employment contracts are being assumed. See "-- Employment Agreements."
Prior to the Effective Date, Portsmouth and Portsmouth Savings shall cause
the waiver or release, at an aggregate expense not to exceed $240,000, by any
present director of either Portsmouth or Portsmouth Savings who has any right or
interest, including the right to receive compensation or other payments, under
any director retirement plan of either Portsmouth or Portsmouth Savings or with
respect to service on any advisory board of either Portsmouth or Portsmouth
Savings.
Employment Agreements. Under the terms of the Acquisition Agreement, CFX
has agreed to assume employment contracts that Portsmouth and/or Portsmouth
Savings currently has with Mark E. Simpson, Rodney D. Pridham, William H.
Little, Donald H. Sargent and John J. Pratt, Jr., who are President and Chief
Operating Officer, Senior Vice President -- Mortgages, Vice President and
Treasurer, Senior Vice President -- Finance, and Senior Vice President --
Commercial Lending, respectively, of Portsmouth. Pursuant to those employment
contracts, each officer would be entitled to receive severance benefits if such
officer
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terminates his employment with Portsmouth for "good reason" (as defined in the
contracts) within five years following a "change in control" (as defined in the
contracts). The Acquisition constitutes a change in control under the contracts.
The severance benefits payable to Messrs. Simpson, Pridham, Little and Sargent
would be equal to the product of 2.99 times the officer's average annual
compensation during the last five years immediately prior to the date of
termination (currently equivalent to severance benefits of $306,080, $256,363,
$250,383 and $234,835 respectively). The severance benefit payable to Mr. Pratt
would be equal to the product of one times his annual compensation during the
year immediately prior to the date of termination (currently $81,000). Further
information regarding these agreements is set forth under Item 10 of
Portsmouth's Annual Report on Form 10-K, incorporated herein by reference. See
"AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE."
Indemnification and Insurance. The Acquisition Agreement provides that
from and after the Effective Date, CFX will indemnify those persons who served
as directors and officers of Portsmouth on or before the Effective Date, in
accordance with and subject to the provisions of the Portsmouth's Articles of
Incorporation and By-laws.
In addition, CFX has agreed for a period of not less than six years
commencing on the Effective Date to provide to those persons who served as
directors or officers of Portsmouth on or before the Effective Date,
Portsmouth's existing insurance against liabilities and claims (and related
expenses) made against them resulting from their service as such on or before
the Effective Date, or comparable substitute coverage. In no event shall CFX be
obligated to provide insurance coverage to an insured person on more favorable
terms than is currently provided to him or her in such capacities. CFX also
shall not be required to expend with respect to any year's coverage more than
150% of the current per annum amount expended by Portsmouth to maintain or
procure such insurance coverage. It is currently anticipated that such coverage
may be obtained at a total cost of less than $58,050 per year.
Portsmouth Stock Option Plan. Certain key employees have been granted
stock options pursuant to the Portsmouth Stock Option Plan. See "MEETING
INFORMATION -- Beneficial Ownership." As of February 28, 1997, there were
329,988 shares of Portsmouth Common Stock reserved for issuance pursuant to the
exercise of options granted under the Portsmouth Stock Option Plan (333,018
shares after giving effect to the 2% stock dividend paid on March 15, 1997).
The Portsmouth Stock Option Plan provides that if Portsmouth is a party to
a transaction involving a merger, the Portsmouth Board, or the board of
directors of any corporation assuming the obligations of Portsmouth, shall, as
to outstanding options granted under the Portsmouth Stock Option Plan, either
(i) make appropriate provision for the protection of any such outstanding
options by the substitution on an equitable basis of appropriate stock of
Portsmouth, or of the merged, consolidated or otherwise reorganized corporation
which will be issuable in respect to the shares of Portsmouth Common Stock,
provided that no additional benefits shall be conferred upon optionees as a
result of such substitution, and the excess of the aggregate fair market value
of the shares subject to the options immediately after such substitution over
the Exercise Price (as defined in the Portsmouth Stock Option Plan) thereof is
not more than the excess of the aggregate fair market value of the shares
subject to such options immediately before such substitution over the Exercise
Price thereof, (ii) upon written notice to the optionees, provide that all
unexercised options (to the extent then exercisable) will be terminated in a
specified number of days, or (iii) upon written notice to the optionees, provide
that all unexercised options (to the extent then exercisable) will be terminated
upon payment to the holders of such options a cash amount equal to the excess of
the aggregate fair market value of the shares subject to such options over the
Exercise Price thereof. In the event of any such change, equitable adjustments
shall also be made by the board of directors in its discretion in the terms and
conditions of any Stock Appreciation Right (as defined in the Portsmouth Stock
Option Plan) granted under the Portsmouth Stock Option Plan.
The Acquisition Agreement provides that, on the Effective Date, outstanding
obligations under the Portsmouth Stock Option Plan will be assumed by CFX and,
except as provided in the Acquisition Agreement, each stock option outstanding
under the Portsmouth Stock Option Plan will become the right to receive, upon
payment of the exercise price, the number of shares of CFX Common Stock equal to
the Exchange Ratio multiplied by the number of shares of Portsmouth Common Stock
covered by such option.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
the Acquisition to stockholders of Portsmouth. The federal income tax laws are
complex and the tax consequences of the Acquisition may vary depending upon each
stockholder's individual circumstances or tax status. Moreover, some
stockholders such as foreign persons, financial institutions, tax-exempt
organizations, insurance companies and persons who acquired shares of Portsmouth
Common Stock pursuant to the exercise of employee stock options or rights or
otherwise as compensation may be subject to special rules. Therefore, each
stockholder is urged to consult a tax advisor regarding the federal, state,
local, foreign and other tax consequences of the Acquisition in light of the
particular circumstances of such stockholder.
Arnold & Porter, special counsel to CFX, has rendered an opinion to CFX and
Portsmouth regarding certain federal income tax consequences of the Acquisition,
which opinion is described below. That opinion is based on laws, regulations,
rulings and judicial decisions as they now exist. These authorities are all
subject to change and such change may be made with retroactive effect. Arnold &
Porter cannot give any assurance that, after any such change, its opinion would
not be different, and does not undertake any responsibility to update or
supplement its opinion. Moreover, Arnold & Porter's opinion does not address the
consequences of the Acquisition under state, local or foreign tax laws, to the
extent such laws may apply.
CFX and Portsmouth have provided Arnold & Porter with the facts,
representations, and assumptions on which Arnold & Porter has relied in
rendering its opinion, which information is consistent with the state of facts
that CFX and Portsmouth believe will be existing as of the Effective Date. Based
on such facts, representations and assumptions, Arnold & Porter has opined that,
for federal income tax purposes: (i) the Acquisition, when consummated in
accordance with the Acquisition Agreement and certain related agreements, either
will constitute or will be treated as part of a reorganization within the
meaning of Section 368(a) of the Code (under either alternative, no gain or loss
will be recognized by the stockholders of Portsmouth who exchange all of their
Portsmouth Common Stock for CFX Common Stock, except as provided below); (ii) no
gain or loss will be recognized by a stockholder of Portsmouth who exchanges all
of the stockholder's Portsmouth Common Stock solely for CFX Common Stock
pursuant to the Acquisition (except as described below with respect to cash
received in lieu of a fractional share interest in CFX Common Stock); (iii) the
aggregate adjusted tax basis of the CFX Common Stock received by a stockholder
who exchanges all of the stockholder's Portsmouth Common Stock solely for CFX
Common Stock in the Acquisition will be the same as the aggregate adjusted tax
basis of the Portsmouth Common Stock surrendered in exchange therefor, reduced
by any amount allocable to a fractional share interest for which cash is
received; and (iv) the holding period for CFX Common Stock received in exchange
for Portsmouth Common Stock will include the period during which the stockholder
held the Portsmouth Common Stock surrendered in the exchange, provided that the
Portsmouth Common Stock was held as a capital asset at the Effective Date.
For federal income tax purposes, a stockholder of Portsmouth who receives
cash in lieu of a fractional share interest in CFX Common Stock will be treated
as having received such fractional share interest. The cash received by such a
stockholder in lieu of a fractional share interest in CFX Common Stock will be
treated as received in exchange for such fractional share interest, and gain or
loss generally 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 shares of Portsmouth Common Stock allocable to such fractional share
interest. Such gain or loss should be long-term capital gain or loss if the
stockholder's shares of Portsmouth Common Stock are held as capital assets and
have been held for more than one year at the Effective Date.
A holder of Portsmouth Common Stock who exercises dissenters' rights under
applicable New Hampshire law and who receives cash payment of the fair value of
the holder's shares of Portsmouth Common Stock will be treated as having
received such payment in redemption of such shares. Such redemption will be
subject to the conditions and limitations of Section 302 of the Code, including
the attribution rules of Section 318 of the Code. In general, if the shares of
Portsmouth Common Stock are held by the holder as a capital asset at the
Effective Date, a dissenting holder will recognize capital gain or loss measured
by the difference between the amount of cash received by such holder and the
basis for such shares. If, however, such holder owns, either actually or
constructively, any other Portsmouth Common Stock or CFX Common Stock, the
payment made to such holder could be treated as dividend income. In general,
under the constructive
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ownership rules of the Code, a holder may be considered to own stock that is
owned, and in some cases constructively owned, by certain related individuals or
entities, as well as stock that such holder (or related individuals or entities)
has the right to acquire by exercising an option or converting a convertible
security. Each holder of Portsmouth Common Stock who contemplates exercising
dissenters' rights should consult his or her own tax advisor as to the
possibility that the payment will be treated as dividend income.
ACCOUNTING TREATMENT
In the Acquisition Agreement, the consummation of the Acquisition is
conditioned upon it being accounted for as a pooling-of-interests transaction.
Although this condition may be waived pursuant to the terms of the Acquisition
Agreement, CFX has advised Portsmouth that it does not intend to waive this
condition. CFX and Portsmouth also agreed that they would not take any action
that would disqualify the Acquisition as a pooling-of-interests for accounting
purposes. Under the pooling-of-interests method of accounting, the historical
basis of the assets and liabilities of CFX and Portsmouth will be combined and
carried forward at their previously recorded amounts. Revenue and expenses of
CFX and Portsmouth will be combined at historically recorded amounts.
A requirement of pooling treatment is that affiliates of Portsmouth cannot
reduce their holdings of Portsmouth Common Stock or CFX Common Stock received in
the Acquisition, as the case may be, for a period beginning 30 days prior to the
Effective Date and ending upon the publication of at least 30 days of
post-Acquisition combined operations of CFX and Portsmouth. The
pooling-of-interests method will not apply if the holders of more than 10% of
the outstanding shares of Portsmouth Common Stock exercise their dissenters'
rights. See "-- Background of the Acquisition" and "-- Rights of Dissenting
Stockholders."
Pro forma financial information provided herein is presented assuming use
of the pooling-of-interests accounting methods. See "-- Terms of the
Acquisition" and "PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)."
STOCK OPTION AGREEMENT
The summary information below in this Proxy Statement-Prospectus concerning
the material terms of the Stock Option Agreement is qualified in its entirety by
reference to the full text of such agreement attached in its entirety hereto as
Appendix B.
Under the Stock Option Agreement, Portsmouth has granted an Option to CFX
to purchase up to 1,164,840 authorized but unissued shares of Portsmouth Common
Stock (constituting 19.99% of the shares of Portsmouth Common Stock outstanding
on the date of such grant, adjusted to give effect to the 2% stock dividend paid
by Portsmouth on March 15, 1997) at a price of $15.44 per share (as adjusted),
or at such lesser price as provided in the Stock Option Agreement. In the event
of any change in Portsmouth Common Stock by reason of stock dividends,
split-ups, recapitalizations, combinations, exchanges of shares or the like, the
type and number of shares subject to the Option and the purchase price therefor
shall be adjusted appropriately. If any additional shares of Portsmouth Common
Stock are issued or otherwise become outstanding after the date of the Stock
Option Agreement (other than as contemplated in the Stock Option Agreement), the
number of shares of Portsmouth Common Stock subject to the Option shall be
adjusted so that, after such issuance, it equals 19.99% of the number of shares
of Portsmouth Common Stock then issued and outstanding without giving effect to
any shares subject to or issued pursuant to the Option. The closing price for
Portsmouth Common Stock on Nasdaq for February 12, 1997 (as adjusted) was
$15.44.
The purpose of the Option is to increase the likelihood that the
Acquisition will be consummated by making it more difficult and more expensive
for a third party to acquire control of Portsmouth. Accordingly, the Option is
exercisable only upon the occurrence of certain "Purchase Events" that might
jeopardize consummation of the Acquisition pursuant to the terms of the
Acquisition Agreement. The term "Purchase Event" in the Stock Option Agreement
generally relates to attempts by one or more third parties to acquire a
significant interest in Portsmouth.
The Option would terminate on the earliest to occur of: (i) the Effective
Date; (ii) termination of the Transaction Documents in accordance with the terms
of the Acquisition Agreement other than as provided in
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<PAGE> 50
the following clause; or (iii) six months after termination of the Transaction
Documents if such termination follows the occurrence of a Purchase Event or is
due to a willful breach by Portsmouth or Portsmouth Savings of certain covenants
contained therein. For additional information regarding the terms of the Option
and events upon which it could be exercised, reference should be made to the
Stock Option Agreement, a copy of which is attached hereto as Appendix B.
The Stock Option Agreement also provides that at the election of CFX during
the nine months immediately following (i) the acquisition by one or more third
parties of 25% or more of the outstanding shares of Portsmouth Common Stock or
(ii) the execution by one or more third parties and Portsmouth or any Portsmouth
subsidiary of an agreement to (A) merge or consolidate, or enter into any
similar transaction, with Portsmouth or any Portsmouth subsidiary, (B) purchase,
lease or otherwise acquire all or substantially all the assets of Portsmouth or
any Portsmouth subsidiary, or (C) purchase or otherwise acquire (including by
way of merger, consolidation, share exchange or any similar transaction)
securities representing 25% or more of the voting power of Portsmouth or any
Portsmouth subsidiary (but not later than the termination of the Option)
Portsmouth is required to repurchase the Option from CFX together with any
shares of Portsmouth Common Stock purchased by CFX and as to which CFX then has
beneficial ownership pursuant thereto, at a price specified in the Stock Option
Agreement.
Although the shares issuable upon exercise of the Option represent
approximately 19.99% of the Portsmouth Common Stock that would be outstanding
after such exercise, CFX may not acquire more than 5% of the Portsmouth Common
Stock, pursuant to the exercise of the Option or otherwise, without prior
approval of the Federal Reserve. See "-- Regulatory and Other Approvals."
RIGHTS OF DISSENTING STOCKHOLDERS
Pursuant to Sections 13.01 et seq. of Chapter 293-A of the NHRSA which
Chapter 293-A is hereinafter referred to as the "New Hampshire Corporate Law,"
in the event that the Acquisition is consummated, any holder of shares of
Portsmouth Common Stock who objects to the Acquisition is entitled to dissent
from the Acquisition and to have the fair value of such shares ("Dissenting
Stock") as determined by Portsmouth, or if necessary, judicially determined,
paid to him or her, by complying with the provisions of Sections 13.01 et seq.
of the New Hampshire Corporate Law. Failure to take any steps set forth in
Sections 13.01 et seq. in connection with the exercise of such rights may result
in termination or waiver thereof.
The following is a summary of the statutory procedures required to be
followed by a holder of Dissenting Stock (a "dissenting stockholder") in order
to exercise his or her rights under the New Hampshire Corporate Law. This
summary is qualified in its entirety by reference to Sections 13.01 et seq. of
the New Hampshire Corporate Law, the text of which is attached as Appendix D to
this Proxy Statement-Prospectus.
If a stockholder elects to exercise dissenters' rights with respect to the
Acquisition, such stockholder must (i) deliver to Portsmouth prior to the vote
on the Acquisition at the Special Meeting a written notice of intention to
demand payment for his shares if the Acquisition is effected and (ii) not vote
in favor of the Acquisition. The written notice required to be delivered to
Portsmouth by a dissenting stockholder is in addition to and separate from any
proxy or vote against the Acquisition. Neither voting against nor failure to
vote for the Acquisition will constitute the written notice required to be filed
by a dissenting stockholder. Failure to vote against the Acquisition, however,
will not constitute a waiver of rights under Sections 13.01 et seq. of the New
Hampshire Corporate Law provided that a written notice has been properly filed.
A signed proxy that is returned but which does not contain any instructions as
to how it should be voted will be voted in favor of approval of the Acquisition
and will be deemed a waiver of dissenters' rights. See "MEETING INFORMATION --
Voting and Revocation of Proxies."
Subject to the foregoing, a beneficial stockholder may assert dissenters'
rights as to shares held on his or her behalf only if (i) he or she submits to
Portsmouth the record stockholder's written consent to the dissent not later
than the time the beneficial stockholder asserts dissenters' rights and (ii) he
or she does so with respect to all shares of Portsmouth Common Stock of which he
or she is the beneficial owner or over which he or she has the power to direct
the vote. A record holder of shares of Portsmouth Common Stock may dissent on
behalf of any beneficial owner with respect to all but not less than all the
shares of such beneficial owner if
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<PAGE> 51
the record holder notifies Portsmouth in writing of the name and address of each
such person on whose behalf he asserts dissenters' rights. All notices of
intention to demand payment should be addressed to Mark E. Simpson, Secretary
and Treasurer, Portsmouth Bank Shares, Inc., 333 State Street, P.O. Box 6700,
Portsmouth, New Hampshire 03802-6700.
If the Acquisition is approved, Portsmouth is obligated to give written
notice to each dissenting stockholder who timely filed a notice of intention to
demand payment and who did not vote in favor of approval of the Acquisition no
later than 10 days after the approval of the Acquisition by the stockholders of
Portsmouth. The notice must be accompanied by a copy of Sections 13.01 et seq.
and must (i) state where a demand for payment must be sent and where and when
certificates for Dissenting Stock must be deposited in order to obtain payment,
(ii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received, (iii) be
accompanied by a form for demanding payment that includes the date of the first
announcement to news media or to stockholders of the terms of the proposed
Acquisition (February 13, 1997) and requires that the person asserting
dissenters' rights certify whether or not he or she acquired beneficial
ownership of the shares before that date and (iv) set a date by which Portsmouth
shall receive the payment demand, which date shall not be less than 30 days nor
more than 60 days after the date the notice is delivered. The dissenting
stockholder must demand payment, certify whether he or she acquired ownership of
such shares prior to February 13, 1997 and deposit the certificates in
accordance with the terms of the notice. A dissenting stockholder who fails to
demand payment or deposit certificates for Dissenting Stock, as required, shall
have no right under Sections 13.01 et seq. to receive payment for the Dissenting
Stock.
Unless the Acquisition has been effected and Portsmouth has made the
payment required below within 60 days after the date for demanding payment and
depositing certificates for Dissenting Stock, Portsmouth shall return any
certificates for Dissenting Stock so deposited. If such Dissenting Stock has
been returned by Portsmouth, Portsmouth may at a later time send a new notice
conforming to the requirements herein described.
As soon as the Acquisition has been consummated, or upon receipt of demand
for payment, if the Acquisition has already been consummated, Portsmouth shall
pay to each dissenting stockholder who has made proper demand and deposited his
or her certificates the amount which Portsmouth estimates to be the fair value
of his or her Dissenting Stock, with accrued interest, if any, accompanied by
(i) Portsmouth's balance sheet as of the end of a fiscal year ending not more
than 16 months before the date of payment, (ii) an income statement and a
statement of changes in stockholders' equity for such fiscal year, (iii)
Portsmouth's latest available interim financial statements, if any, (iv) a
statement of Portsmouth's estimate of the fair value of the shares, (v) an
explanation of how the interest was calculated and (vi) a statement of the
dissenting stockholder's right to demand supplemental payment pursuant to
Section 13.28 if the stockholder is dissatisfied with Portsmouth's offer, as
well as a copy of Sections 13.01 et seq. Portsmouth may withhold payment from
any dissenting stockholder acquiring beneficial ownership of the Portsmouth
Common Stock subsequent to February 13, 1997, the date on which announcement of
the Acquisition was first made. For such shares of Portsmouth Common Stock
acquired after February 13, 1997, Portsmouth, upon consummation of the
Acquisition, shall estimate the fair value of such shares, plus accrued
interest, if any, and pay such estimated amount to each holder of such shares
who agrees to accept such payment in full satisfaction of his or her demand.
With each such offer of payment, Portsmouth shall send its estimate of the fair
value of such shares of Portsmouth Common Stock, an explanation of how the
interest was calculated, and a statement of such dissenting stockholder's right
to demand payment if such dissenting stockholder is dissatisfied with such
offer.
Fair value of Dissenting Stock means the value immediately before the
Effective Date, excluding any change in value in anticipation of the Acquisition
if such exclusion is not inequitable (which amount may be more, less or the same
as the consideration to be received by stockholders of Portsmouth in connection
with the Acquisition).
If Portsmouth fails to remit such fair value to the dissenting stockholder
within 60 days from the date set for demanding payment, or if Portsmouth fails
to return any deposited certificates or release the transfer
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<PAGE> 52
restrictions imposed on uncertificated shares within 60 days of the date set for
demanding payment, or if such dissenting stockholder believes the amount paid or
offered to be paid, as the case may be, to be less than fair value (or that the
interest, if any, is not correct), such dissenting stockholder may send
Portsmouth his or her own estimate of fair value (and interest, if any) and
demand payment of the deficiency, or reject Portsmouth's offer and demand
payment of the fair value (and interest, if any). If the dissenting stockholder
does not notify Portsmouth of his or her payment demand within 30 days after
Portsmouth has made payment or offered payment, as the case may be, such
stockholder shall be entitled to no more than the amount remitted.
Within 60 days after a demand for payment of the deficiency, if it remains
unsettled, Portsmouth shall file a petition with the Superior Court of
Rockingham County, New Hampshire (the "Court") requesting determination of the
fair value of the Dissenting Stock and accrued interest. All dissenting
stockholders whose demands have not been settled shall be parties to such action
and shall be served a copy of the petition. The Court shall determine the fair
value of the Dissenting Stock and each dissenting stockholder shall be entitled
to judgment for the amount by which the amount previously remitted by Portsmouth
is exceeded by the Court's determination of fair value, if any. If Portsmouth
does not file a petition, each dissenting stockholder who has made a demand and
who has not settled his or her claim shall be entitled to receive the amount
demanded with interest and may sue to enforce his or her claim in an appropriate
court.
Costs of an appraisal proceeding, including costs and expenses of
appraisers appointed by the Court, shall be determined by the Court and assessed
against Portsmouth, except that the Court may assess any part of such costs and
expenses to all or some of the dissenting stockholders who are parties and whose
action the Court finds to be arbitrary, vexatious or not in good faith in
demanding payment under Sections 13.01 et seq. Fees and expenses of counsel and
experts for the respective parties may be assessed against (i) Portsmouth if the
Court finds it failed to comply substantially with the requirements of Sections
13.01 et seq. or (ii) either Portsmouth or a dissenting stockholder if the Court
finds that the party acted arbitrarily, vexatiously or not in good faith with
respect to its dissenters' rights. The Court may award reasonable attorney fees
to be paid out of the amounts awarded to the dissenting stockholders if the
Court finds that the services of counsel for any dissenting stockholder have
been of substantial benefit to other dissenting stockholders similarly situated
and that such attorney fees should not be assessed against Portsmouth.
CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS
CFX and Portsmouth are both New Hampshire corporations. The rights of
holders of CFX Common Stock and Portsmouth Common Stock are governed generally
by the New Hampshire Corporate Law. The rights of holders of CFX Common Stock
are further governed by the CFX Articles of Incorporation, as amended (the "CFX
Articles") and by the CFX By-laws, as amended (the "CFX By-laws"). Likewise, the
rights of holders of Portsmouth Common Stock are also governed by the Portsmouth
Articles of Incorporation, as amended (the "Portsmouth Articles") and by the
Portsmouth By-laws, as amended (the "Portsmouth By-laws"). Upon consummation of
the acquisition, the stockholders of Portsmouth (except those who exercise
dissenters' rights) will become stockholders of CFX and as such their rights
will continue to be governed by the New Hampshire Corporate Law.
The rights of stockholders of CFX and Portsmouth with respect to cumulative
voting, preemptive rights, dividends and repurchases of stock, special meetings
of stockholders and inspection of records by stockholders are generally
comparable. Certain significant differences between the rights of stockholders
of CFX and Portsmouth with respect to other provisions are set forth below.
This summary contains a list of material differences, but is not meant to
be relied upon as an exhaustive list or a detailed description of the provisions
discussed and is qualified in its entirety by reference to the CFX Articles, the
CFX By-laws, the Portsmouth Articles and the Portsmouth By-laws.
Classification of Directors. CFX. Pursuant to the CFX Articles, the CFX
Board is divided into three classes, with the directors in each class being
elected for staggered three-year terms.
Portsmouth. The Portsmouth Board is not divided into classes.
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<PAGE> 53
Action by Consent of Stockholders. CFX. Pursuant to the New Hampshire
Corporate Law and CFX By-laws, any action required or permitted to be taken at a
stockholders' meeting may be taken without a meeting if the action is taken by
all the stockholders entitled to vote on the action, provided that the action is
evidenced by one or more written consents describing the action taken, signed by
the holders of all of the issued and outstanding shares of stock entitled to
vote upon such action.
Portsmouth. The Portsmouth By-laws do not permit the stockholders to take
any action by consent.
Vacancies on the Board of Directors. CFX. The New Hampshire Corporate Law
permits and the CFX Articles provide that any vacancy in the CFX Board caused by
death, resignation, retirement, disqualification, removal or other cause, shall
be filled by a majority vote of the remaining directors, though less than a
quorum. A director so chosen holds office for the unexpired term of the
director's predecessor in office. Any directorship to be filled by reason of an
increase in the authorized number of directors may be filled by the CFX Board
for a term of office continuing only until the next election of directors by the
stockholders.
Portsmouth. The Portsmouth Articles provide that any vacancy in the
Portsmouth Board, including any directorship to be filled by an increase in the
authorized number of directors, may be filled by vote of a majority of the
directors then in office; provided, however, that if at the time of such vacancy
there is an "interested stockholder", such vacancy may only be filled by vote of
at least a majority of the "continuing directors" then in office. The term
"interested stockholder" generally includes any person who or which is the
beneficial owner of 10% or more of the voting stock of Portsmouth. The term
"continuing directors" generally means any directors of Portsmouth who are not
affiliated with the interested stockholder. A director elected to fill such a
vacancy serves for the unexpired term of his predecessor in office.
Removal of Directors. CFX. The CFX Articles provide that at any meeting of
stockholders called expressly for the purpose, any director may be removed from
office by the affirmative vote of the holders of 75% of the shares entitled to
vote or, if removal is for cause, then by a majority of the shares then entitled
to vote.
Portsmouth. Under the Portsmouth By-laws, a director may be removed from
office, with or without cause, by an affirmative vote of not less than (i) 80%
of the total votes eligible to be cast by stockholders at a duly constituted
meeting of stockholders called expressly for such purpose, or (ii) two-thirds of
the members of the Portsmouth Board then in office, unless at the time of such
removal there shall be an interested stockholder, in which case the affirmative
vote of not less than a majority of the continuing directors then in office
shall instead be required for removal by vote of the Portsmouth Board.
Business Combinations. CFX. The CFX Articles contain a so-called "fair
price" provision pursuant to which certain business combinations (as defined in
the CFX Articles), including an acquisition or consolidation, require the
approval of (i) the holders of at least 80% of the outstanding shares entitled
to vote for the election of directors unless the consideration to be received by
the stockholders of CFX is of the same value and form as the highest
consideration paid by the other party to the business combination (the
"Acquiring Party") in acquiring CFX Common Stock, and (ii) subject to the
provisions in (i) above, the vote of the holders of at least 75% of the
outstanding shares entitled to vote for the election of directors unless the
business combination is approved by at least two-thirds of the directors of CFX
who are not affiliated with, or stockholders of, the Acquiring Party.
The CFX Articles allow the CFX Board, in evaluating a business combination
or a tender or exchange offer, to consider, in addition to the adequacy of the
amount to be paid on connection with any such transaction, certain specified
factors and any other factors the CFX Board deems relevant. Among the factors
the CFX Board may consider are: the social and economic effects of the
transaction on CFX, its employees, depositors, loan and other customers,
creditors and other elements of the communities in which CFX operates or is
located; the business and financial condition and earnings prospects of the
acquiring party or parties; and the competence, experience and integrity of the
acquiring party or parties and its or their management.
Portsmouth. The Portsmouth Articles contain a so-called "fair price"
provision relating to certain business combinations (as defined in the
Portsmouth Articles) involving Portsmouth and an interested stockholder,
including a merger or consolidation. Any such business combination requires the
approval of the
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<PAGE> 54
holders of at least 80% of the outstanding shares entitled to vote for the
election of directors. The fair price provision of the Portsmouth Articles
provides that a business combination is not subject to the foregoing
requirements if certain procedural requirements are met, and if (i) the business
combination has been approved by the majority of the continuing directors, or
(ii) the aggregate amount of the consideration received by holders of Portsmouth
Common Stock shall be at least equal to the highest of (A) the highest per share
price paid, within a certain time period, for any shares of Portsmouth Common
Stock by the interested stockholder, (B) the highest "fair market value" (as
defined in the Portsmouth Articles) per share of Portsmouth Common Stock during
the one-year period prior to and including the "announcement date" (as defined
in the Portsmouth Articles), or (C) the price per share equal to the product of
(x) the fair market value per share of Portsmouth Common Stock on the
announcement date, or on the date on which the interested stockholder became an
interested stockholder, whichever is higher, and (y) a fraction, the numerator
of which is highest price per share of Portsmouth Common Stock paid by the
interested stockholder in the two-year period immediately prior to and including
the announcement date, and the denominator of which is the fair market value per
share of Portsmouth Common Stock on the first day in such two-year period upon
which the interested stockholder acquired any shares of Portsmouth Common Stock.
Amendments to Articles. CFX. The CFX Articles provide that the holders of
at least two-thirds of all of the shares of CFX entitled to vote for the
election of directors is required to amend or repeal, or to adopt any provision
in contravention of or inconsistent with, the CFX Articles. In addition, the
vote of the holders of at least 80% of all of the shares of CFX entitled to vote
for the election of directors is required to amend or repeal, or to adopt any
provision in contravention of or inconsistent with, those provisions described
above in "-- Business Combinations."
Portsmouth. The Portsmouth Articles provide that no amendment, addition,
alteration, change or repeal of the Portsmouth Articles shall be made, unless
the same is first approved by the affirmative vote of a majority of the
Portsmouth Board and thereafter approved by the stockholders by not less than
80% of the total votes eligible to be cast at a duly constituted meeting.
However, the Portsmouth Articles may be amended to change the name, purpose and
powers, total number of authorized shares, identity of the registered agent and
address of registered office of Portsmouth by the vote of not less than a
majority of the total votes eligible to be cast at a duly constituted meeting;
provided, however, that if, at any time within the 60 day period immediately
preceding the meeting at which the stockholder vote is to be taken, there is an
interested stockholder, such amendment, addition, alteration, change or repeal
shall also require the affirmative vote of not less than a majority of the
continuing directors then in office, prior to approval by the stockholders.
Notwithstanding the foregoing, to the extent that any provision of the
Portsmouth Articles stipulates stockholder approval by a vote of more than 80%
of the total votes eligible to be cast, and if, at any time within the 60 day
period immediately preceding the meeting at which the stockholder vote is to be
taken there is as interested stockholder, such provision may only be amended,
altered, changed or repealed after approval by the same vote required by such
provision, unless such amendment, alteration or repeal shall also have been
approved by the affirmative vote of not less than a majority of the continuing
directors then in office, in which case only the vote of 80% of the total votes
eligible to be cast by the stockholders shall be required.
Amendments to By-Laws. CFX. Pursuant to the CFX Articles and CFX By-laws,
the CFX By-laws may be amended by the affirmative vote of a majority of the
entire CFX Board subject to repeal, change or adoption of any contravening or
inconsistent provision only by vote of the holders of at least two-thirds of all
the shares entitled to vote on the matter at a meeting expressly called for the
purpose.
Portsmouth. Pursuant to the Portsmouth Articles and the Portsmouth
By-laws, the Portsmouth By-laws may be amended by the Portsmouth Board or the
stockholders. Such action by the Portsmouth Board shall require the affirmative
vote of at least two-thirds of the directors then in office, unless at the time
of such action there shall be an interested stockholder, in which case such
action shall also require the affirmative vote of a majority of the continuing
directors then in office. Such action by the stockholders shall require (i)
approval by the affirmative vote of a majority of the Portsmouth Board, unless
at the time of such action there shall be an interested stockholder, in which
case such action shall also require the affirmative vote of a majority of the
continuing directors then in office at such meeting, (ii) unless waived by the
affirmative vote of the Portsmouth Board (and, if applicable, continuing
directors) specified in the preceding sentence, the
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<PAGE> 55
submission by the stockholders of written proposals for adopting, altering,
amending, changing or repealing the Portsmouth By-laws at least 60 days prior to
the meeting at which they are to be considered, and (iii) the affirmative vote
of at least two-thirds of the total votes eligible to be cast by stockholders at
a meeting expressly called for that purpose.
Rights Agreement. On November 17, 1988, the Portsmouth Board authorized
and declared a dividend distribution of one Right for each share of Portsmouth
Common Stock outstanding as of the close of business on November 28, 1988 (the
"Record Date"), and authorized the issuance of one Right for each share of
Portsmouth Common Stock issued between the Record Date and the Distribution Date
(as defined in the Rights Agreement dated as of November 17, 1988 between
Portsmouth and The First National Bank of Boston, as Rights Agent (the
"Portsmouth Rights Agreement")). After the Distribution Date, each Right will
entitle the registered holder to purchase from Portsmouth one share of
Portsmouth Common Stock at an exercise price of $40 per share, subject to
adjustment. The description and terms of the Rights are set forth in the Rights
Agreement, a copy of which was filed as an exhibit to Portsmouth's Registration
Statement on Form 8-A filed with the Commission on November 30, 1988, which is
incorporated by reference herein. See "AVAILABLE INFORMATION; DOCUMENTS
INCORPORATED BY REFERENCE."
At the Effective Date, each share of outstanding Portsmouth Common Stock
(including each attached Right issued pursuant to the Portsmouth Rights
Agreement), other than Dissenting Shares, will be exchanged for an amount of CFX
Common Stock equal to one share multiplied by the Exchange Ratio and cash in
lieu of any fractional share of CFX Common Stock. See "INTRODUCTION" and "THE
PROPOSED ACQUISITION -- Terms of the Acquisition."
CFX has not adopted a shareholder rights plan.
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PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma combined condensed financial statements
reflect the Acquisition and the Community Acquisition on a pooling-of-interests
basis. The pro forma balance sheet has been prepared as if the Acquisition and
the Community Acquisition had been consummated on March 31, 1997, and the pro
forma income statements have been prepared as if such acquisitions had occurred
as of the beginning of the earliest period presented. Under pooling-of-interests
accounting treatment for the Acquisition and the Community Acquisition, the
recorded assets and liabilities of CFX, Portsmouth and Community are carried
forward to the combined company at their recorded amounts. See "THE PROPOSED
ACQUISITION -- Accounting Treatment." The following pro forma financial
statements reflect the exchange of Portsmouth Common Stock for CFX Common Stock
in connection with the Acquisition at a maximum Exchange Ratio of 1.0294 and
reflect the exchange of Community Common Stock for CFX Common Stock at a maximum
exchange ratio of 2.2. The actual exchange ratios will depend on average CFX
trading prices. This unaudited pro forma combined financial information should
be read in conjunction with the consolidated historical financial statements of
CFX, including notes thereto, incorporated by reference herein, and the
consolidated historical financial statements of Portsmouth, including notes
thereto, appearing elsewhere herein. See "AVAILABLE INFORMATION; DOCUMENTS
INCORPORATED BY REFERENCE."
The unaudited pro forma combined condensed financial statements give effect
to the Acquisition and the Community Acquisition, but do not reflect anticipated
expenses and nonrecurring charges which may result from the Acquisition and the
Community Acquisition, estimated expense savings and revenue enhancements
anticipated to result from the respective acquisitions, or leverage strategies
anticipated to be employed as a result of such acquisitions.
The unaudited pro forma combined financial data is not necessarily
indicative of the financial position and results of future operations of the
combined entity or the actual financial position and results of operations that
would have been achieved had the Acquisition and the Community Acquisition been
consummated at the date indicated. The unaudited pro forma combined condensed
balance sheet reflects preliminary pro forma adjustments made to combine CFX
with Portsmouth and CFX with Community, utilizing the pooling-of-interests
accounting method.
The actual adjustments to CFX's accounts will be made as of the Effective
Date of the Acquisition and the Community Acquisition and may differ from those
reflected in the pro forma financial statements.
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CFX CORPORATION -- PORTSMOUTH BANK SHARES, INC. -- COMMUNITY BANKSHARES, INC. --
POOLING ACCOUNTING
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
CFX PRO
FORMA
COMBINED
CFX PORTSMOUTH PRO FORMA W/ COMMUNITY PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS PORTSMOUTH (HISTORICAL) ADJUSTMENTS
------------- ---------- ----------- ---------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash and due from banks.................. $ 62,080 $ 6,107 $ -- $ 68,187 $22,709
Interest bearing deposits with other
banks.................................. 4,628 44,752 49,380 4,227
Securities available for sale............ 379,423 86,698 466,121 88,081
Securities held to maturity.............. 30,951 21,504 52,455 43,806
Mortgage loans held for sale............. 21,101 0 21,101 4,352
Loans and leases......................... 1,150,658 97,967 1,248,625 400,503
Less allowance for loan and lease
losses............................. 15,661 688 16,349 4,088
----------- --------- -------- ---------- -------- --------
Net Loans and Leases............. 1,134,997 97,279 0 1,232,276 396,415 0
Premises and equipment................... 28,227 890 29,117 9,923
Mortgage servicing rights................ 6,555 0 6,555 1,654
Goodwill and deposit base intangibles.... 9,080 0 9,080 0
Foreclosed real estate................... 1,806 100 1,906 1,112
Bank-owned life insurance................ 31,376 0 31,376 0
Other assets............................. 34,225 5,591 39,816 8,366
----------- --------- -------- ---------- -------- --------
$ 1,744,449 $262,921 $ 0 $2,007,370 $580,645 $ 0
=========== ========= ======== ========== ======== ========
Liabilities and Shareholders' Equity
Deposits:
Interest bearing..................... $ 1,074,879 $190,515 $1,265,394 $356,492
Noninterest bearing.................. 148,651 3,575 152,226 54,193
----------- --------- -------- ---------- -------- --------
Total Deposits................... 1,223,530 194,090 1,417,620 410,685 0
Advances from FHLBB...................... 238,681 0 238,681 83,684
Other borrowed funds..................... 104,535 0 104,535 34,682
Other liabilities........................ 43,884 2,765 46,649 10,177
----------- --------- -------- ---------- -------- --------
Total Liabilities................ 1,610,630 196,855 1,807,485 539,228 0
Shareholders' Equity
Preferred stock.......................... 0 0 0 0
Common stock(1)(2)(3).................... 8,718 666 3,365 12,749 2,465 1,152
Paid-in capital.......................... 98,234 35,416 (9,729) 123,921 22,391 (1,152)
Retained earnings........................ 30,094 35,955 66,049 16,875
Net unrealized gains (losses) on
securities available for sale, after
tax effects............................ (2,757) 393 (2,364) (314)
Cost of common stock in treasury......... (470) (6,364) 6,364 (470) 0
----------- --------- -------- ---------- -------- --------
Total Shareholders' Equity....... 133,819 66,066 0 199,885 41,417 0
----------- --------- -------- ---------- -------- --------
$ 1,744,449 $262,921 $ 0 $2,007,370 $580,645 $ 0
=========== ========= ======== ========== ======== ========
Number of common shares outstanding(1)... 13,050 5,872 19,095 2,465
----------- --------- ---------- --------
Common shareholders' equity per
share(4)............................... $ 10.25 $ 11.25 $ 10.47 $16.80
----------- --------- ---------- --------
<CAPTION>
CFX PRO
FORMA
COMBINED CFX
W/ FULLY PRO FORMA
COMMUNITY COMBINED
---------- ----------------
<S> <C> <C>
Assets
Cash and due from banks.................. $ 84,789 $ 90,896
Interest bearing deposits with other
banks.................................. 8,855 53,607
Securities available for sale............ 467,504 554,202
Securities held to maturity.............. 74,757 96,261
Mortgage loans held for sale............. 25,453 25,453
Loans and leases......................... 1,551,161 1,649,128
Less allowance for loan and lease
losses............................. 19,749 20,437
---------- ----------
Net Loans and Leases............. 1,531,412 1,628,691
Premises and equipment................... 38,150 39,040
Mortgage servicing rights................ 8,209 8,209
Goodwill and deposit base intangibles.... 9,080 9,080
Foreclosed real estate................... 2,918 3,018
Bank-owned life insurance................ 31,376 31,376
Other assets............................. 42,591 48,182
---------- ----------
$2,325,094 $2,588,015
========== ==========
Liabilities and Shareholders' Equity
Deposits:
Interest bearing..................... $1,431,371 $1,621,886
Noninterest bearing.................. 202,844 206,419
---------- ----------
Total Deposits................... 1,634,215 1,828,305
Advances from FHLBB...................... 322,365 322,365
Other borrowed funds..................... 139,217 139,217
Other liabilities........................ 54,061 56,826
---------- ----------
Total Liabilities................ 2,149,858 2,346,713
Shareholders' Equity
Preferred stock.......................... 0 0
Common stock(1)(2)(3).................... 12,335 16,366
Paid-in capital.......................... 119,473 145,160
Retained earnings........................ 46,969 82,924
Net unrealized gains (losses) on
securities available for sale, after
tax effects............................ (3,071) (2,678)
Cost of common stock in treasury......... (470) (470)
---------- ----------
Total Shareholders' Equity....... 175,236 241,302
---------- ----------
$2,325,094 $2,588,015
========== ==========
Number of common shares outstanding(1)... 18,473 24,518
---------- ----------
Common shareholders' equity per
share(4)............................... $ 9.49 $ 9.84
---------- ----------
</TABLE>
51
<PAGE> 58
CFX CORPORATION -- PORTSMOUTH BANK SHARES, INC. -- COMMUNITY BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1997(7)
(UNAUDITED)
<TABLE>
<CAPTION>
CFX PRO FORMA CFX PRO FORMA CFX
CFX PORTSMOUTH COMBINED W/ COMMUNITY COMBINED W/ FULLY PRO FORMA
(HISTORICAL) (HISTORICAL) PORTSMOUTH (HISTORICAL) COMMUNITY COMBINED
------------ ---------- ------------- ------------ ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income
Interest on loans and leases........ $ 24,399 $1,965 $26,364 $ 8,940 $33,339 $35,304
Interest and dividends on
securities........................ 5,013 1,794 6,807 1,946 6,959 8,753
Other interest income............... 91 821 912 28 119 940
-------- ------ ------- ------- ------- -------
Total Interest and Dividend
Income....................... 29,503 4,580 34,083 10,914 40,417 44,997
-------- ------ ------- ------- ------- -------
Interest expense
Interest on deposits................ 10,577 1,995 12,572 3,664 14,241 16,236
Interest on borrowings.............. 3,922 0 3,922 1,537 5,459 5,459
-------- ------ ------- ------- ------- -------
Total interest expense......... 14,499 1,995 16,494 5,201 19,700 21,695
-------- ------ ------- ------- ------- -------
Net Interest and Dividend
Income....................... 15,004 2,585 17,589 5,713 20,717 23,302
Provision for loan and lease losses...... 702 0 702 240 942 942
-------- ------ ------- ------- ------- -------
Net Interest and Dividend
Income after Provision for
Loan and Lease Losses........ 14,302 2,585 16,887 5,473 19,775 22,360
Other income............................. 4,372 242 4,614 1,298 5,670 5,912
Other expense............................ 11,974 888 12,862 4,670 16,644 17,532
-------- ------ ------- ------- ------- -------
Income Before Income Taxes..... 6,700 1,939 8,639 2,101 8,801 10,740
Income taxes............................. 1,958 431 2,389 778 2,736 3,167
-------- ------ ------- ------- ------- -------
Net Income..................... $ 4,742 $1,508 $ 6,250 $ 1,323 $ 6,065 $ 7,573
======== ====== ======= ======= ======= =======
Weighted average common shares
outstanding (5)........................ 13,014 5,843 19,029 2,518 18,554 24,568
======== ====== ======= ======= ======= =======
Earnings per common share................ $ 0.36 $ 0.26 $ 0.33 $ 0.53 $ 0.33 $ 0.31
======== ====== ======= ======= ======= =======
</TABLE>
52
<PAGE> 59
CFX CORPORATION -- PORTSMOUTH BANK SHARES, INC. -- COMMUNITY BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996(7)
(UNAUDITED)
<TABLE>
<CAPTION>
CFX PRO FORMA CFX PRO FORMA CFX
CFX PORTSMOUTH COMBINED W/ COMMUNITY COMBINED W/ FULLY PRO FORMA
(HISTORICAL) (HISTORICAL) PORTSMOUTH (HISTORICAL) COMMUNITY COMBINED
------------ ---------- ------------- --------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income
Interest on loans and leases........ $ 88,416 $ 7,141 $ 95,557 $32,976 $ 121,392 $ 128,533
Interest and dividends on
securities........................ 19,386 8,169 27,555 8,287 27,673 35,842
Other interest income............... 623 2,992 3,615 315 938 3,930
-------- -------- --------- ------- --------- ---------
Total Interest and Dividend
Income....................... 108,425 18,302 126,727 41,578 150,003 168,305
-------- -------- --------- ------- --------- ---------
Interest expense
Interest on deposits................ 40,740 8,055 48,795 14,839 55,579 63,634
Interest on borrowings.............. 10,826 204 11,030 4,918 15,744 15,948
-------- -------- --------- ------- --------- ---------
Total interest expense......... 51,566 8,259 59,825 19,757 71,323 79,582
-------- -------- --------- ------- --------- ---------
Net Interest and Dividend
Income....................... 56,859 10,043 66,902 21,821 78,680 88,723
Provision for loan and lease losses...... 2,935 -- 2,935 1,350 4,285 4,285
-------- -------- --------- ------- --------- ---------
Net Interest and Dividend
Income after Provision for
Loan and Lease Losses........ 53,924 10,043 63,967 20,471 74,395 84,438
Other income............................. 16,827 1,888 18,715 3,993 20,820 22,708
Other expense............................ 51,370 3,527 54,897 16,820 68,190 71,717
-------- -------- --------- ------- --------- ---------
Income Before Income Taxes..... 19,381 8,404 27,785 7,644 27,025 35,429
Income taxes............................. 6,740 2,447 9,187 2,689 9,429 11,876
-------- -------- --------- ------- --------- ---------
Net Income..................... $ 12,641 $ 5,957 $ 18,598 $ 4,955 $ 17,596 $ 23,553
======== ======== ========= ======= ========= =========
Weighted average common shares
outstanding (5)........................ 12,823 6,074 19,076 2,477 18,273 24,526
======== ======== ========= ======= ========= =========
Earnings per common share................ $ 0.99 $ 0.98 $ 0.97 $ 2.00 $ 0.96 $ 0.96
======== ======== ========= ======= ========= =========
</TABLE>
53
<PAGE> 60
CFX CORPORATION -- PORTSMOUTH BANK SHARES, INC. -- COMMUNITY BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995(7)
(UNAUDITED)
<TABLE>
<CAPTION>
CFX PRO FORMA CFX PRO FORMA CFX
CFX PORTSMOUTH COMBINED W/ COMMUNITY COMBINED W/ FULLY PRO FORMA
(HISTORICAL) (HISTORICAL) PORTSMOUTH (HISTORICAL)(6) COMMUNITY COMBINED
------------ ---------- ------------- --------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income
Interest on loans and leases........ $ 76,747 $ 6,769 $ 83,516 $26,086 $ 102,833 $ 109,602
Interest and dividends on
securities........................ 18,422 10,007 28,429 7,564 25,986 35,993
Other interest income............... 1,220 1,770 2,990 223 1,443 3,213
-------- -------- --------- ------- --------- ---------
Total Interest and Dividend
Income....................... 96,389 18,546 114,935 33,873 130,262 148,808
-------- -------- --------- ------- --------- ---------
Interest expense
Interest on deposits................ 37,279 7,491 44,770 12,904 50,183 57,674
Interest on borrowings.............. 7,084 193 7,277 2,914 9,998 10,191
-------- -------- --------- ------- --------- ---------
Total interest expense......... 44,363 7,684 52,047 15,818 60,181 67,865
-------- -------- --------- ------- --------- ---------
Net Interest and Dividend
Income....................... 52,026 10,862 62,888 18,055 70,081 80,943
Provision for loan and lease losses...... 3,037 -- 3,037 777 3,814 3,814
-------- -------- --------- ------- --------- ---------
Net Interest and Dividend
Income after Provision for
Loan and Lease Losses........ 48,989 10,862 59,851 17,278 66,267 77,129
Other income............................. 14,311 1,226 15,537 2,201 16,512 17,738
Other expense............................ 46,202 3,608 49,810 13,442 59,644 63,252
-------- -------- --------- ------- --------- ---------
Income Before Income Taxes..... 17,098 8,480 25,578 6,037 23,135 31,615
Income taxes............................. 5,760 2,439 8,199 1,862 7,622 10,061
-------- -------- --------- ------- --------- ---------
Net Income..................... 11,338 6,041 17,379 4,175 15,513 21,554
Preferred stock dividends................ 89 -- 89 -- 89 89
-------- -------- --------- ------- --------- ---------
Net Income Available to Common
Stock........................ $ 11,249 $ 6,041 $ 17,290 $ 4,175 $ 15,424 $ 21,465
======== ======== ========= ======= ========= =========
Weighted average common shares
outstanding (5)........................ 12,701 6,082 18,962 2,458 18,109 24,369
-------- -------- --------- ------- --------- ---------
Earnings per common share................ $ 0.89 $ 0.99 $ 0.91 $ 1.70 $ 0.85 $ 0.88
======== ======== ========= ======= ========= =========
</TABLE>
54
<PAGE> 61
CFX CORPORATION -- PORTSMOUTH BANK SHARES, INC. -- COMMUNITY BANKSHARES, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
DECEMBER 31, 1994(7)
(UNAUDITED)
<TABLE>
<CAPTION>
CFX PRO FORMA CFX PRO FORMA CFX
CFX PORTSMOUTH COMBINED W/ COMMUNITY COMBINED W/ FULLY PRO FORMA
(HISTORICAL) (HISTORICAL) PORTSMOUTH (HISTORICAL)(6) COMMUNITY COMBINED
------------ ---------- ------------- ------------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income
Interest on loans and leases........ $ 62,546 $ 6,716 $69,262 $21,489 $ 84,035 $ 90,751
Interest and dividends on
securities........................ 18,025 10,336 28,361 5,419 23,444 33,780
Other interest income............... 1,066 904 1,970 296 1,362 2,266
-------- -------- ------- ------- --------- ---------
Total Interest and Dividend
Income....................... 81,637 17,956 99,593 27,204 108,841 126,797
-------- -------- ------- ------- --------- ---------
Interest expense
Interest on deposits................ 28,122 6,051 34,173 11,262 39,384 45,435
Interest on borrowings.............. 5,517 196 5,713 506 6,023 6,219
-------- -------- ------- ------- --------- ---------
Total interest expense......... 33,639 6,247 39,886 11,768 45,407 51,654
-------- -------- ------- ------- --------- ---------
Net Interest and Dividend
Income....................... 47,998 11,709 59,707 15,436 63,434 75,143
Provision for loan and lease losses...... 2,697 -- 2,697 925 3,622 3,622
-------- -------- ------- ------- --------- ---------
Net Interest and Dividend
Income after Provision for
Loan and Lease Losses........ 45,301 11,709 57,010 14,511 59,812 71,521
Other income............................. 11,079 503 11,582 2,818 13,897 14,400
Other expense............................ 44,864 4,035 48,899 12,811 57,675 61,710
-------- -------- ------- ------- --------- ---------
Income Before Income Taxes.......... 11,516 8,177 19,693 4,518 16,034 24,211
Income taxes............................. 4,272 2,305 6,577 897 5,169 7,474
-------- -------- ------- ------- --------- ---------
Net Income.......................... 7,244 5,872 13,116 3,621 10,865 16,737
Preferred stock dividends................ 268 -- 268 19 287 287
-------- -------- ------- ------- --------- ---------
Net Income Available to Common
Stock............................. $ 6,976 $ 5,872 $12,848 $ 3,602 $ 10,578 $ 16,450
======== ======== ======= ======= ========= =========
Weighted average common shares
outstanding (5)........................ 12,052 6,121 18,353 2,424 17,385 23,685
======== ======== ======= ======= ========= =========
Earnings per common share................ $ 0.58 $ 0.96 $ 0.70 $ 1.49 $ 0.61 $ 0.69
======== ======== ======= ======= ========= =========
</TABLE>
55
<PAGE> 62
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) Common Stock at March 31, 1997:
CFX, $0.66 2/3 par value, 22,500,000 authorized shares, of which
13,080,325 shares have been issued and 13,049,961 are outstanding.
Portsmouth, $0.10 par value, 25,000,000 authorized shares, of which
6,657,184 shares have been issued and 5,872,334 are outstanding.
Community, $1.00 par value, 4,500,000 authorized shares, of which
2,465,238 shares have been issued and are outstanding.
(2) The pro forma financial statements reflect the exchange of Portsmouth
and Community Common Stock for CFX Common Stock in connection with the
acquisitions at the maximum exchange ratios of 1.0294 and 2.2, respectively.
In combining the companies, a pro forma adjustment at March 31, 1997 was
made to reflect the issuance of 6,044,981 shares of CFX Common Stock to
Portsmouth shareholders and 5,423,524 shares of CFX Common Stock to Community
stockholders in exchange for the outstanding shares of Portsmouth and Community
common stock.
(3) The Acquisition Agreement and the acquisition agreement for the
Community Acquisition provide that each holder of Portsmouth and Community
Common Stock, who would otherwise have been entitled to a fraction of CFX Common
Stock, will receive cash in lieu of such fractional share. Such cash payments
have not been reflected in the pro forma information.
(4) Pro forma common shareholders' equity per share was computed by
dividing combined historical common shareholders' equity by the sum of the
common shares outstanding at period end, adjusted to give effect to one or both
of the acquisitions, assuming the exchange ratios of 1.0294 and 2.2,
respectively.
(5) Pro forma weighted average common shares outstanding represent the
historical weighted average common shares outstanding of CFX during the periods,
plus the historical weighted average common shares outstanding of Portsmouth (as
restated to reflect the 2% stock dividend paid on March 15, 1997) and Community,
adjusted to give effect to one or both of the acquisitions, assuming the maximum
exchange ratios of 1.0294 and 2.2, respectively.
(6) The pro forma income statements for the years ended December 31, 1995
and 1994 include the historical amounts of Community for the years ended June
30, 1995 and 1994, respectively. Effective December 31, 1995, Community changed
its fiscal year end from June 30 to December 31.
(7) The unaudited pro forma combined condensed income statements do not
reflect material nonrecurring charges, totaling approximately $7.7 million in
the aggregate, net of related tax effects, attributable to the Portsmouth
Acquisition and Community Acquisition.
56
<PAGE> 63
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
Bank holding companies, banks and many of their nonbank affiliates are
extensively regulated under both federal and state law. The following
information describes certain aspects of that regulation. To the extent that the
following information describes statutory provisions, it is qualified in its
entirety by reference to the particular statutory provisions and any regulations
promulgated thereunder. The following is not intended to be an exhaustive
description of the statutes and regulations applicable to CFX's or Portsmouth's
business. Additional information regarding supervision and regulation is
included in documents incorporated herein by reference. See "AVAILABLE
INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE."
CFX is a bank holding company subject to the supervision of the Federal
Reserve under the BHCA. As such, CFX is a legal entity separate and distinct
from its subsidiary banks ("Banks", which will include Portsmouth Savings as a
division of CFX Bank following the Acquisition and the Bank Merger), and its
nonbanking subsidiaries. Accordingly, the right of CFX, and consequently the
right of creditors and stockholders of CFX, to participate in any distribution
of the assets or earnings of any subsidiary is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that claims of CFX
in its capacity as a creditor may be recognized. The principal source of CFX's
revenue and cash flows is dividends from its Banks and nonbank subsidiaries.
There are legal limitations on the extent to which the Banks can finance or
otherwise supply funds to CFX and its nonbanking subsidiaries.
CFX Bank, a subsidiary of CFX, is a New Hampshire-chartered FDIC-insured
bank and, therefore, is subject to supervision and regulation by the
Commissioner and the FDIC. Orange Savings is a Massachusetts-chartered
FDIC-insured savings bank subject to supervision and regulation by the
Massachusetts Commissioner of Banks and the FDIC. Safety Fund is a national
banking association subject to supervision and regulation by the Office of the
Comptroller of the Currency ("OCC").
RESTRICTIONS ON PAYMENT OF DIVIDENDS
Because CFX derives substantially all of its income from the payment of
dividends by the Banks, its ability to pay dividends is affected by the ability
of its subsidiaries to pay dividends. The Banks are subject to various statutory
and regulatory restrictions on their ability to pay dividends to CFX. In
addition, the FDIC, in the case of CFX Bank and Orange Savings, and the OCC in
the case of Safety Fund, have authority to prohibit any such Bank from engaging
in an unsafe or unsound practice in conducting its business. The payment of
dividends, depending upon the financial condition of the Bank in question, could
be deemed to constitute such an unsafe or unsound practice. The ability of the
Banks to pay dividends in the future is presently, and could be further,
influenced by federal and state bank regulatory policies or agreements and by
regulatory capital guidelines.
In addition, consistent with its policy regarding bank holding companies
serving as a source of strength for their subsidiary banks, the Federal Reserve
has stated that, as a matter of prudent banking, a bank holding company
generally should not maintain a rate of cash dividends unless its net income
available to common stockholders has been sufficient to fund fully the
dividends, and the prospective rate of earnings retention appears to be
consistent with such holding company's capital needs, asset quality and overall
financial condition.
AFFILIATE TRANSACTION RESTRICTIONS
The Banks are subject to affiliate transaction restrictions under federal
law which limit the transactions by subsidiary banks with or on behalf of their
parent company and to or on behalf of any nonbank subsidiaries, whether in the
form of loans, extensions of credit, issuances of guaranties, acceptances or
letters of credit, investments or asset purchases. Such transactions by a
subsidiary bank to its parent company or to any nonbank subsidiary are limited
to 10% of a bank subsidiary's capital and surplus and, with respect to such
parent company and all such nonbank subsidiaries, to an aggregate of 20% of such
bank subsidiary's capital
57
<PAGE> 64
and surplus. An exception to these quantitative restrictions is provided for
transactions between insured banks that are within the same holding company
structure where the holding company owns 80% or more of each institution.
Further, such loans and extensions of credit generally are required to be
secured by eligible collateral in specified amounts. Federal law also prohibits
subsidiary banks from purchasing "low-quality" assets from affiliates.
COMMUNITY REINVESTMENT ACT
Bank holding companies and their subsidiary banks are subject to the
provisions of the Community Reinvestment Act of 1977, as amended ("CRA"). Under
CRA, each subsidiary bank's record in meeting the credit needs of the community
served by the bank, including low- and moderate-income neighborhoods, is
regularly assessed by the bank's primary regulatory authority (assessments
include the following CRA ratings in descending order: "Outstanding,"
"Satisfactory," "Needs to Improve" and "Substantial Noncompliance"). When a bank
holding company applies for approval to acquire a bank or other bank holding
company, the Federal Reserve will review the assessment of each subsidiary bank
of the applicant bank holding company, and such records may be the basis for
denying the application. At their most recent respective CRA examinations, CFX
Bank received an overall CRA rating of "Outstanding" and Orange Savings, Safety
Fund and Portsmouth Savings received overall CRA ratings of "Satisfactory."
CROSS-GUARANTEE AND HOLDING COMPANY LIABILITY
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
contains a "cross-guarantee" provision which could result in insured depository
institutions "commonly controlled" by CFX being liable for losses incurred by
the FDIC in connection with assistance provided to, or the failure of, any other
insured depository institution owned by CFX. Such liability could have a
material adverse effect on the financial condition of any assessed Bank and CFX.
Under Federal Reserve policy, CFX is expected to act as a source of financial
strength to each Bank and to commit resources to support each Bank. This support
may be required at times when, absent such policy, CFX might not otherwise
provide such support. In addition, any capital loans by CFX to any of the Banks
would be subordinate in right of payment to deposits and to certain other
indebtedness of the Banks.
Under the prompt corrective action provisions of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA") and the Federal
Reserve's source of strength policy, a bank holding company may be required to
infuse sufficient capital into a subsidiary insured depository institution to
ensure that such subsidiary is in compliance with its minimum capital
requirements. See "-- Enforcement Powers of the Federal Banking Agencies;
Corrective Action" and "-- Capital Guidelines." Further, in the event of a bank
holding company's bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the
trustee will be deemed to have assumed and is required to cure immediately any
deficit under any commitment by the debtor holding company to any of the federal
banking agencies to maintain the capital of an insured depository institution,
and any claim for breach of such obligation will generally have priority over
most other unsecured claims.
FDIC INSURANCE ASSESSMENTS
The deposits of the Banks are insured by the FDIC up to the limits set
forth under applicable law. All of the deposits of Portsmouth Savings and a
majority of the deposits of CFX Bank are insured by the Bank Insurance Fund
("BIF") of the FDIC. However, approximately 17.7% of CFX Bank's deposits are
insured by the Savings Association Insurance Fund ("SAIF") of the FDIC. Pursuant
to budget reconciliation legislation enacted in 1996, the FDIC imposed a special
assessment on SAIF-insured deposits in order to increase the SAIF's net worth to
1.25% of insured deposits as of October 1, 1996. The pre-tax impact of this
assessment on CFX Bank was approximately $691,000 and was recorded as an expense
in 1996. Thereafter, the FDIC equalized the assessment rates for BIF- and
SAIF-insured deposits, effective January 1, 1997. Currently, the amount of FDIC
assessments range from the statutory minimum of $2,000 per year for the best
rated institutions, including CFX Bank, and 0.27% of insured deposits for the
worst rated institutions. Portsmouth Savings currently pays premiums to the BIF
at the rate of $.013 per $100 of deposits, totalling approximately $25,000
annually. In addition, legislation passed in 1996 requires all insured deposits
to pay a pro rata portion
58
<PAGE> 65
of the interest due on the obligations of the Financing Corporation. On an
annualized basis, in the case of BIF-insured deposits this assessment amounts to
an additional $.013 per $100 of deposits, while in the case of SAIF-insured
deposits this assessment amounts to an additional $.063 per $100 of deposits.
ENFORCEMENT POWERS OF THE FEDERAL BANKING AGENCIES; CORRECTIVE ACTION
Failure to comply with applicable laws, regulations and supervisory
agreements could subject CFX and its subsidiary banks, which will include CFX
Bank (of which Portsmouth Savings will be a division following the Acquisition),
as well as officers, directors and institution-affiliated parties of these
institutions, to administrative sanctions and potentially substantial civil
money penalties.
Under FDICIA, the federal banking agencies possess broad powers to take
corrective action as deemed appropriate for an insured depository institution
and its holding companies. The extent of these powers depends upon whether the
institution in question is considered "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" or
"critically undercapitalized." As of December 31, 1995, each of the Banks, as
well as Portsmouth Savings, exceeded the required ratios for classification as
"well capitalized." The categorization of depository institutions under the
uniform regulations is solely for the purpose of applying the federal bank
agencies' prompt corrective action powers and is not intended to be, and should
not be interpreted as, a representation of the depository institution's overall
financial condition or prospects.
Generally, as an institution is deemed to be less well capitalized, the
scope and severity of the agencies' powers increase. The agencies' corrective
powers can include, among other things, requiring an insured financial
institution to adopt a capital restoration plan which cannot be approved unless
guaranteed by the institution's parent holding company; placing limits on asset
growth and restrictions on activities; placing restrictions on transactions with
affiliates; restricting the interest rate the institution may pay on deposits;
prohibiting the institution from accepting deposits from correspondent banks;
prohibiting the payment of principal or interest on subordinated debt;
prohibiting the holding company from making capital distributions without prior
regulatory approval; and, ultimately, appointing a receiver for the institution.
Business activities may also be influenced by an institution's capital
classification. For instance, only a "well capitalized" depository institution
may accept brokered deposits without prior regulatory approval and only
"adequately capitalized" institutions may accept brokered deposits with prior
regulatory approval.
CAPITAL GUIDELINES
CFX and Portsmouth each are subject to capital adequacy guidelines of the
Federal Reserve. Under the Federal Reserve's capital guidelines, a holding
company's capital is divided into two tiers, Tier 1 and Tier 2, the respective
components of which are described in materials incorporated herein by reference.
See "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE." Holding
companies are required to maintain a minimum ratio of total capital (Tier 1
capital plus Tier 2 capital) to total risk-adjusted assets (which include the
credit risk equivalents of certain off-balance sheet items) of 8%, of which half
(4%) must be Tier 1 capital. In addition, the Federal Reserve requires a
leverage ratio (Tier 1 capital to average total consolidated assets) of 3%. The
Federal Reserve's risk-based and leverage ratios are minimum supervisory ratios
generally applicable to bank holding companies that meet certain specified
criteria, including that they have the highest regulatory rating. Banking
organizations not meeting these criteria are expected to operate with capital
positions well above the minimum ratios. Each depository institution subsidiary
of CFX and Portsmouth is also subject to similar minimum capital guidelines
established by the subsidiary's primary federal regulator. The federal bank
regulatory agencies may set capital requirements for a particular banking
organization that are higher than the minimum ratios when circumstances warrant.
Portsmouth Savings satisfies all applicable capital requirements.
The federal banking agencies' risk-based capital standards explicitly
identify concentrations of credit risk and the risk arising from non-traditional
activities, as well as an institution's ability to manage these risks, as
important factors to be taken into account by an agency in assessing the
institution's overall capital adequacy. The capital guidelines also provide that
an institution's exposure to a decline in the economic value of its capital due
to changes in interest rates be considered by the agency as a factor in
evaluating the institution's
59
<PAGE> 66
capital adequacy. The federal banking agencies also have recently issued
additional capital guidelines for certain banks and bank holding companies that
engage in trading activities. Portsmouth does not believe that consideration of
the additional factors considered in this paragraph will affect the regulators'
assessment of Portsmouth's or Portsmouth Savings' capital adequacy.
Under federal banking laws, failure to meet the minimum regulatory capital
requirements could subject a banking institution to a variety of enforcement
remedies available to federal regulatory authorities, including, in the most
severe cases, the termination of deposit insurance by the FDIC and seizure of
the institution.
As of December 31, 1996, CFX and Portsmouth's capital ratios and the
capital ratios of each of their subsidiary depository institutions exceeded the
minimum regulatory capital requirements established by the appropriate federal
regulatory agency. It is anticipated that, after the consummation of the
Acquisition, CFX and its depository institution subsidiaries will continue to
exceed the minimum requirements.
RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT OF 1994
On September 29, 1994, the President signed into law the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 ("IBBEA"), which permits
adequately capitalized and adequately managed bank holding companies to acquire
banks in any state. The IBBEA also permits banks in separate states to
consolidate into single entities with branches in multiple states. Consequently,
CFX has the authority to acquire any bank or bank holding company, and can be
acquired by any bank or bank holding company, located anywhere in the United
States. Further, effective June 1, 1997, the Banks have the authority, subject
to certain restrictions, including state opt-out provisions, to consolidate with
other banking subsidiaries of CFX, including Portsmouth Savings. Among other
provisions, the IBBEA provides that interstate branches of national banks will
be subject to host state laws, such as intrastate branching, consumer
protection, fair lending and community reinvestment laws, unless any such law is
preempted by federal law or is discriminatory in effect. The IBBEA provides that
interstate branches of state banks will be subject to the laws of the host
state. In addition, among other things, the IBBEA also increases the community
reinvestment requirements applicable to multi-state depository institutions.
This legislation may increase competition as banks branch across state lines and
enter new markets.
LEGAL OPINIONS
The validity of the CFX Common Stock offered in connection with the
Acquisition will be passed upon by Devine, Millimet & Branch, P.A., Manchester,
New Hampshire, counsel to CFX. Certain federal income tax consequences of the
Acquisition and other legal matters in connection with the Acquisition will be
passed upon by Arnold & Porter, Washington, D.C., special counsel to CFX, and
Hale and Dorr LLP, Boston, Massachusetts, special counsel to Portsmouth.
EXPERTS
The consolidated financial statements of Portsmouth and subsidiary as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996 incorporated by reference herein and in the Registration
Statement have been certified by Shatswell, MacLeod & Company, P.C., independent
certified public accountants, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
Representatives of Shatswell, MacLeod & Company, P.C., are expected to be
present at the Special Meeting, will have an opportunity to make a statement if
they wish to do so and are expected to be available to respond to appropriate
questions.
The consolidated financial statements of CFX and subsidiaries appearing in
CFX's Annual Report on Form 10-K for the year ended December 31, 1996
incorporated by reference herein have been certified by Wolf & Company, P.C.
independent certified public accountants, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein
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by reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The consolidated financial statements of Community and subsidiaries
appearing in Community's Annual Report on Form 10-K for the year ended December
31, 1996 incorporated herein by reference have been certified by KPMG Peat
Marwick LLP, independent certified public accountants, as set forth in their
report thereon included therein and incorporated herein by reference in reliance
upon such report given upon the authority of such firms as experts in accounting
and auditing.
Documents incorporated herein by reference in the future will include
financial statements, related schedules (if required) and auditors' reports,
which financial statements and schedules will have been audited to the extent
and for the periods set forth in such reports by the firm or firms rendering
such reports, and, to the extent so audited and consent to incorporation by
reference is given, will be incorporated herein by reference in reliance upon
such reports given upon the authority of such firms as experts in accounting and
auditing.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Reorganization
Agreement"), dated as of February 13, 1997, is by and among PORTSMOUTH BANK
SHARES, INC. ("Portsmouth"), a New Hampshire corporation, PORTSMOUTH SAVINGS
BANK ("Portsmouth Bank"), a New Hampshire state-chartered savings bank, CFX
CORPORATION ("CFX"), a New Hampshire corporation, and CFX BANK, a New Hampshire
state-chartered savings bank ("CFX Bank").
WITNESSETH
WHEREAS, the parties hereto desire to combine their respective businesses
on the terms and subject to the conditions of this Reorganization Agreement;
WHEREAS, the parties hereto desire that CFX acquire all the outstanding
shares of capital stock of Portsmouth, including each attached right issued
pursuant to the Portsmouth Rights Agreement (as defined below), through an
exchange (the "Share Exchange") of shares of CFX Common Stock (as defined below)
for the issued and outstanding shares of Portsmouth Common Stock (as defined
below) pursuant to a Plan of Share Exchange (the "Plan of Exchange") in the form
attached hereto as Annex A;
WHEREAS, the parties desire that, following the Share Exchange, Portsmouth
shall be merged (the "Holding Company Merger") with and into CFX, pursuant to a
merger agreement or plan of merger (the "Merger Agreement") in a form to be
specified by CFX and reasonably satisfactory to Portsmouth and consistent with
the terms of this Reorganization Agreement;
WHEREAS, the parties desire that, following the consummation of the Holding
Company Merger, Portsmouth Bank, a wholly-owned subsidiary of Portsmouth, shall
be merged (the "Bank Merger") with and into CFX Bank, a wholly-owned subsidiary
of CFX, pursuant to an Agreement and Plan of Merger (the "Plan of Merger") in
the form attached hereto as Annex B;
WHEREAS, in connection with the execution of this Reorganization Agreement,
Portsmouth and CFX have entered into a Stock Option Agreement (the "Stock Option
Agreement") dated as of even date herewith pursuant to which Portsmouth will
grant CFX the right to purchase certain shares of Portsmouth Common Stock; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with Share
Exchange, the Holding Company Merger, the Bank Merger and the other transactions
(collectively, the "Transactions") contemplated by this Reorganization
Agreement, the Plan of Exchange, the Merger Agreement, the Plan of Merger and
the Stock Option Agreement (collectively, the "Transaction Documents");
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
1.1. "AMEX" shall mean the American Stock Exchange, Inc.
1.2. "BHC Act" shall mean the Bank Holding Company Act of 1956, as
amended.
1.3. "CFX Entities" shall mean CFX and CFX Bank.
1.4. "CFX Financial Statements" shall mean (i) the consolidated balance
sheets of CFX as of September 30, 1996 and as of December 31, 1995 and 1994 and
the related consolidated statements of
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income, cash flows and changes in shareholders' equity (including related notes,
if any) for the nine months ended September 30, 1996 and each of the three years
ended December 31, 1995, 1994 and 1993 as filed by CFX in SEC Documents and (ii)
the consolidated balance sheets of CFX and related consolidated statements of
income, cash flows and changes in shareholders' equity (including related notes,
if any) as filed by CFX in SEC Documents with respect to periods ended
subsequent to September 30, 1996.
1.5. "Closing Date" shall mean the date specified pursuant to Section 4.8
hereof as the date on which the Parties shall close the Transactions.
1.6. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.7. "Commissioner" shall mean the New Hampshire State Bank Commissioner.
1.8. "Effective Date" shall mean the date specified pursuant to Section
4.8 hereof as the effective date of the Share Exchange.
1.9. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.10. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.11. "FDIA" shall mean the Federal Deposit Insurance Act.
1.12. "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.13. "Federal Reserve" shall mean the Board of Governors of the Federal
Reserve System or any appropriate Federal Reserve Bank.
1.14. "Intellectual Property" means domestic and foreign letters patent,
patents, patent applications, patent licenses, software licensed or owned,
know-how, know-how licenses, trade names, common law and other trademarks,
service marks, licenses of trademarks, trade names and/or service marks,
trademark registrations and applications, service mark registrations and
applications and copyright registrations and applications.
1.15. "Investment Company Act" means the Investment Company Act of 1940,
as amended.
1.16. "Material Adverse Effect" shall mean, with respect to Portsmouth or
CFX, as the case may be, a material adverse effect on the business, results of
operations or financial condition of such party and its subsidiaries taken as a
whole; provided, however, that the following shall not constitute or contribute
to a Material Adverse Effect: (i) changes in the financial condition, business,
or results of operations of a person resulting directly or indirectly from 1.
changes in interest rates (provided that Portsmouth is in compliance with its
asset/liability management policy as Previously Disclosed to CFX, as the same
may be revised thereafter with CFX's concurrence), or 2. changes in state and
federal regulations or legislation affecting New Hampshire banks; or (ii)
matters related to changes in federal, state or local tax laws or changes in
federal, state or local tax status, characteristics, or attributes or the
ability to use such attributes.
1.17. "Parties" shall mean CFX, CFX Bank, Portsmouth and Portsmouth Bank.
1.18. "Portsmouth Entities" shall mean Portsmouth and Portsmouth Bank.
1.19. "Portsmouth Financial Statements" shall mean (i) the consolidated
balance sheets of Portsmouth as of September 30, 1996 and as of December 31,
1995 and 1994 and the related consolidated statements of income, cash flows and
changes in shareholders' equity (including related notes, if any) for the nine
months ended September 30, 1996 and each of the three years ended December 31,
1995, 1994 and 1993 as filed by Portsmouth in SEC Documents and (ii) the
consolidated balance sheets of Portsmouth and related consolidated statements of
income, cash flows and changes in shareholders' equity (including related notes,
if any) as filed by Portsmouth in SEC Documents with respect to periods ended
subsequent to September 30, 1996.
1.20. "Previously Disclosed" shall mean disclosed prior to the execution
hereof in (i) an SEC Document filed with the SEC subsequent to December 31, 1995
and prior to the date hereof, or (ii) a letter
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dated of even date herewith from the Party making such disclosure and delivered
to the other Parties prior to the execution hereof.
1.21. "Proxy Statement" shall mean the proxy statement/prospectus (or
similar documents) together with any supplements thereto sent to the
shareholders of CFX or Portsmouth to solicit their votes in connection with this
Reorganization Agreement and the Plan of Exchange.
1.22. "Registration Statement" shall mean the registration statement with
respect to the CFX Common Stock to be issued in connection with the Share
Exchange as declared effective by the SEC under the Securities Act, if required.
1.23. "Rights" shall mean subscriptions, warrants, options, rights, calls,
agreements, understandings or commitments of any character calling for the
transfer, purchase, issuance or disposition of, or representing the right to
purchase, acquire, subscribe to or otherwise receive any shares of capital
stock, or any securities convertible into or representing the right to purchase,
acquire, subscribe to or otherwise receive any shares of capital stock, or any
stock appreciation rights, performance units and other similar stock-based
rights whether they obligate the issuer thereof to issue stock or other
securities or to pay cash.
1.24. "SEC" shall mean the Securities and Exchange Commission.
1.25. "SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a Party pursuant to the Securities Laws.
1.26. "Securities Act" shall mean the Securities Act of 1933, as amended.
1.27. "Securities Laws" shall mean the Securities Act; the Exchange Act;
the Investment Company Act; the Investment Advisers Act of 1940, as amended; the
Trust Indenture Act of 1939, as amended; and the rules and regulations of the
SEC promulgated thereunder.
Other terms used herein are defined in the preamble and the recitals to
this Reorganization Agreement and in Articles II, III and IV hereof.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF PORTSMOUTH AND PORTSMOUTH BANK
Portsmouth and Portsmouth Bank hereby represent and warrant to CFX and CFX
Bank as follows: 2.1. CAPITAL STRUCTURE OF PORTSMOUTH
(a) The authorized capital stock of Portsmouth consists solely of
25,000,000 shares of common stock, par value $0.10 per share ("Portsmouth Common
Stock"), and 15,000,000 shares of preferred stock, par value $0.10 per share
("Portsmouth Preferred Stock"). There are 5,713,421 shares of Portsmouth Common
Stock issued and outstanding, 784,850 shares of Portsmouth Common Stock held in
its treasury, no shares of Portsmouth Preferred Stock issued and outstanding,
and no shares of Portsmouth Preferred Stock held in its treasury. There are
370,734 shares of Portsmouth Common Stock reserved for issuance under
Portsmouth's Revised 1987 Stock Option and Appreciation Rights Plan (the
"Portsmouth Stock Option Plan"). In connection with a rights agreement adopted
by Portsmouth on November 17, 1988 (the "Portsmouth Rights Agreement"), each
share of Portsmouth Common Stock outstanding on November 28, 1988, and each
share of Portsmouth Common Stock subsequently issued, has associated with it
such rights to acquire such additional shares of Portsmouth Common Stock as are
specified in the Portsmouth Rights Agreement.
(b) Except for shares of Portsmouth Common Stock subject to options under
the Portsmouth Stock Option Plan as Previously Disclosed, subject to the Stock
Option Agreement and subject to the Portsmouth Rights Agreement, Portsmouth is
not bound by any outstanding Rights. Except for the Portsmouth Rights Agreement
and the Stock Option Agreement, there are no agreements, understandings or
commitments to which Portsmouth is a party with respect to the voting of any
shares of Portsmouth Common Stock or which restrict the transfer of such shares.
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(c) All outstanding shares of Portsmouth's capital stock have been duly
issued and are validly outstanding, fully paid and nonassessable. None of the
shares of Portsmouth's capital stock has been issued in violation of the
preemptive rights of any person. All options granted under the Portsmouth Stock
Option Plan have become fully exercisable in accordance therewith.
2.2. ORGANIZATION, STANDING AND AUTHORITY OF PORTSMOUTH
Portsmouth is a duly organized corporation, validly existing and in good
standing under the laws of New Hampshire, with full corporate power and
authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on Portsmouth. Portsmouth
is registered as a bank holding company under the BHC Act.
2.3. OWNERSHIP AND CAPITAL STRUCTURE OF PORTSMOUTH BANK
(a) Portsmouth does not own, directly or indirectly, 5 percent or more of
the outstanding capital stock or other voting securities of any corporation,
bank or other organization other than Portsmouth Bank.
(b) The authorized capital stock of Portsmouth Bank consists solely of
1,000,000 shares of common stock, par value $0.10 per share ("Portsmouth Bank
Common Stock"). There are 100 shares of Portsmouth Bank Common Stock issued and
outstanding, and no shares of Portsmouth Bank Common Stock held in its treasury.
(c) The outstanding shares of Portsmouth Bank Common Stock are validly
issued and outstanding, fully paid and nonassessable and all such shares are
directly owned by Portsmouth free and clear of all liens, claims and
encumbrances, subject to the Distribution and Liquidation Account (the
"Liquidation Account") established by Portsmouth Bank in connection with its
conversion from mutual to stock form and maintained pursuant to Article 7 of
Portsmouth Bank's Amended and Restated Charter. Portsmouth Bank is not bound by
any Rights with respect to the Portsmouth Bank Common Stock, and there are no
agreements, understandings or commitments relating to the right of Portsmouth to
vote or to dispose the Portsmouth Bank Common Stock. None of the shares of
Portsmouth Bank Common Stock has been issued in violation of the preemptive
rights of any person whose cause of action is not time barred by any applicable
statute of limitations. Portsmouth Bank has established and maintained the
Liquidation Account in accordance with all applicable laws and regulations.
2.4. ORGANIZATION, STANDING AND AUTHORITY OF PORTSMOUTH BANK
Portsmouth Bank is a duly organized state savings bank, validly existing
and in good standing under the laws of New Hampshire with full power and
authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on the Portsmouth
Entities. Portsmouth Bank does not own, directly or indirectly, five percent or
more of the outstanding capital stock or other voting securities of any
corporation, bank or other organization. Portsmouth Bank does not engage in any
activities other than those expressly authorized to it by applicable New
Hampshire and federal banking laws, including without limitation the regulations
of the FDIC under Section 24 of the FDIA. Portsmouth Bank is a member in good
standing of the Federal Home Loan Bank of Boston and owns the requisite amount
of stock therein. The deposits of Portsmouth Bank are insured by the Bank
Insurance Fund of the FDIC in accordance with the FDIA, and Portsmouth has paid
all assessments that have come due and has filed all reports required by the
FDIA.
2.5. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Portsmouth has all requisite corporate power and authority to enter
into and perform all its obligations under the Transaction Documents to which
Portsmouth is a party. The adoption, execution and
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delivery of the Transaction Documents to which Portsmouth is a party and the
consummation of the Transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Portsmouth, including without limitation the approval of a majority of the
"Continuing Directors" as contemplated by Article 7, Section 2.B of Portsmouth's
Articles of Incorporation, except that (1) pursuant to applicable New Hampshire
law and Portsmouth's Articles of Incorporation and By-laws, the Plan of Exchange
must be approved by the affirmative vote of the holders of a majority of all the
shares of Portsmouth Common Stock entitled to vote thereon, and (2) pursuant to
applicable New Hampshire law, certain required or appropriate actions may or
must be taken with respect to the rights of any dissenting shareholders. The
Board of Directors of Portsmouth has directed that the Transaction Documents and
the Transactions be, to the extent necessary, submitted to Portsmouth's
stockholders for approval at an annual or special meeting to be held as soon as
practicable.
(b) Portsmouth Bank has all requisite corporate power and authority to
enter into and perform all its obligations under the Transaction Documents to
which Portsmouth Bank is a party. The execution and delivery of this
Reorganization Agreement and the Plan of Merger and the consummation of the
Transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of Portsmouth Bank.
(c) Assuming the accuracy of the representations contained in Section
3.5(c) hereof, the Transaction Documents constitute legal, valid and binding
obligations of the Portsmouth Entities, enforceable against them in accordance
with their respective terms subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(d) Except as Previously Disclosed, neither the adoption, execution and
delivery of the Transaction Documents nor the consummation of the Transactions
nor compliance by the Portsmouth Entities with any of the provisions hereof or
thereof shall (i) conflict with or result in a breach of any provision of the
articles or certificates of incorporation or association, charters or by-laws of
either of the Portsmouth Entities, (ii) assuming that the regulatory approvals
referred to in Section 5.1(b) hereof are duly obtained, constitute or result in
a breach of any term, condition or provision of, or constitute a default under,
or give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance upon
any property or asset of either Portsmouth Entity pursuant to, any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation, or
(iii) assuming that the regulatory approvals referred to in Section 5.1(b)
hereof are duly obtained, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to either Portsmouth Entity, except for such
violations, rights, conflicts, breaches, creations or defaults which, either
individually or in the aggregate, will not have a Material Adverse Effect on
Portsmouth.
(e) Except for the approvals specified in Sections 4.2 and 4.4 hereof,
except as Previously Disclosed and except as expressly referred to in this
Reorganization Agreement, no consent, approval or authorization of, or
declaration, notice, filing or registration with, any governmental or regulatory
authority, or any other person, is required to be made or obtained by the
Portsmouth Entities on or prior to the Closing Date in connection with the
execution, delivery and performance of the Transaction Documents or the
consummation of the Transactions other than the filing of certificates or
articles of merger or share exchange or similar documents with the appropriate
New Hampshire state authorities.
2.6. SEC DOCUMENTS; REGULATORY FILINGS
Portsmouth has filed all SEC Documents required by the Securities Laws and
such SEC Documents complied, as of their respective dates, in all material
respects with the Securities Laws. Each of the Portsmouth Entities has filed all
reports required by statute or regulation to be filed with any federal or state
bank regulatory agency, and such reports were prepared in accordance with the
applicable statutes, regulations and instructions in existence as of the date of
filing of such reports in all material respects.
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2.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS; MINUTE BOOKS
The Portsmouth Financial Statements fairly present, or when filed will
fairly present, in all material respects, the consolidated financial position of
the Portsmouth Entities as of the dates indicated and the results of operations,
changes in shareholders' equity and cash flows of the Portsmouth Entities for
the periods then ended in conformity with generally accepted accounting
principles applicable to banking organizations or financial institutions applied
on a consistent basis (except as disclosed therein, except for the omission of
notes for unaudited financial statements and year-end adjustments to interim
results, and except as required or permitted by SFAS 109 and 115). The books and
records of each of the Portsmouth Entities fairly reflect in all material
respects the transactions to which it is a party or to or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. The minute books of the Portsmouth
Entities contain records which are accurate in all material respects of all
corporate actions of their respective shareholders and Boards of Directors
(including committees of their respective Boards of Directors).
2.8. MATERIAL ADVERSE CHANGE
Portsmouth has not suffered any Material Adverse Effect in its financial
condition, results of operations or business since December 31, 1995.
2.9. ABSENCE OF UNDISCLOSED LIABILITIES
Neither of the Portsmouth Entities has any liability (contingent or
otherwise) that is material to the Portsmouth Entities taken as a whole or that,
when combined with all similar liabilities, would be material to the Portsmouth
Entities taken as a whole, except as Previously Disclosed, except as disclosed
in the Portsmouth Financial Statements filed with the SEC prior to the date
hereof and except for liabilities incurred in the ordinary course of business
subsequent to September 30, 1996.
2.10. PROPERTIES
The Portsmouth Entities have good and marketable title free and clear of
all liens, encumbrances, charges, defaults or equitable interests to all of
their respective properties and assets, real and personal that are reflected on
the Portsmouth Financial Statements as of September 30, 1996 or acquired after
such date, except (i) as may be reflected in the Portsmouth Financial
Statements, (ii) for liens for taxes not yet delinquent, (iii) for liens on real
estate acquired by foreclosure or substantively repossessed, (iv) for pledges to
secure deposits and other liens incurred in the ordinary course of banking
business, (v) for such imperfections of title, easements, encumbrances, liens,
charges, defaults and equitable interests, if any, that do not have a Material
Adverse Effect on the value of personal or real property reflected in the
Portsmouth Financial Statements or acquired since the date of such statements
and which do not materially interfere with or impair the present and continued
use of such property, and (vi) for dispositions and encumbrances in the ordinary
course of business. All leases pursuant to which either of the Portsmouth
Entities, as lessee, leases real and personal property which, individually or in
the aggregate, are material to the business of the Portsmouth Entities are valid
and enforceable by one or both of the Portsmouth Entities in accordance with
their respective terms.
2.11. LOANS; ALLOWANCE FOR LOAN LOSSES
(a) Each loan reflected as an asset in the Portsmouth Financial Statements
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected,
and (iii) is not subject to any known defenses, set-off or counterclaims except
as may be provided under bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights and to
general principles of equity.
(b) The Portsmouth Entities have Previously Disclosed all loans in the
original principal amount in excess of $200,000 of either Portsmouth Entity
that, as of the date of this Reorganization Agreement, are
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classified by Portsmouth or any state or federal bank regulatory or supervisory
authority as "Special Mention," "Substandard," "Doubtful," "Loss" or
"Classified," together with the aggregate principal amount of and accrued and
unpaid interest on such loans, by category, it being understood that no
representation is being made that any state or federal bank regulatory or
supervisory authority would agree with such loan classifications.
(c) Except as Previously Disclosed or as identified in the notes to the
Portsmouth Financial Statements, as of September 30, 1996, Portsmouth Bank was
not, as of the date hereof, a party to any loan, including any loan guaranty,
with any director, executive officer or 5% shareholder of Portsmouth or any
person, corporation or enterprise controlling, controlled by or under common
control with any of the foregoing. All loans and extensions of credit that have
been made by Portsmouth Bank and that are subject to Section 22(h) of the
Federal Reserve Act, comply therewith.
2.12. TAX MATTERS
Except as Previously Disclosed:
(a) Each of the Portsmouth Entities has timely filed federal income
tax returns for each year through December 31, 1995 and has timely filed
all other federal, state, local and foreign tax returns (including, without
limitation, estimated tax returns, returns required under Sections
1441-1446 and 6031-6060 of the Code and the regulations thereunder and any
comparable state, foreign and local laws, any other information returns,
withholding tax returns, FICA and FUTA returns and back-up withholding
returns required under Section 3406 of the Code and any comparable state,
foreign and local laws) required to be filed with respect to the Portsmouth
Entities. All taxes due in respect of the periods covered by such tax
returns and for any subsequent periods have been paid or adequate reserves
have been established for the payment of such taxes. As of the Closing
Date, all taxes due in respect of any subsequent periods ending on or prior
to the Closing Date (or that portion of any period that is prior to the
Closing Date) will have been paid or adequate reserves will have been
established for the payment thereof. No (i) audit examination, (ii)
deficiency or (iii) refund litigation with respect to any tax is pending.
The Portsmouth Entities will not have any material liability for any taxes
in excess of amounts paid or reserves or accruals established.
(b) All federal, state and local (and, if applicable, foreign) tax
returns filed by the Portsmouth Entities are complete and accurate in all
material respects. Neither of the Portsmouth Entities is delinquent in the
payment of any tax, assessment or governmental charge, and neither
Portsmouth Entity 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. No deficiency for any tax, assessment or governmental
charge has been proposed, asserted or assessed (tentatively or otherwise)
against either Portsmouth Entity which has not been settled and paid. There
are currently no agreements in effect with respect to either Portsmouth
Entity to extend the period of limitations for the assessment or collection
of any tax.
2.13. EMPLOYEE BENEFITS; ERISA
(a) The Portsmouth Entities have Previously Disclosed a true and complete
list of each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, medical, life or other insurance,
profit-sharing, or pension plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by either
Portsmouth Entity or by any trade or business, whether or not incorporated, that
together with either Portsmouth Entity would be deemed a "single employer" under
Section 414 of the Code (an "ERISA Affiliate") for the benefit of any employee
or director (including advisory directors) or former employee or former director
(including advisory directors) of either Portsmouth Entity, whether formal or
informal and whether legally binding or not (the "Plans"). Neither of the
Portsmouth Entities has any formal plan or commitment, whether legally binding
or not, to create any additional plan or modify or change any existing Plan that
would affect any employee or director or former employee or former director of
either Portsmouth Entity.
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(b) With respect to each of the Plans, the Portsmouth Entities have
Previously Disclosed to CFX true and complete copies of each of the following
documents: (a) the Plan and related documents (including all amendments
thereto); (b) the two most recent annual reports and financial statements, if
any; (c) the most recent Summary Plan Description, together with each Summary of
Material Modifications, required under ERISA with respect to such Plan, and all
material employee communications relating to such Plan; and (d) the most recent
determination letter received from the IRS with respect to each Plan that is
intended to be qualified under the Code and all material communications to or
from the IRS or any other governmental or regulatory authority relating to each
Plan.
(c) No liability under Title IV of ERISA has been incurred by either
Portsmouth Entity or any ERISA Affiliate since the effective date of ERISA that
has not been satisfied in full, and no condition exists that presents a material
risk to Portsmouth or any ERISA Affiliate of incurring a liability under such
Title. No reportable event under Section 4043 of ERISA (other than the
reportable event described in Pension Benefit Guaranty Corporation Regulation
sec. 2615.23 occurring by reason of the Transactions) has occurred or will occur
with respect to any Plan on or before the Closing Date or the Effective Date.
(d) No Portsmouth Entity, no ERISA Affiliate, no Plan, no trust created
thereunder, and no trustee or administrator thereof has engaged in a transaction
in connection with which any Portsmouth Entity, any Plan, any trust, or any
trustee or administrator thereof, could be subject to either a civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA, or a tax imposed pursuant
to Section 4975 or 4976 of the Code.
(e) Full payment has been made, or will be made in accordance with Section
404(a)(6) of the Code, of all amounts that either Portsmouth Entity or any ERISA
Affiliate is required to pay under Section 412 of the Code or under the terms of
the Plans, and all such amounts properly accrued through the Closing Date or the
Effective Date will be paid on or prior to the Closing Date or the Effective
Date (as applicable) or will be properly recorded on the books and records of
Portsmouth. None of the Plans or any trust established thereunder has incurred
any "accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived.
(f) Except as Previously Disclosed, with respect to each Plan that is
subject to Title IV of ERISA, the present value of accrued benefits under such
Plan, based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Plan's actuary with respect to such
Plan, did not, as of the valuation date used in such report, exceed the current
value of the assets of such Plan allocable to such accrued benefits as of such
valuation date and no material adverse change in the funded status of any such
Plan has occurred since such valuation date.
(g) No Plan is a "multiemployer pension plan," as such term is defined in
Section 3(37) of ERISA, a "multiple employer welfare arrangement," as such term
is defined in Section 3(40) of ERISA, or a single employer plan that has two or
more contributing sponsors, at least two of whom are not under common control,
within the meaning of Section 4063(a) of ERISA.
(h) Each Plan that is intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified. Each Plan that is intended to
satisfy the requirements of Section 125 or 501(c)(9) of the Code satisfies such
requirements. Each Plan has been operated and administered in all material
respects in accordance with its terms and applicable laws, including without
limitation ERISA and the Code.
(i) Except as Previously Disclosed, each Plan may be amended or terminated
without liability to Portsmouth or any ERISA Affiliate. No amounts payable under
the Plans will fail to be deductible for federal income tax purposes under
Section 280G of the Code.
(j) There are no actions, suits or claims pending, or, to the knowledge of
the Portsmouth Entities, threatened or anticipated (other than routine claims
for benefits) against any Plan, the assets of any Plan or against either
Portsmouth Entity or any ERISA Affiliate with respect to any Plan. There is no
judgment, decree, injunction, rule or order of any court, governmental body,
commission, agency or arbitrator outstanding against or in favor of any Plan or
any fiduciary thereof (other than rules of general applicability). There are no
pending or threatened audits, examinations or investigations by any governmental
body, commission or agency involving any Plan.
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(k) Except as Previously Disclosed, neither consummation of the
Transactions nor termination of the employment of any employees of either of the
Portsmouth Entities prior to or following consummation of the Transactions will
(i) entitle any current or former employee or director of either Portsmouth
Entity to severance pay, unemployment compensation or any similar payment, (ii)
accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such current or former employee or director, (iii) renew
or extend the term of any agreement regarding compensation for a current or
former employee or director, or (iv) result in the Portsmouth Entities making or
being required to make any "excess parachute payment" as that term is defined in
Section 280G of the Code.
2.14. CERTAIN CONTRACTS
(a) Except as Previously Disclosed or as specifically identified in the
notes to the Portsmouth Financial Statements, neither of the Portsmouth Entities
is a party to, or bound by, (i) any material contract, arrangement or commitment
whether or not made in the ordinary course of business or any agreement
restricting the nature or geographic scope of its business activities in any
material respect, (ii) any agreement, indenture or other instrument relating to
the borrowing of money by either Portsmouth Entity or the guarantee by either
Portsmouth Entity of any such obligation, other than instruments relating to
transactions entered into in the customary course of Portsmouth Bank's business,
(iii) any written or oral agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election, retention in office or
severance of any present or former director or officer, or (iv) any contract,
agreement or understanding with a labor union.
(b) Neither Portsmouth Entity is in default in any material respect under
any material agreement, commitment, arrangement, lease, insurance policy or
other instrument whether entered into in the ordinary course of business or
otherwise, and there has not occurred any event that, with the lapse of time or
giving of notice or both, would constitute such a material default.
2.15. LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits or proceedings
instituted, pending or, to the knowledge of the Portsmouth Entities, threatened
against either Portsmouth Entity or any asset, interest or right of either
Portsmouth Entity that, if determined adversely to the Portsmouth Entities,
would, individually or in the aggregate, have a Material Adverse Effect on the
Portsmouth Entities. To the knowledge of the Portsmouth Entities, there are no
actual or threatened actions, suits or proceedings which present a claim to
restrain or prohibit the Transactions or to impose any material liability in
connection therewith. There are no actions, suits or proceedings instituted,
pending or, to the knowledge of the Portsmouth Entities, threatened against any
present or former director or officer of either Portsmouth Entity, that would be
likely to give rise to a claim for indemnification and that, in the event of an
unfavorable outcome, would, individually or in the aggregate, have a Material
Adverse Effect on the Portsmouth Entities and, to the knowledge of the
Portsmouth Entities, there is no reasonable basis for any such action, suit or
proceeding.
2.16. COMPLIANCE WITH LAWS; REGULATORY EXAMINATIONS; REGULATORY APPROVALS
(a) Each Portsmouth Entity holds, and at all times has held, all licenses,
franchises, permits, approvals, consents, qualifications and authorizations
material for the lawful conduct of its business under and pursuant to, and has
complied with, and is not in default under, any applicable law, statute, order,
rule, regulation, policy, ordinance, reporting or filing requirement and/or
guideline of any federal, state or local governmental authority relating to the
Portsmouth Entities, except as Previously Disclosed and except for violations
which, either individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Portsmouth Entities, and neither Portsmouth
Entity has knowledge of any material violation of any of the above.
(b) Except for normal examinations conducted by a regulatory agency in the
regular course of business of the Portsmouth Entities, no regulatory agency has
initiated any proceeding or, to the best knowledge of the Portsmouth Entities,
investigation into the business or operations of either Portsmouth Entity since
September 30, 1996. Neither of the Portsmouth Entities has received any
objection from any regulatory agency to any
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response by either Portsmouth Entity to any violation, criticism or exception
with respect to any report or statement relating to any examinations of the
Portsmouth Entities.
(c) Neither Portsmouth Entity has received notification from any agency or
department of federal, state or local government (i) asserting a material
violation of any such statute or regulation, (ii) threatening to revoke any
license, franchise, permit or government authorization, or (iii) restricting or
in any way limiting its operations. Neither Portsmouth Entity is subject to any
regulatory or supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, and neither of them has received any
communication requesting that it enter into any of the foregoing.
(d) Neither Portsmouth Entity is aware of any reason why the conditions set
forth in Section 5.1(b) hereof would not be satisfied without significant delay.
2.17. LABOR MATTERS
With respect to their respective employees, the Portsmouth Entities are not
parties to any labor agreement with any labor organization, group or association
and has not engaged in any unfair labor practice as defined under applicable
federal law. Since January 1, 1996, neither Portsmouth Entity has experienced
any attempt by organized labor or its representatives to make either Portsmouth
Entity conform to demands of organized labor relating to its employees or to
enter into a binding agreement with organized labor that would cover the
employees of either Portsmouth Entity. There is no unfair labor practice charge
or other complaint by any employee or former employee of either Portsmouth
Entity against it pending before any governmental agency arising out of the
activities of the Portsmouth Entities which charge or complaint (i) has a
reasonable probability of an unfavorable outcome and (ii) in the event of an
unfavorable outcome would, individually or in the aggregate, have a Material
Adverse Effect on the Portsmouth Entities taken as a whole; there is no labor
strike or labor disturbance pending or, to the knowledge of the Portsmouth
Entities, threatened against either Portsmouth Entity; and neither Portsmouth
Entity has experienced a work stoppage or other labor difficulty since January
1, 1996.
2.18. BROKERS AND FINDERS
Neither the Portsmouth Entities nor any of their respective officers,
directors or employees, has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with the
Transactions, except that Portsmouth has engaged and will pay a fee or
commission to Tucker Anthony Incorporated as Previously Disclosed.
2.19. INSURANCE
The Portsmouth Entities have Previously Disclosed a list of all material
policies of insurance of either Portsmouth Entity in effect as of the date
hereof and true and correct copies of all such policies have previously been
made available to CFX. Neither Portsmouth Entity has any liability for unpaid
premiums or premium adjustments not properly reflected on Portsmouth's Financial
Statements, except for any such liability that would not have a Material Adverse
Effect on the Portsmouth Entities taken as a whole. Except as Previously
Disclosed, neither Portsmouth Entity has received any notice of termination of
any such insurance coverage or material increase in the premiums therefor or has
any reason to believe that any such insurance coverage will be terminated or the
premiums therefor materially increased.
2.20. ENVIRONMENTAL LIABILITY
(a) Except for any violation, liability or noncompliance which does not
have a Material Adverse Effect on the Portsmouth Entities: (i) neither
Portsmouth Entity has violated during the last five years or is in violation of
or is liable under any federal, state or local environmental law; (ii) none of
the properties owned or leased by either Portsmouth Entity (including, without
limitation, soils and surface and ground waters) are contaminated with any
hazardous substance; (iii) neither Portsmouth Entity is liable for any off-site
contamination; and (iv) each Portsmouth Entity is, and during the last five
years has been, in compliance with, all of its respective permits, licenses and
other authorizations issued under any environmental laws. For
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purposes of the foregoing, all references to "properties" include, without
limitation, any owned real property or leased real property.
(b) Neither Portsmouth Entity has received any written notice of any legal,
administrative, arbitral or other proceeding, claim or action and, to the
knowledge of the Portsmouth Entities, there is no governmental investigation of
any nature ongoing, in each case that could reasonably be expected to result in
the imposition, on the Portsmouth Entities of any liability arising under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, which liability would have a
Material Adverse Effect on the Portsmouth Entities; there are no facts or
circumstances which could reasonably be expected to form the basis for any such
proceeding, claim, action or governmental investigation that would impose any
such liability; and neither Portsmouth Entity is subject to any agreement,
order, judgment, decree or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any such liability.
2.21. ADMINISTRATION OF TRUST ACCOUNTS
Except as Previously Disclosed, Portsmouth Bank does not currently and has
not previously administered any accounts for which it acts as a fiduciary or
agent, including without limitation accounts for which it serves as a trustee,
agent, custodian, personal representative, guardian, conservator or investment
advisor.
2.22. INTELLECTUAL PROPERTY
The Portsmouth Entities own the entire right, title and interest in and to,
or have valid licenses with respect to, all the Intellectual Property necessary
in all material respects to conduct their business and operations as presently
conducted, except where the failure to do so would not, individually or in the
aggregate, have a Material Adverse Effect on the Portsmouth Entities. None of
such Intellectual Property is subject to any outstanding order, decree,
judgment, stipulation, settlement, lien, charge, encumbrance or attachment,
which order, decree, judgment, stipulation, settlement, lien, charge,
encumbrance or attachment would have a Material Adverse Effect on the Portsmouth
Entities.
2.23. CERTAIN INFORMATION
At all times subsequent to the effectiveness of the Registration Statement
or any post-effective amendment thereto and up to and including the time of the
Portsmouth shareholders' meeting to vote upon the Transactions, and at all times
subsequent to the mailing of any Proxy Statement or any amendment thereto and up
to and including the time of the Portsmouth shareholders' meeting to vote upon
the Transactions, such Registration Statement or Proxy Statement and all
amendments or supplements thereto, with respect to all information set forth
therein furnished by Portsmouth relating to Portsmouth shall (i) comply in all
material respects with the applicable provisions of the Securities Laws, and
(ii) not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
2.24. POOLING OF INTERESTS
The Portsmouth Entities know of no reason which would reasonably cause
either of them to believe that the Transactions will not qualify as a pooling of
interests for financial accounting purposes.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF CFX AND CFX BANK
CFX and CFX Bank hereby represent and warrant to Portsmouth and Portsmouth
Bank as follows:
3.1. CAPITAL STRUCTURE OF CFX
(a) The authorized capital stock of CFX consists solely of 22,500,000
shares of common stock, par value $0.66 2/3 per share ("CFX Common Stock"), and
3,000,000 shares of preferred stock, par value $1.00 per share ("CFX Preferred
Stock"). As of December 31, 1996, there were 13,008,787 shares of CFX Common
Stock issued and outstanding, 28,000 shares of CFX Common Stock held in its
treasury, no shares of CFX Preferred Stock issued and outstanding, and no shares
of CFX Preferred Stock held in its treasury. All outstanding shares of CFX's
capital stock have been duly issued and are validly outstanding, fully paid and
nonassessable. None of the shares of CFX's capital stock has been issued in
violation of the preemptive rights of any person. The shares of CFX Common Stock
to be issued in connection with the Share Exchange have been duly authorized
and, when issued in accordance with the terms of the Transaction Documents, will
be validly issued, fully paid, nonassessable and free and clear of any
preemptive rights.
(b) As of September 30, 1996, CFX's Tier 1 risk-based capital ratio, total
risk-based capital ratio, and leverage ratio, each calculated in accordance with
the capital guidelines of the Federal Reserve applicable to bank holding
companies on a fully phased-in basis, were each in excess of the specified
minimum levels for qualification as "well capitalized."
(c) As of the date hereof, except for shares of CFX Common Stock subject to
options under CFX's employee stock option and incentive plans, CFX is not bound
by any outstanding Rights. There are no agreements or understandings to which
CFX is a party with respect to the voting of any shares of CFX Common Stock or
which restrict the transfer of such shares.
3.2. ORGANIZATION, STANDING AND AUTHORITY OF CFX
CFX is a duly organized corporation, validly existing and in good standing
under the laws of New Hampshire, with full corporate power and authority to
carry on its business as now conducted and is duly licensed or qualified to do
business in the states of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on CFX. CFX is registered as a bank holding
company under the BHC Act.
3.3. OWNERSHIP AND CAPITAL STRUCTURE OF CFX'S SUBSIDIARIES
Except as Previously Disclosed, CFX does not own, directly or indirectly,
25 percent or more of the outstanding capital stock or other voting securities
of any corporation, bank or other organization (each a "CFX Subsidiary" and
collectively the "CFX Subsidiaries"). The outstanding shares of capital stock or
other equity interests of the CFX Subsidiaries are validly issued and
outstanding, fully paid and nonassessable and, except with respect to CFX
Funding L.L.C. in which CFX owns 51% of the equity interests, all such shares or
interests are directly or indirectly owned by CFX free and clear of all liens,
claims and encumbrances. No CFX Subsidiary has or is bound by any Rights which
are authorized, issued or outstanding with respect to the capital stock or other
equity interests of any CFX Subsidiary, and there are no agreements,
understandings or commitments relating to the right of CFX to vote or to dispose
of said shares or interests. None of the shares of capital stock or other equity
interests of any CFX Subsidiary has been issued in violation of the preemptive
rights of any person.
3.4. ORGANIZATION, STANDING AND AUTHORITY OF CFX SUBSIDIARIES
Each CFX Subsidiary is a duly organized corporation or banking association,
validly existing and in good standing under applicable laws. Each CFX Subsidiary
(i) has full power and authority to carry on its business as now conducted, and
(ii) is duly licensed or qualified to do business in the states of the United
States and
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foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such licensing or qualification and where failure to be
licensed or qualified would have a Material Adverse Effect on CFX. Each CFX
Subsidiary has all federal, state, local and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on its
business as it is now being conducted, except where the failure to be so
authorized would not have a Material Adverse Effect on CFX.
3.5. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) CFX has all requisite corporate power and authority to enter into and
perform all of its obligations under the Transaction Documents to which CFX is a
party. The adoption, execution and delivery of the Transaction Documents to
which CFX is a party and the consummation of the Transactions contemplated
thereby have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of CFX, except that the issuance of CFX Common
Stock pursuant to the Transaction Documents must be approved by the affirmative
vote of the holders of a majority of the votes cast by the holders of CFX Common
Stock eligible to vote thereon in accordance with AMEX policy. The Board of
Directors of CFX has directed that the Transaction Documents and the
Transactions be submitted to CFX's stockholders for approval at an annual or
special meeting to be held as soon as practicable.
(b) CFX Bank has all requisite corporate power and authority to enter into
and perform all of its obligations under the Transaction Documents to which CFX
Bank is a party. The execution and delivery of this Reorganization Agreement and
the Plan of Merger and the consummation of the Transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of CFX Bank.
(c) Assuming the accuracy of the representations contained in Sections
2.5(c) hereof, the Transaction Documents constitute legal, valid and binding
obligations of CFX and CFX Bank, in each case enforceable against them in
accordance with their respective terms subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(d) Except as Previously Disclosed, neither the adoption, execution and
delivery of the Transaction Documents nor the consummation of the Transactions
nor compliance by the CFX Entities with any of the provisions hereof or thereof
shall (i) conflict with or result in a breach of any provision of the articles
or certificates of incorporation or association, charters or by-laws of the CFX
Entities, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of the
CFX Entities pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the CFX Entities,
except for such violations, rights, conflicts, breaches, creations or defaults
which, either individually or in the aggregate, will not have a Material Adverse
Effect on CFX.
(e) Except for the approvals specified in Sections 4.2 and 4.4 hereof,
except as Previously Disclosed and except as expressly referred to in this
Reorganization Agreement, no consent, approval or authorization of, or
declaration, notice, filing or registration with, any governmental or regulatory
authority, or any other person, is required to be made or obtained by the CFX
Entities on or prior to the Closing Date in connection with the execution,
delivery and performance of the Transaction Documents or the consummation of the
Transactions other than the filing of certificates or articles of merger or
share exchange or similar documents with the appropriate New Hampshire state
authorities.
3.6. SEC DOCUMENTS; REGULATORY FILINGS
CFX has filed all SEC Documents required by the Securities Laws and such
SEC Documents complied, as of their respective dates, in all material respects
with the Securities Laws. CFX and each of the CFX Subsidiaries has filed all
reports required by statute or regulation to be filed with any federal or state
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bank regulatory agency, and such reports were prepared in accordance with the
applicable statutes, regulations and instructions in existence as of the date of
filing of such reports in all material respects.
3.7. FINANCIAL STATEMENTS
The CFX Financial Statements fairly present the consolidated financial
position of CFX and the consolidated CFX Subsidiaries as of the dates indicated
and the consolidated results of operations, changes in shareholders' equity and
cash flows of CFX and the consolidated CFX Subsidiaries for the periods then
ended in conformity with generally accepted accounting principles applicable to
banking organizations or financial institutions applied on a consistent basis
except as disclosed therein. The books and records of CFX fairly reflect in all
material respects the transactions to which it is a party or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. The minute books of the CFX
Entities contain records which are accurate in all material respects of all
corporate actions of their respective shareholders and Boards of Directors
(including committees of their respective Boards of Directors).
3.8. MATERIAL ADVERSE CHANGE
CFX has not, on a consolidated basis, suffered any material adverse change
in its financial condition, results of operations or business since September
30, 1996.
3.9. ABSENCE OF UNDISCLOSED LIABILITIES
Neither CFX nor any CFX Subsidiary has any liability (contingent or
otherwise) that is material to CFX on a consolidated basis, or that, when
combined with all similar liabilities, would be material to CFX on a
consolidated basis, except as Previously Disclosed, as disclosed in the CFX
Financial Statements filed with the SEC prior to the date hereof and except for
liabilities incurred in the ordinary course of business subsequent to September
30, 1996.
3.10. BROKERS AND FINDERS
Neither the CFX Entities nor any of their respective officers, directors or
employees, has employed any broker, finder or financial advisor or incurred any
liability for any fees or commissions in connection with the Transactions,
except that CFX has engaged and will pay a fee or commission to Alex. Brown &
Sons Incorporated.
3.11. LEGAL PROCEEDINGS
Except for matters which, individually or in the aggregate, would not have
a Material Adverse Effect on CFX and the CFX Subsidiaries, taken as a whole,
neither CFX nor any of the CFX Subsidiaries is a party to any, and there are no
pending or, to the best of CFX's knowledge, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental investigations of
any nature by or against CFX or any of the CFX Subsidiaries; and neither CFX nor
any of the CFX Subsidiaries is a party to or subject to any order, judgment or
decree. To the knowledge of the CFX Entities, there are no actual or threatened
actions, suits or proceedings which present a claim to restrain or prohibit the
Transactions or to impose any material liability in connection therewith.
3.12. COMPLIANCE WITH LAWS; REGULATORY EXAMINATIONS; REGULATORY APPROVALS
(a) CFX and each of the CFX Subsidiaries holds, and has at all times held,
all licenses, franchises, permits, approvals, consents, qualifications and
authorizations material for the lawful conduct of its business under and
pursuant to, and has complied with, and is not in default under, any applicable
law, statute, order, rule, regulation, policy, ordinance, reporting or filing
requirement and/or guideline of any federal, state or local governmental
authority relating to CFX or any of the CFX Subsidiaries, except for violations
which, either individually or in the aggregate, do not or would not have a
Material Adverse Effect on CFX and the
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CFX Subsidiaries taken as a whole, and neither CFX or any of the CFX
Subsidiaries has knowledge of any violation of any of the above.
(b) Except for normal examinations conducted by a regulatory agency in the
regular course of the business of CFX and the CFX Subsidiaries, no regulatory
agency has initiated any proceeding or, to the best knowledge of CFX,
investigation into the business or operations of CFX or any of the CFX
Subsidiaries since September 30, 1996. CFX has not received any objection from
any regulatory agency to CFX's response to any violation, criticism or exception
with respect to any report or statement relating to any examinations of CFX or
any of the CFX Subsidiaries.
(c) Neither CFX Entity has received notification from any agency or
department of federal, state or local government (i) asserting a material
violation of any such statute or regulation, (ii) threatening to revoke any
license, franchise, permit or government authorization, or (iii) restricting or
in any way limiting its operations. Neither CFX Entity is subject to any
regulatory or supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, and neither of them has received any
communication requesting that it enter into any of the foregoing.
(d) Neither CFX Entity is aware of any reason why the conditions set forth
in Section 5.1(b) hereof would not be satisfied without significant delay.
3.13. CERTAIN INFORMATION
At all times subsequent to the effectiveness of the Registration Statement
or any post-effective amendment thereto and up to and including the time of the
CFX shareholders' meeting to vote upon the Transactions, and at all times
subsequent to the mailing of any Proxy Statement or any amendment thereto and up
to and including the time of the CFX shareholders' meeting to vote upon the
Transactions, such Registration Statement or Proxy Statement and all amendments
or supplements thereto, with respect to all information set forth therein
furnished by CFX relating to the CFX Entities shall (i) comply in all material
respects with the applicable provisions of the Securities Laws, and (ii) not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading.
3.14. POOLING OF INTERESTS
The CFX Entities know of no reason which would reasonably cause either of
them to believe that the Transactions will not qualify as a pooling of interests
for financial accounting purposes.
ARTICLE 4.
COVENANTS
4.1. SHAREHOLDERS' MEETING
CFX and Portsmouth shall submit the Transaction Documents and, in the case
of CFX, the issuance of CFX Common Stock thereunder, to their respective
shareholders for approval at annual or special meetings to be held as soon as
practicable after the date hereof. Subject to the fiduciary duties of the
respective boards of directors of Portsmouth and CFX as determined by each after
consultation with such board's counsel, the boards of directors of CFX and
Portsmouth shall recommend at the respective shareholders' meetings that the
shareholders vote in favor of such approval. Nothing contained in this Section
4.1 shall prohibit either CFX or Portsmouth from taking and disclosing to its
stockholders a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2 promulgated under the Exchange Act or making such other
disclosure to its stockholders which, in the judgment of its Board, based upon
the advice of outside counsel, may be required under applicable law, or making
disclosure to its stockholders of the absence of an opinion from Portsmouth's
investment advisor dated the date of the Proxy Statement as to the fairness of
the consideration to be paid to Portsmouth's stockholders in connection with the
Share Exchange.
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4.2. PROXY STATEMENT; REGISTRATION STATEMENT
As promptly as practicable after the date hereof, CFX and Portsmouth shall
cooperate in the preparation of the Proxy Statements to be mailed to the
shareholders of Portsmouth and CFX in connection with the Transactions and, if
required, to be filed by CFX as part of the Registration Statement. In the event
that the issuance of CFX Common Stock in connection with the Share Exchange is
exempt from registration under Section 3(a)(10) of the Securities Act and the
SEC's regulations and interpretations thereunder and shares received will not be
considered "restricted securities" for purposes of Rule 144 under the Securities
Act, no Registration Statement will be filed. CFX will advise Portsmouth,
promptly after it receives notice thereof, of the time when the Registration
Statement or any post-effective amendment thereto has become effective or any
supplement or amendment has been filed, of the issuance of any stop order, of
the suspension of qualification of the CFX Common Stock issuable in connection
with the Share Exchange for offering or sale in any jurisdiction, or the
initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration Statement or for
additional information. CFX shall take all actions necessary to register or
qualify the shares of CFX Common Stock to be issued in the Share Exchange
pursuant to all applicable state "blue sky" or securities laws and shall
maintain such registrations or qualifications in effect for all purposes hereof.
CFX shall apply for approval to list the shares of CFX Common Stock to be issued
in the Share Exchange on the AMEX, subject to official notice of issuance, prior
to the Effective Date.
4.3. APPLICATIONS
As promptly as practicable after the date hereof, the Parties shall take
all action necessary or desirable to obtain any required regulatory approval for
the Transactions. Without limiting the generality of the foregoing sentence, CFX
or CFX Bank shall (i) file a request with the Federal Reserve for a waiver of
the application and prior approval requirements of Section 3 of the BHC Act with
respect to the Share Exchange and the Holding Company Merger, (ii) file an
application with the FDIC for prior approval of the Bank Merger under the Bank
Merger Act and the regulations promulgated thereunder, and (iii) file a notice
with the Commissioner with respect to the Bank Merger pursuant to Chapter 388 or
other applicable section of the New Hampshire Revised Statutes Annotated and the
regulations promulgated thereunder. Each of the Parties shall, and they shall
cause their respective subsidiaries to, submit any applications, notices,
requests or other filings to any other state or federal government agency,
department or body the approval of which is required for consummation of the
Transactions. Portsmouth and CFX each represents and warrants to the other that
all information concerning it and its directors, officers, shareholders and
subsidiaries included (or submitted for inclusion) in any such application,
notice, request or other filing and furnished by it shall be true, correct and
complete in all material respects.
4.4. BEST EFFORTS; CERTAIN NOTICES AND INFORMATION
(a) The Parties shall each use their reasonable best efforts in good faith
to (a) furnish such information as may be required in connection with the
preparation of the documents referred to in Sections 4.2 and 4.3 above, and (b)
take or cause to be taken all action necessary or desirable on its part so as to
permit consummation of the Transactions at the earliest possible date,
including, without limitation, (i) obtaining the consent or approval of each
individual, partnership, corporation, association or other business or
professional entity whose consent or approval is required for consummation of
the Transactions, provided that neither Portsmouth Entity shall agree to make
any payments or modifications to agreements in connection therewith without the
prior written consent of CFX, and (ii) requesting the delivery of appropriate
opinions, consents and letters from its counsel and independent auditors. No
Party shall take or fail to take, or cause or permit its subsidiaries to take or
fail to take, or to the best of its ability permit to be taken or omitted to be
taken by any third persons, any action that would substantially impair the
prospects of completing the Transactions pursuant to the Transaction Documents,
or that would adversely affect the qualification of the Transactions for pooling
of interests accounting treatment or as a reorganization within the meaning of
Section 368(a) of the Code; provided that nothing herein contained shall
preclude CFX from exercising its rights under the Stock Option Agreement. In the
event that any Party has taken any action, whether before, on or after the date
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hereof, that would adversely affect such qualification, each Party shall take
such action as any other Party may reasonably request to cure such effect to the
extent curable without a Material Adverse Effect on any of the Parties.
(b) Portsmouth shall give prompt notice to CFX, and CFX shall give prompt
notice to Portsmouth, of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Reorganization Agreement to be untrue or inaccurate
in any material respect at the date hereof or on the Closing Date (if so
required under Section 5.2(a) or Section 5.3(a) hereof), and (ii) any material
failure of Portsmouth or CFX, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each Party shall use all reasonable efforts to remedy such
failure.
(c) Portsmouth shall provide and shall request its auditors to provide CFX
with such historical financial information regarding it (and related audit
reports and consents) as CFX may reasonably request for securities disclosure
purposes.
4.5. INVESTIGATION AND CONFIDENTIALITY
Portsmouth and CFX each will keep the other advised of all material
developments relevant to its business or to consummation of the Transactions,
material transactions outside of its ordinary course of business, and material
changes in the normal course of its business or in the operation of its
properties. The Parties each may make or cause to be made such investigation of
the financial and legal condition of the other Parties as such Party reasonably
deems necessary or advisable in connection with the Transactions; provided,
however, that such investigation shall be reasonably related to such
Transactions and shall not interfere unnecessarily with normal operations. Each
Party agrees to furnish the other Parties and the other Parties' advisors with
such financial data and other information with respect to its business and
properties as such other Parties shall from time to time reasonably request. No
investigation pursuant to this Section 4.5 shall affect or be deemed to modify
any representation or warranty made by, or the conditions to the obligations to
consummate the Transactions of, any Party. Each Party shall hold all information
furnished by the other Parties or any of such Party's subsidiaries or
representatives pursuant hereto in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement dated January
17, 1997 by and between Portsmouth and CFX (the "Confidentiality Agreement").
4.6. PRESS RELEASES
Portsmouth and CFX shall agree with each other as to the form and substance
of any press release related to the Transactions, and shall consult each other
as to the form and substance of other public disclosures related thereto;
provided, however, that nothing contained herein shall prohibit any Party,
following notification to the other Parties, from making any disclosure which
its counsel deems necessary.
4.7. COVENANTS OF PORTSMOUTH AND PORTSMOUTH BANK
(a) Prior to the Closing Date, and except as otherwise provided for by the
Transaction Documents or consented to or approved by CFX, the Portsmouth
Entities shall use their respective reasonable best efforts to preserve their
respective properties, business and relationships with customers, employees and
other persons.
(b) Except with the prior written consent of CFX or except as Previously
Disclosed or except as expressly contemplated or permitted by the Transaction
Documents, neither Portsmouth Entity shall:
1. carry on its business other than in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
2. declare, set aside, make or pay any dividend or other distribution
in respect of its capital stock other than its regular cash and stock
dividends on Portsmouth Common Stock in amounts not to exceed the dividends
paid to Portsmouth stockholders in the comparable period in the last 12
months and in a manner consistent with past practice and in accordance with
applicable law, regulation and contractual and regulatory commitments,
provided that Portsmouth's cash dividends may be increased to the
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Increased Dividend (as defined below) per share of Portsmouth Common Stock
beginning with the dividend payable in the first quarter of 1998, and
provided further that the Parties agree to consult with respect to the last
quarterly Portsmouth dividend payable prior to the Effective Date with the
objective of assuring that the Portsmouth stockholders do not receive a
shortfall, or dividend or distribution from both Portsmouth and CFX, for
the period covered by such dividend based on the record and payment dates
of their last dividend prior to the Effective Date. The "Increased
Dividend" shall be determined by multiplying the quarterly dividend then
being paid by CFX with respect to each share of CFX Common Stock by 0.95;
3. issue any shares of its capital stock or permit any treasury shares
to become outstanding other than pursuant to the Stock Option Agreement or
Rights outstanding at the date hereof or a stock dividend not to exceed 2%
payable in the first quarter of each of 1997 and 1998;
4. incur any additional debt obligation or other obligation for
borrowed money other than in the ordinary course of business consistent
with past practice;
5. issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization, or redeem, repurchase or otherwise acquire any
shares of its capital stock;
6. amend its articles or certificate of incorporation or association,
charter or by-laws;
7. except for foreclosing on collateral, merge with any other
corporation, savings association or bank or permit any other corporation,
savings association or bank to merge into it or consolidate with any other
corporation, savings association or bank; acquire control over any other
firm, bank, corporation, savings association or organization or create any
subsidiary;
8. except in the ordinary course of business, waive or release any
material right or cancel or compromise any material debt or claim;
9. fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct of
its business;
10. enter into any material swap, hedge or other similar off-balance
sheet transaction;
11. except for foreclosing on collateral, liquidate or sell or dispose
of any material assets or acquire any material assets; except as Previously
Disclosed, make any capital expenditure in excess of $100,000 in any
instance or $250,000 in the aggregate; or, except as Previously Disclosed,
establish new branches or other similar facilities or enter into or modify
any leases or other contracts relating thereto that involve annual payments
that exceed $25,000 in any instance or $100,000 in the aggregate;
12. except as Previously Disclosed, increase the rate of compensation
of, pay or agree to pay any bonus to, or provide any other employee benefit
or incentive to, any of its directors, officers or employees except in a
manner consistent with past practice and except as Previously Disclosed;
13. enter into, modify or extend any employment or severance contracts
with any of its present or former directors, officers or employees;
14. enter into or substantially modify (except as may be required by
applicable law) any pension, retirement, stock option, stock purchase,
stock appreciation right, savings, profit sharing, deferred compensation,
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 other employees;
15. change its lending, investment, asset/liability management or
other material banking policies in any material respect except as may be
required by changes in applicable law or regulations;
16. change its methods of accounting in effect at December 31, 1995,
except as required by changes in generally accepted accounting principles
or regulatory requirements concurred in by its independent certified public
accountants, or change any of its methods of reporting income and
deductions for federal
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income tax purposes from those employed in the preparation of its federal
income tax returns for the year ended December 31, 1995, except as required
by law;
17. solicit or initiate inquiries or proposals with respect to any
acquisition or purchase of all or a substantial portion of the assets of,
or a substantial equity interest in, either Portsmouth Entity or any
business combination with either Portsmouth Entity other than as
contemplated by this Reorganization Agreement; or authorize or permit any
officer, director, agent or affiliate of it to do any of the above; or fail
to notify CFX as soon as practicable if any such inquiries or proposals are
received by either Portsmouth Entity, or if either Portsmouth Entity or any
officer, director, agent or affiliate thereof is requested to or does
furnish any confidential information relating to, or participates in any
negotiations or discussions concerning, any transaction of a type described
in this paragraph; or
18. agree to do any of the foregoing.
(c) Each of the Portsmouth Entities agrees to approve, execute and deliver
any amendment to the Transaction Documents and any additional plans and
agreements requested by CFX to modify the structure of, or to substitute parties
to, the Transactions; provided, however, that no such change shall (i) alter or
change the amount or kind of consideration to be delivered to the shareholders
of Portsmouth in connection with the Share Exchange, (ii) adversely affect the
tax treatment to the shareholders of Portsmouth as a result of receiving such
consideration in the Share Exchange, or (iii) materially impede or delay receipt
of any approval referred to in Section 4.1 or 4.3 hereof or the consummation of
the Transactions.
(d) Immediately prior to the Closing, the Portsmouth Entities will
supplement or amend their prior disclosures to the CFX Entities pursuant to this
Reorganization Agreement, including without limitation all Previously Disclosed
documents and information, with respect to any matter hereafter arising which,
at the Closing Date, would be required to be Previously Disclosed to the CFX
Entities if this Reorganization Agreement were dated as of the Closing Date, or
which is necessary to correct any Previously Disclosed document or information
which was inaccurate at the time it was made. No such supplement or amendment
shall have any effect for the purpose of determining satisfaction of the
conditions set forth in Article 5 hereof or the compliance by either of the
Portsmouth Entities with the covenants set forth in this Section 4.7.
4.8. CLOSING; EFFECTIVE DATE
The Transactions shall be consummated at a closing (the "Closing") to be
held at the offices of CFX, 102 Main Street, Keene, New Hampshire, at 10:00 a.m.
on the first business day that is at least 20 calendar days after the date on
which the last of all required approvals for the Transactions has been obtained
and the last of all required waiting periods under such approvals has expired,
or at such other place, date and time as the Parties may mutually agree upon
(the "Closing Date"), with the Transactions to be consummated in such order and
after such intermediate steps as CFX may specify; provided, however, that the
order and any intermediate steps shall not (i) alter or change the amount or
kind of consideration to be delivered to the shareholders of Portsmouth in
connection with the Share Exchange, (ii) adversely affect the tax treatment to
the shareholders of Portsmouth as a result of receiving such consideration in
the Share Exchange, or (iii) materially impede or delay receipt of any approval
referred to in Section 4.1 or 4.3 hereof or the consummation of the
Transactions. The Transactions shall be effective at the times and on the dates
specified in the certificates or articles of merger or share exchange to be
filed with the appropriate New Hampshire state authorities as contemplated by
the Transaction Documents. For purposes of this Reorganization Agreement, the
term "Effective Date" shall mean the effective time and date of the Share
Exchange specified in the articles of share exchange to be filed with the
appropriate New Hampshire state authorities as contemplated by the Plan of
Exchange.
4.9. AFFILIATES
(a) The Parties shall cooperate and use their reasonable best efforts to
identify those persons who may be deemed to be "affiliates" of Portsmouth within
the meaning of Rule 145 promulgated by the SEC under the Securities Act and for
purposes of qualifying the Share Exchange for "pooling of interests" accounting
treatment. Portsmouth shall use its reasonable best efforts to cause each person
so identified to deliver to
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CFX, no later than 30 days prior to the Effective Date, a written agreement
providing that such person will not dispose of any CFX Common Stock received in
the Share Exchange except in compliance with the Securities Act, the rules and
regulations promulgated thereunder and the SEC's rules relating to pooling of
interests accounting treatment. Shares of CFX Common Stock issued to such
affiliates in exchange for Portsmouth Common Stock shall not be transferable
until such time as financial results covering at least 30 days of combined
operations of CFX and Portsmouth have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written agreement
referred to in this section.
(b) CFX shall use its reasonable best efforts to publish no later than 25
days after the end of the first calendar quarter in which there are at least 30
days of combined operations following consummation of the Transactions (which
calendar quarter may be the calendar quarter in which the Effective Date
occurs), combined sales and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
4.10. PORTSMOUTH EMPLOYEES; DIRECTORS AND MANAGEMENT
(a) All employees of the Portsmouth Entities as of the Effective Date shall
become employees of one or more of the CFX Entities, as determined by CFX, as of
the Effective Date. Nothing in the Transaction Documents shall give any employee
of the Portsmouth Entities a right to continuing employment with the CFX
Entities after the Effective Date. As soon as practicable after the Effective
Date, CFX shall provide or cause to be provided to all employees of the
Portsmouth Entities who remain employed by the CFX Entities after the Effective
Date with employee benefits (including without limitation the severance benefits
provided for in CFX's termination guidelines in the form previously provided by
CFX to Portsmouth) which, in the aggregate, are no less favorable than those
generally afforded to other employees of the CFX Entities holding similar
positions, subject to the terms and conditions under which those employee
benefits are made available to such employees; provided that (1) for purposes of
determining eligibility for and vesting of such employee benefits only (and not
for pension benefit accrual purposes), service with Portsmouth prior to the
Effective Date shall be treated as service with an "employer" to the same extent
as if such persons had been employees of the CFX Entities, and (2) this Section
4.10(a) shall not be construed to limit the ability of the CFX Entities to
terminate the employment of any employee or to review employee benefits programs
from time to time and to make such changes as they deem appropriate. In
addition, the benefits listed in Section 4.10(a) of Portsmouth's Previously
Disclosed letter, dated as of the date hereof, as being continuing benefits
shall be continued notwithstanding that such benefits may not be provided to
other CFX employees.
(b) Prior to or at the Effective Date, three directors of Portsmouth to be
designated by Portsmouth, after consultation with and the consent of CFX (which
consent shall not be unreasonably withheld), shall be elected to the Board of
Directors of CFX effective upon the Effective Date, shall be divided evenly
among the classes, and shall be nominated for re-election, if at all, pursuant
to CFX's then existing policies and procedures (provided that one of the three
directors to be designated by Portsmouth shall serve as a director of CFX for
one year only and shall not be nominated for re-election).
(c) Prior to or at the Effective Date, two directors of Portsmouth to be
designated by Portsmouth, after consultation with and the consent of CFX and CFX
Bank (which consent shall not be unreasonably withheld), shall be elected to the
Board of Trustees of CFX Bank effective upon the Effective Date and shall be
nominated for re-election, if at all, pursuant to CFX Bank's then existing
policies and procedures.
(d) From and after the Effective Date, the appropriate CFX Entity shall
assume and honor in accordance with their terms all employment agreements
Previously Disclosed by Portsmouth. CFX agrees that the consummation of the
Transactions constitutes a "change in control" as defined in such employment
agreements. The provisions of this Section 4.10(d) are expressly intended to be
for the irrevocable benefit of, and shall be enforceable by, each officer
covered by such employment agreements and his or her heirs and representatives.
(e) Prior to the Effective Date, the Portsmouth Entities shall cause the
waiver or release, at an aggregate expense not to exceed $240,000, by any
present director of either Portsmouth Entity who has any right or
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interest, including the right to receive compensation or other payment, under
any director retirement plan of either Portsmouth Entity or with respect to
service on any advisory board of either Portsmouth Entity.
(f) From and after the Effective Date, CFX shall indemnify persons who
served as directors and officers of Portsmouth on or before the Effective Date
in accordance with and subject to the provisions of Portsmouth's Articles of
Incorporation and By-laws Previously Disclosed to CFX. From and after the
Effective Date, CFX will cause the persons who served as directors or officers
of Portsmouth on or before the Effective Date to be covered by Portsmouth's
existing directors' and officers' liability insurance policy (or policies of at
least the same coverage and amounts and containing terms and conditions which
are not less advantageous than such policy); provided that no such person shall
be entitled to insurance coverage more favorable than that provided to the
person in such capacity at the date hereof with respect to acts or omissions
resulting from the person's service as such on or prior to the Effective Date,
and provided further that CFX shall not be required to expend with respect to
any year of coverage more than 150 percent of the current per annum amount
expended by Portsmouth to maintain or procure insurance coverage pursuant
hereto. Such insurance coverage shall commence on the Effective Date and will be
provided for a period of no less than six years after the Effective Date.
ARTICLE 5.
CONDITIONS PRECEDENT
5.1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL THE PARTIES
The respective obligations of the Parties to effect the Transactions shall
be subject to satisfaction or waiver of the following conditions at or prior to
the Closing Date:
(a) All corporate action necessary to authorize the execution,
delivery and performance of the Transaction Documents and the consummation
of the Transactions shall have been duly and validly taken;
(b) The Parties shall have received all regulatory approvals required
or mutually deemed necessary in connection with the Transactions, all
notice periods and waiting periods required after the granting of any such
approvals shall have passed and all conditions contained in any such
approval required to have been satisfied prior to consummation of the
Transactions shall have been satisfied, provided that no such approval
shall have imposed any condition or requirement not reasonably foreseen as
of the date of this Agreement that would, in the reasonable good faith
opinion of the Board of Directors of CFX, materially and adversely affects
the anticipated economic and business benefits to CFX of the Transactions
as to render consummation of the Transactions inadvisable, provided that no
condition or requirement that relates primarily to regulatory matters
existing at the date hereof with respect to CFX's business or activities
shall be deemed to affect the business, operations, financial condition,
property or assets of the combined enterprise or of Portsmouth or otherwise
materially impair the value of Portsmouth to CFX;
(c) One of the following shall have occurred:
(i) a Registration Statement (including any post-effective
amendment thereto) shall have been filed with the SEC and shall be
effective under the Securities Act, and no proceeding shall be pending
or to the knowledge of CFX threatened by the SEC to suspend the
effectiveness of such Registration Statement;
(ii) the Parties shall have received a "no-action" letter from the
staff of the SEC stating that, by reason of the exemption afforded by
Section 3(a)(10) of the Securities Act, it will not recommend any
enforcement action to the SEC with respect to the issuance of CFX Common
Stock in exchange for Portsmouth Common Stock in connection with the
Share Exchange without registration thereof under the Securities Act and
that such shares do not constitute "restricted securities"; or
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(iii) the Parties shall have received an opinion of counsel to CFX
reasonably satisfactory to the Parties to the effect that the issuance
of CFX Common Stock in exchange for Portsmouth Common Stock in
connection with the Share Exchange is exempt from the registration
provisions of the Securities Act by reason of the exemption afforded by
Section 3(a)(10) thereof and that such shares do not constitute
"restricted securities";
(d) CFX shall have received all state securities or "Blue Sky" permits
or other authorizations, or confirmations as to the availability of an
exemption from registration requirements as may be necessary;
(e) To the extent that any lease, license, loan, financing agreement
or other contract or agreement to which Portsmouth is a party requires the
consent of or waiver from the other party thereto as a result of the
Transactions, such consent or waiver shall have been obtained, unless the
failure to obtain such consents or waivers, individually or in the
aggregate, would not have a Material Adverse Effect on the Portsmouth
Entities;
(f) None of the Parties shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Transactions;
(g) The shares of CFX Common Stock that may be issued in the Share
Exchange shall have been approved for listing on the AMEX, subject to
official notice of issuance; and
(h) Portsmouth and CFX shall have received an opinion of Arnold &
Porter, reasonably satisfactory to tax counsel for Portsmouth,
substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the
state of facts existing on the Effective Date:
1. the Share Exchange shall either constitute a reorganization for
federal income tax purposes within the meaning of Section 368(a) of the
Code or be treated as part of a reorganization within the meaning of
Section 368(a) of the Code;
2. no gain or loss will be recognized by a shareholder of
Portsmouth who exchanges all of the shareholder's Portsmouth Common
Stock solely for CFX Common Stock in the Share Exchange (except with
respect to cash received in lieu of a fractional share interest in CFX
Common Stock);
3. the tax basis of the CFX Common Stock received by a shareholder
who exchanges all of the shareholder's Portsmouth Common Stock solely
for CFX Common Stock in the Share Exchange will be the same as the tax
basis of the Portsmouth Common Stock surrendered in exchange therefor
(reduced by any amount allocable to a fractional share interest for
which cash is received); and
4. the holding period of the shares of CFX Common Stock to be
received by a shareholder of Portsmouth will include the period during
which such shareholder held the shares of Portsmouth Common Stock
surrendered in exchange therefor, provided the Portsmouth Common Stock
surrendered is held as a capital asset on the Effective Date.
Each Party shall provide, in writing, a statement of facts, representations
and assumptions on which Arnold & Porter may rely in rendering its opinion,
which facts, representations and assumptions shall reflect the state of facts
existing on the Effective Date.
5.2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PORTSMOUTH AND PORTSMOUTH BANK
The obligations of Portsmouth and Portsmouth Bank to effect the
Transactions shall be subject to satisfaction of the following additional
conditions at or prior to the Closing Date unless waived by Portsmouth pursuant
to Section 6.4 hereof:
(a) The representations and warranties of CFX and CFX Bank set forth
in Article 3 hereof shall be true and correct in all material respects as
of the date of this Reorganization Agreement and as of the Closing Date as
though made on and as of the Closing Date (or on the date when made in the
case of any
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representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated or permitted by this Reorganization
Agreement or consented to in writing by Portsmouth;
(b) CFX and CFX Bank shall have in all material respects performed all
obligations and complied with all covenants required by the Transaction
Documents prior to the Effective Date;
(c) CFX and CFX Bank each shall have delivered to Portsmouth a
certificate, dated the Closing Date and signed by its President or Chief
Financial Officer to the effect that the conditions set forth in paragraphs
(a) and (b) of this section have been satisfied; and
(d) Portsmouth shall have received an opinion of Devine, Millimet &
Branch, counsel to CFX, dated the Closing Date, as to such matters as
Portsmouth may reasonably request with respect to the Transactions.
5.3. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CFX AND CFX BANK
The respective obligations of CFX to effect the Transactions shall be
subject to satisfaction of the following additional conditions at or prior to
the Closing Date unless waived by CFX pursuant to Section 6.4 hereof:
(a) The representations and warranties of Portsmouth and Portsmouth
Bank set forth in Article 2 hereof shall be true and correct in all
material respects as of the date of this Reorganization Agreement and as of
the Closing Date as though made on and as of the Closing Date (or on the
date when made in the case of any representation and warranty which
specifically relates to an earlier date), except as otherwise contemplated
or permitted by this Reorganization Agreement or consented to in writing by
CFX; provided, however, that (i) in determining whether or not the
condition contained in this paragraph (a) shall be satisfied, no effect
shall be given to any exceptions in such representations and warranties
relating to materiality or Material Adverse Effect, and (ii) the condition
contained in this paragraph (a) shall be deemed to be satisfied unless the
failure of such representations and warranties to be so true and correct
constitute, individually or in the aggregate, a Material Adverse Effect on
Milford;
(b) Portsmouth and Portsmouth Bank shall have, in all material
respects, performed all obligations and complied with all covenants
required by the Transaction Documents;
(c) Portsmouth and Portsmouth Bank each shall have delivered to CFX a
certificate, dated the Closing Date and signed by its President and Chief
Executive Officer to the effect that the conditions set forth in paragraphs
(a) and (b) of this section have been satisfied;
(d) No event shall have occurred that shall preclude the Transactions
from being accounted for as a pooling of interests;
(e) The Rights issued pursuant to the Portsmouth Rights Agreement
shall not have become nonredeemable, exercisable, distributed or triggered
pursuant to the terms of such agreement (unless, in the case of a
distribution or trigger, the effects can be cured by Portsmouth);
(f) CFX shall have received from Shatswell, MacLeod & Co. a "comfort
letter" dated not more than five days prior to (i) the effective date of
the Registration Statement, if any, and, otherwise, the mailing date of the
Proxy Statement, and (ii) the Closing Date, with respect to certain
financial information regarding Portsmouth, in form and substance which is
customary in transactions such as the Transactions; and
(g) CFX shall have received an opinion of Hale and Dorr LLP, counsel
to Portsmouth, dated the Closing Date, as to such matters as CFX may
reasonably request with respect to the Transactions. In rendering such
opinion, Hale and Dorr LLP may rely as to certain matters of New Hampshire
law on an opinion of a law firm Previously Disclosed to CFX.
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ARTICLE 6.
TERMINATION, WAIVER AND AMENDMENT
6.1. TERMINATION
This Reorganization Agreement and the other Transaction Documents (other
than the Stock Option Agreement, which shall be governed by the terms thereof)
may be terminated, either before or after approval by the shareholders of CFX
and Portsmouth:
(a) At any time on or prior to the Effective Date, by the mutual
consent in writing of the Parties;
(b) At any time on or prior to the Closing Date, by CFX in writing, if
Portsmouth or Portsmouth Bank has, or by Portsmouth in writing, if CFX or
CFX Bank has, in any material respect, breached, and the Party seeking to
terminate the Transaction Documents has not, in any material respect,
breached (i) any covenant or agreement contained in the Transaction
Documents, or (ii) any representation or warranty contained herein, and in
either 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 Closing Date (unless the breach, by its
nature, is curable within 30 days after the date of written notice thereof
and such 30-day cure period extends beyond the Closing Date, in which case
the Closing Date shall be delayed to permit the cure of the breach by the
breaching Party within such 30-day cure period);
(c) At any time, by any Party in writing, if the applications for
prior approval or consents referred to in Section 4.3 hereof have been
denied, 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 non-appealable order enjoining or otherwise prohibiting the
Transactions or any of them;
(d) At any time, by any Party in writing, if the shareholders of CFX
or Portsmouth do not approve the Transactions at the annual or special
meetings duly called for that purpose;
(e) By any Party in writing, if the Closing Date has not occurred by
the close of business on February 13, 1998 (the "Termination Date"), unless
the failure of the Closing to occur by such date shall be due to the
failure of the Party seeking to terminate this Reorganization Agreement and
the other Transaction Documents to perform or observe the covenants and
agreements set forth herein, provided that the Termination Date may be
extended until May 13, 1998 by any Party by written notice to the other
Parties (given not later than January 13, 1998) if the Closing shall not
have occurred because of failure to obtain approval from one or more
regulatory authorities whose approval is required in connection with this
Reorganization Agreement and the Transactions under circumstances in which
neither party has the right to terminate this Reorganization Agreement
pursuant to Section 6.1(c) hereof; or
(f) By Portsmouth, if (i) the CFX Price (as that term is defined in
the Plan of Exchange) is less than the Floor Price (as that term is defined
in the Plan of Exchange), (ii) Portsmouth provides written notice to CFX
prior to the third business day immediately preceding the Closing Date of
its intent to terminate this Reorganization Agreement and the other
Transaction Documents (other than the Stock Option Agreement) pursuant to
this Section 6.1(f), and (iii) CFX does not elect prior to the close of
business on the business day immediately preceding the Closing Date to
increase the Exchange Ratio (as that term is defined in the Plan of
Exchange) to the Cure Ratio (as that term is defined in the Plan of
Exchange).
6.2. EFFECT OF TERMINATION
In the event this Reorganization Agreement and the other Transaction
Documents are terminated pursuant to Section 6.1 hereof, the Transaction
Documents (other than the Stock Option Agreement) shall become void and have no
effect, except that (i) the provisions relating to confidentiality, expenses and
governing law set forth in Sections 4.5, 7.1 and 7.7 hereof, respectively, shall
survive any such termination and
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(ii) a termination pursuant to Section 6.1(b)(i) shall not relieve the breaching
Party from liability for an uncured willful breach of such covenant or agreement
giving rise to such termination.
6.3. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Reorganization
Agreement and the other Transaction Documents or in any instrument delivered
pursuant hereto or thereto shall expire on, and be terminated and extinguished
at, the Effective Date other than covenants that by their terms are to survive
or be performed after the Effective Date, provided that no such representations,
warranties or covenants shall be deemed to be terminated or extinguished so as
to deprive any Party (or any director, officer or controlling person thereof) of
any defense in law or equity which otherwise would be available against the
claims of any person, including, without limitation, any shareholder or former
shareholder of either CFX or Portsmouth, the aforesaid representations,
warranties and covenants being material inducements to the consummation by the
Parties of the Transactions.
6.4. WAIVER
Except with respect to any required shareholder or regulatory approval, CFX
and Portsmouth, respectively, by written instrument signed by an executive
officer of such Party, may at any time (whether before or after approval of the
Transaction Documents by the shareholders of CFX and Portsmouth) extend the time
for the performance of any of the obligations or other acts of the Portsmouth
Entities, on the one hand, or the CFX Entities, on the other hand, and may waive
(i) any inaccuracies of the Parties in the representations or warranties
contained in the Transaction Documents or any document delivered pursuant hereto
or thereto, (ii) compliance with any of the covenants, undertakings or
agreements of the Parties, or satisfaction of any of the conditions precedent to
its obligations, contained in the Transaction Documents, or (iii) the
performance by such parties of any of its obligations set out herein or therein;
provided, however, that, after any such approval by the shareholders of
Portsmouth, no such modification shall (i) alter or change the amount or kind of
consideration to be received by holders of Portsmouth Common Stock as provided
in the Plan of Exchange, or (ii) adversely affect the tax treatment to
Portsmouth shareholders as a result of the receipt of such consideration.
6.5. AMENDMENT OR SUPPLEMENT
The Transaction Documents may be amended or supplemented at any time by
mutual agreement of the parties thereto. Any such amendment or supplement must
be in writing and approved by their respective boards of directors and/or
officers authorized thereby and shall be subject to the proviso in Section 6.4
hereof.
ARTICLE 7.
MISCELLANEOUS
7.1. EXPENSES
Each Party shall bear and pay all costs and expenses incurred by it in
connection with the Transactions, including fees and expenses of its own
financial consultants, accountants and counsel, except that CFX and Portsmouth
each shall bear and pay 50 percent of all printing and mailing costs and filing
fees associated with the Registration Statement, if required, and the Proxy
Statements.
7.2. ENTIRE AGREEMENT
The Transaction Documents contain the entire agreement between the parties
with respect to the Transactions and supersede all prior arrangements or
understandings with respect thereto, written or oral, other than documents
referred to herein or therein and the Confidentiality Agreement. The terms and
conditions of the Transaction Documents shall inure to the benefit of and be
binding upon the Parties and thereto and their respective successors. Except as
specifically set forth in the Transaction Documents, nothing
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in the Transaction Documents, expressed or implied, is intended to confer upon
any person, other than the Parties, and their respective successors, any rights,
remedies, obligations or liabilities.
7.3. NO ASSIGNMENT
No Party may assign any of its rights or obligations under this
Reorganization Agreement to any other person.
7.4. NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
facsimile transmission or overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to Portsmouth or Portsmouth Bank:
Portsmouth Bank Shares, Inc.
333 State Street
Portsmouth, N.H. 03802
Attention: Mark E. Simpson
Facsimile No.: 603-431-2322
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Edward Young, Esquire
Facsimile No.: 617-526-5000
If to CFX or CFX Bank:
CFX Corporation
102 Main Street
Keene, N.H. 03431
Attention: Mark A. Gavin
Facsimile No.: 603-358-5028
With a copy to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
Attention: Steven Kaplan, Esquire
Facsimile No.: 202-942-5999
7.5. CAPTIONS
The captions contained in this Reorganization Agreement are for reference
purposes only and are not part of this Reorganization Agreement.
7.6. COUNTERPARTS
This Reorganization 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.
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7.7. GOVERNING LAW
This Reorganization Agreement shall be governed by and construed in
accordance with the laws of the State of New Hampshire applicable to agreements
made and entirely to be performed within such jurisdiction, except to the extent
federal law may be applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement and Plan of Reorganization to be executed in
counterparts by their duly authorized officers and their corporate seal to be
hereunto affixed and attested by their officers thereunto duly authorized, all
as of the day and year first above written.
PORTSMOUTH BANK SHARES, INC.
By:
------------------------------------
Harry R. Hart
President and Chief Executive
Officer
PORTSMOUTH SAVINGS BANK
By:
------------------------------------
Harry R. Hart
Chairman and Chief Executive Officer
CFX CORPORATION
By:
------------------------------------
Peter J. Baxter,
President and Chief Executive
Officer
CFX BANK
By:
------------------------------------
Peter J. Baxter,
President and Chief Executive
Officer
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<PAGE> 95
ANNEX A
PLAN OF SHARE EXCHANGE
PURSUANT TO THIS PLAN OF SHARE EXCHANGE (this "Plan of Exchange"), dated as
of February 13, 1997, CFX CORPORATION ("CFX"), a New Hampshire corporation,
shall, subject to the terms and conditions specified herein and in a related
Agreement and Plan of Reorganization dated as of even date herewith (the
"Reorganization Agreement"), acquire through a share exchange all the
outstanding shares of PORTSMOUTH BANK SHARES, INC. ("Portsmouth"), a New
Hampshire corporation.
ARTICLE 8.
SHARE EXCHANGE
8.1. On the Effective Date (as hereinafter defined), each share of common
stock of Portsmouth, par value $0.10 per share ("Portsmouth Common Stock"),
outstanding immediately prior to the Effective Date (except as provided in
Paragraphs 4, 7 and 8 of this Article), including each attached right issued
pursuant to the Portsmouth Rights Agreement (as defined in Section 2.1(a) of the
Reorganization Agreement), shall be converted without any action on the part of
the holder thereof into an amount of common stock, par value $0.66 2/3 per
share, of CFX ("CFX Common Stock") equal to one share multiplied by the Exchange
Ratio as determined below (rounded to the nearest four decimal places).
8.2. As used herein, the term "CFX Price" shall mean the average closing
price of CFX Common Stock on the American Stock Exchange (as reported by The
Wall Street Journal) for the ten consecutive trading days ending on the business
day before the date on which the last regulatory approval required to consummate
the transactions contemplated by this Plan of Exchange and the Reorganization
Agreement is obtained.
8.3. For purposes of this Plan of Exchange, the Exchange Ratio shall be:
(a) 0.9500, if the CFX Price is greater than $17.375;
(b) $16.50 ? the CFX Price, if the CFX Price is greater than $15.70
and is no greater than $17.375; or
(c) 1.0500, if the CFX Price is no greater than $15.70; provided,
however, that the Exchange Ratio shall be $14.91 ? the CFX Price (the "Cure
Ratio"), if the CFX Price is $14.20 (the "Floor Price") or less and CFX has
elected to increase the Exchange Ratio in accordance with Section 6.1(f) of
the Reorganization Agreement.
8.4. On the Effective Date, all shares of Portsmouth Common Stock held in
the treasury of Portsmouth or owned beneficially by any subsidiary of Portsmouth
other than in a fiduciary capacity or in connection with a debt previously
contracted and all shares of Portsmouth Common Stock owned by CFX or owned
beneficially by any subsidiary of CFX other than in a fiduciary capacity or in
connection with a debt previously contracted shall be canceled and no cash,
stock or other property shall be delivered in exchange therefor.
8.5. (a) Prior to the Effective Date, CFX shall appoint a bank, trust
company or other stock transfer agent selected by CFX as the exchange agent (the
"Exchange Agent") to effect the exchange of certificates evidencing shares of
Portsmouth Common Stock (any such certificate being hereinafter referred to as a
"Certificate") for shares of CFX Common Stock to be received in the share
exchange. On the Effective Date, CFX shall have granted the Exchange Agent the
requisite power and authority to effect for and on behalf of CFX the issuance of
the number of shares of CFX Common Stock issuable in the share exchange.
(b) Within five business days after the Effective Date, the Exchange Agent
shall mail to each holder of record of Portsmouth Common Stock as of the
Effective Date a notice of consummation of the share exchange and a form of
transmittal letter pursuant to which each such shareholder shall transmit the
Certificate or Certificates, or, in lieu thereof, such evidence of lost, stolen
or mutilated Certificate or Certificates and such surety bond as the Exchange
Agent may reasonably require in accordance with
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customary exchange practices. Portsmouth shareholders who satisfy such
requirements for lost, stolen or mutilated certificates shall for purposes of
the exchange procedures set forth herein be deemed to have submitted
Certificates for Portsmouth Common Stock. As soon as practicable after surrender
of such Certificate to the Exchange Agent with a properly completed transmittal
letter, the Exchange Agent will promptly mail by first class mail to such
shareholder a certificate or certificates representing the number of full shares
of CFX Common Stock into which the shares of Portsmouth Common Stock evidenced
by the Certificate surrendered shall have been converted pursuant to this Plan
of Exchange.
(c) The Exchange Agent shall accept such Certificates upon compliance with
such reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange thereof in accordance with customary exchange practices.
Until so surrendered, each Certificate shall be deemed for all purposes to
evidence ownership of the number of shares of CFX Common Stock into which the
shares represented by such Certificates have been changed or converted as
aforesaid. No dividends or other distributions declared after the Effective Date
with respect to CFX Common Stock shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Article I. After the surrender of a
Certificate in accordance with this Article I, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
CFX Common Stock represented by such Certificate.
(d) No transfer taxes shall be payable by any shareholders of Portsmouth in
respect of the issuance of certificates for CFX Common Stock and no expenses
shall be imposed on any shareholder of Portsmouth in connection with the
conversion of shares of Portsmouth Common Stock into shares of CFX Common Stock
and the delivery of such shares to the former holder of Portsmouth Common Stock
entitled thereto, except that, if any certificate for shares of CFX Common Stock
is to be issued in a name other than that in which a certificate or certificates
for shares of Portsmouth Common Stock surrendered shall have been registered, it
shall be a condition to such issuance that the person requesting such issuance
shall pay to CFX any transfer taxes payable by reason thereof or of any prior
transfer of such surrendered certificate or certificates or establish to the
reasonable satisfaction of the Exchange Agent that such taxes have been paid or
are not payable.
(e) Certificates surrendered for exchange by any person who is an
"affiliate" of Portsmouth for purposes of Rule 145(c) under the Securities Act
of 1933, as amended, shall not be exchanged for certificates representing shares
of CFX Common Stock until CFX has received the written agreement of such person
contemplated by Section 4.9 of the Reorganization Agreement. If any certificate
for shares of Portsmouth Common Stock is to be issued in a name other than that
in which a certificate surrendered for exchange is issued, the certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and the person requesting such exchange shall affix any requisite stock transfer
tax stamps to the certificate surrendered or provide funds for their purchase or
establish to the reasonable satisfaction of CFX or its agent that such taxes are
not payable.
8.6. Upon the Effective Date, the stock transfer books of Portsmouth shall
be closed and no transfer of Portsmouth Common Stock shall thereafter be made or
recognized. Any other provision of this Plan of Exchange notwithstanding,
neither CFX or its agent nor any party to the share exchange shall be liable to
a holder of Portsmouth Common Stock for any amount paid or property delivered in
good faith to a public official pursuant to any applicable abandoned property,
escheat or similar law.
8.7. In the event that, between the date hereof and prior to the Effective
Date, the outstanding shares of CFX Common Stock or Portsmouth Common Stock
shall have been increased, decreased or changed into or exchanged for a
different number or kind of shares or securities by reorganization,
recapitalization, reclassification, stock split or other like changes in the
capitalization of CFX or Portsmouth, or if a stock dividend is declared on CFX
Common Stock or Portsmouth Common Stock with a record date within such period,
then an appropriate and proportionate adjustment shall be made in the number and
kind of shares of CFX Common Stock to be thereafter delivered pursuant to this
Plan of Exchange, and the dollar amounts and the Exchange Ratio set forth in
Section 3 of this Article I, so that each shareholder of Portsmouth shall be
entitled to receive such number of shares of CFX Common Stock or other
securities as such shareholder
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would have received pursuant to such reorganization, recapitalization,
reclassification, stock split, exchange or shares or readjustment or other like
changes in the capitalization of CFX or Portsmouth, or as a result of a stock
dividend on CFX Common Stock or Portsmouth Common Stock, had the record date
therefor been immediately following the Effective Date.
8.8. Notwithstanding any other provision hereof, each holder of shares, or
of options to purchase shares, of Portsmouth Common Stock who would otherwise
have been entitled to receive a fraction of a share of CFX Common Stock (after
taking into account all Certificates delivered by such holder or all shares such
holder is entitled to receive in accordance with Article III hereof) shall
receive (by check from the Exchange Agent, mailed to the shareholder with the
certificate(s) for CFX Common Stock which such holder is to receive pursuant to
the share exchange), in lieu thereof, cash in an amount equal to such fractional
part of a share of CFX Common Stock multiplied by the "market value" of such
Common Stock. The "market value" of one share of CFX Common Stock shall be the
closing price of CFX Common Stock on the American Stock Exchange (as reported by
The Wall Street Journal) on the last business day preceding the Effective Date.
No such holder shall be entitled to dividends, voting rights or any other
shareholder right in respect of any fractional share.
8.9. On the Effective Date, the share exchange contemplated hereby shall
have the effect set forth in Section 293-A:11.06 of the New Hampshire Revised
Statutes Annotated.
ARTICLE 9.
DISSENTERS' RIGHTS
Notwithstanding anything in this Plan of Exchange to the contrary and
unless otherwise provided by applicable New Hampshire law, shares of Portsmouth
Common Stock that are issued and outstanding immediately prior to the Effective
Date and that are owned by stockholders who, pursuant to applicable New
Hampshire law, (1) deliver to Portsmouth before the taking of the vote of
Portsmouth's stockholders on the Plan of Exchange a written notice of their
intent to demand payment for their shares of Portsmouth Common Stock if the
share exchange is effectuated, and (2) do not vote their shares in favor of this
Plan of Exchange (the "Dissenting Shares"), shall not be converted into the
right to receive, or be exchangeable for, shares of CFX Common Stock, but,
instead, the holders of such Dissenting Shares shall be entitled to payment of
the fair value of such Dissenting Shares, plus accrued interest, in accordance
with applicable New Hampshire law. If any holders of Portsmouth Common Stock
shall have failed to perfect or shall have effectively withdrawn, waived or lost
the right to dissent from the share exchange and to receive the fair value of
such shares as provided under applicable New Hampshire law, the shares of
Portsmouth Common Stock held by such holder shall be deemed to have been
converted into and be exchangeable for shares of CFX Common Stock on the
Effective Date.
ARTICLE 10.
STOCK OPTIONS
On the Effective Date, Portsmouth's obligations with respect to stock
options granted under its Revised 1987 Stock Option and Stock Appreciation
Rights Plan (the "Option Plan") shall be assumed by CFX and each stock option
outstanding under the Option Plan shall become the right to receive (except as
provided in Paragraph 8 of Article I hereof), upon payment of the exercise
price, the number of shares of CFX Common Stock equal to the number of shares of
Portsmouth Common Stock subject to such option multiplied by the Exchange Ratio
as determined pursuant to Section 3 of Article I hereof; provided that (1) in
respect of any stock option which is an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), the conversion hereinabove provided for shall comply with the
requirements of Section 424(a) of the Code, including the requirement that such
converted options shall not give to the holder thereof any benefits additional
to those which such holder had prior to such conversion under the option as
originally granted, and (2) under no circumstances shall CFX have any
responsibility or
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liability with respect to any stock appreciation rights referred to in
connection with grants of stock options under the Option Plan.
ARTICLE 11.
EFFECTIVE DATE OF THE SHARE EXCHANGE
Articles of share exchange evidencing the transactions contemplated herein
shall be delivered to the New Hampshire Secretary of State in accordance with
applicable New Hampshire law. The share exchange contemplated hereby shall be
effective at the time and on the date specified in such articles of share
exchange (such date and time being herein referred to as the "Effective Date").
ARTICLE 12.
CONDITIONS PRECEDENT
The obligations of CFX and Portsmouth to effect the share exchange as
herein provided shall be subject to satisfaction, unless duly waived, of the
conditions set forth in the Reorganization Agreement.
ARTICLE 13.
TERMINATION
Anything contained in this Plan of Exchange to the contrary
notwithstanding, and notwithstanding the adoption hereof by the shareholders of
Portsmouth, this Plan of Exchange may be terminated and the share exchange
abandoned as provided in the Reorganization Agreement.
ARTICLE 14.
MISCELLANEOUS
14.1. This Plan of Exchange may be amended or supplemented at any time
prior to its Effective Date by mutual agreement of CFX and Portsmouth. Any such
amendment or supplement must be in writing and approved by their respective
Boards of Directors and/or by officers authorized thereby and shall be subject
to the proviso in Section 6.4 of the Reorganization Agreement.
14.2. Any notice or other communication required or permitted under this
Plan of Exchange shall be given, and shall be effective, in accordance with the
provisions of the Reorganization Agreement.
14.3. The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Plan of Exchange.
14.4. This Plan of Exchange shall be governed by and construed in
accordance with the laws of New Hampshire applicable to the internal affairs of
Portsmouth and CFX.
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APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Option Agreement"), dated as of February
, 1997, is by and between PORTSMOUTH BANK SHARES, INC. ("Portsmouth"), a New
Hampshire corporation, and CFX CORPORATION ("CFX"), a New Hampshire corporation.
WITNESSETH
WHEREAS, the respective Boards of Directors of Portsmouth and CFX have
approved a Plan of Share Exchange (the "Plan of Exchange"), and the respective
Boards of Directors of Portsmouth, Portsmouth Savings Bank, a New Hampshire
state-chartered savings bank subsidiary of Portsmouth, CFX and CFX Bank, a New
Hampshire state-chartered savings bank subsidiary of CFX, have approved an
Agreement and Plan of Reorganization (the "Reorganization Agreement") and an
Agreement and Plan of Merger (the "Plan of Merger" and, together with the Plan
of Exchange, the Reorganization Agreement and certain other agreements
contemplated by the Reorganization Agreement, the "Transaction Documents"),
providing for certain transactions pursuant to which CFX would acquire all the
outstanding capital stock of Portsmouth through a share exchange, Portsmouth
would be merged with and into CFX, and Portsmouth Savings Bank, a wholly-owned
New Hampshire state-chartered savings bank subsidiary of Portsmouth, would be
merged with and into CFX Bank, a wholly-owned New Hampshire state-chartered
savings bank subsidiary of CFX (collectively, the "Transactions");
WHEREAS, as a condition to CFX's entry into the Transaction Documents and
the Transactions, and to induce such entry, Portsmouth has agreed to grant CFX
the option set forth herein to purchase authorized but unissued shares of
Portsmouth Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. CERTAIN DEFINITIONS.
(a) Capitalized terms used but not defined herein shall have the same
meanings as in the Transaction Documents.
(b) The term "Effective Date" shall have the meaning specified in the
Reorganization Agreement.
(c) The term "person" shall have the meanings specified in Sections 3(a)(9)
and 13(d)(3) of the Exchange Act, and shall also include persons (other than
Portsmouth, any Portsmouth subsidiary, CFX, or any CFX affiliate), who have
entered into an agreement, arrangement or understanding (whether or not in
writing), or who are acting in concert or with conscious parallel behavior, for
the purpose of acquiring, holding, voting or disposing of any voting securities
of Portsmouth (except pursuant solely to a revocable proxy given in response to
a public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable provisions of the Exchange Act and the regulations promulgated
thereunder).
(d) The term "Purchase Event" shall mean any of the following events or
transactions occurring after the date hereof:
(1) any person (other than Portsmouth, any Portsmouth subsidiary, CFX,
or any CFX affiliate) shall have commenced a bona fide tender or exchange
offer to purchase shares of Portsmouth Common Stock such that upon
consummation of such offer such person would own or control 10 percent or
more of the outstanding shares of Portsmouth Common Stock;
(2) any person (other than Portsmouth, any Portsmouth subsidiary, CFX,
or any CFX affiliate), other than in connection with a transaction to which
CFX has given its prior written consent, shall have filed an application or
notice with any federal or state regulatory agency for clearance or
approval, to (i) merge or consolidate, or enter into any similar
transaction, with Portsmouth or any Portsmouth
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subsidiary, (ii) purchase, lease or otherwise acquire all or substantially
all the assets of Portsmouth or any Portsmouth subsidiary, or (iii)
purchase or otherwise acquire (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 10
percent or more of the voting power of Portsmouth or any Portsmouth
subsidiary;
(3) any person (other than Portsmouth, any Portsmouth subsidiary,
subsidiaries of Portsmouth in a fiduciary capacity, CFX, affiliates of CFX,
or subsidiaries of CFX in a fiduciary capacity) shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 10
percent or more of the outstanding shares of Portsmouth Common Stock (the
term "beneficial ownership" for purposes of this Option Agreement having
the meaning assigned thereto in Section 13(d) of the Exchange Act and the
regulations promulgated thereunder);
(4) any person (other than Portsmouth, any Portsmouth subsidiary, CFX
or any CFX affiliate) shall have made a bona fide proposal to Portsmouth by
public announcement or written communication that is or becomes the subject
of public disclosure to (i) acquire Portsmouth or any Portsmouth subsidiary
by merger, consolidation, purchase of all or substantially all its assets
or any other similar transaction, or (ii) make an offer described in clause
(1) above; or
(5) Portsmouth shall have willfully breached any Specified Covenant
(as defined below), which breach would entitle CFX to terminate the
Transaction Documents (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the Notice Date
(as defined below).
(e) The term "Repurchase Event" shall mean any of the following:
(1) any person (other than Portsmouth, any Portsmouth subsidiary, CFX,
or any CFX affiliate) shall have acquired beneficial ownership of 25
percent or more of the outstanding shares of Portsmouth Common Stock; or
(2) any person (other than CFX or any CFX affiliate) shall have
entered into an agreement, arrangement or understanding (whether or not in
writing) with Portsmouth or any Portsmouth subsidiary to (i) merge or
consolidate, or enter into any similar transaction, with Portsmouth or any
Portsmouth subsidiary, (ii) purchase, lease or otherwise acquire all or
substantially all the assets of Portsmouth or any Portsmouth subsidiary, or
(iii) purchase or otherwise acquire (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 25 percent or more of the voting power of Portsmouth or any
Portsmouth subsidiary.
(f) The term "Specified Covenant" shall mean any covenant contained in
Sections 4.1, 4.2, 4.3, 4.4 or 4.8 or subsections (2), (3), (4), (5), (6), (7),
(12), (17) and, to the extent applicable to the foregoing subsections, (18) of
Section 4.7(b) of the Reorganization Agreement.
2. GRANT OF OPTION.
Subject to the terms and conditions set forth herein, Portsmouth hereby
grants to CFX an option (the "Option") to purchase up to 1,142,000 shares of
Portsmouth Common Stock at a price of $15.75 per share payable in cash as
provided in Section 4 hereof; provided, however, that in the event Portsmouth
issues or agrees to issue any shares of Portsmouth Common Stock in breach of its
obligations under the Transaction Documents at a price less than $15.75 per
share (as adjusted pursuant to Section 6 hereof), the exercise price shall be
equal to such lesser price.
3. EXERCISE OF OPTION.
(a) If not then in material breach of the Transaction Documents, CFX may
exercise the Option, in whole or part, at any time or from time to time if a
Purchase Event shall have occurred and be continuing; provided that, to the
extent the Option shall not have been exercised, it shall terminate and be of no
further force and effect upon the earliest to occur of (i) the Effective Date,
(ii) termination of the Transaction Documents in accordance with the terms of
the Reorganization Agreement before the occurrence of a
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Purchase Event (other than a termination resulting from a willful breach by
Portsmouth or Portsmouth Bank of any Specified Covenant contained in the
Transaction Documents), or (iii) six months after the termination of the
Transaction Documents if such termination follows the occurrence of a Purchase
Event or is due to a willful material breach by Portsmouth or Portsmouth Bank of
any Specified Covenant contained in the Transaction Documents; and provided
further that any such exercise shall be subject to compliance with applicable
provisions of law.
(b) If more than one of the transactions giving rise to a Purchase Event is
undertaken or effected, then all such transactions shall give rise only to one
Purchase Event, which Purchase Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
(c) In the event CFX wishes to exercise the Option, it shall send to
Portsmouth a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise, and (ii) a place and date not earlier than three
business days nor later than 30 business days from the Notice Date for the
closing of such purchase (the "Closing Date"); provided that, if prior
notification to or approval of any federal or state regulatory agency is
required in connection with such purchase, CFX shall promptly file the required
notice or application for approval 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 period has expired or
been terminated or such approval has been obtained and any requisite waiting
period shall have passed.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) At the closing referred to in Section 3 hereof, CFX shall pay to
Portsmouth the aggregate purchase price for the shares of Portsmouth Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by Portsmouth.
(b) At such closing, simultaneously with the delivery of cash as provided
in subsection (a), Portsmouth shall deliver to CFX a certificate or certificates
representing the number of shares of Portsmouth Common Stock purchased by CFX,
and CFX shall deliver to Portsmouth a letter agreeing that CFX will not offer to
sell, pledge or otherwise dispose of such shares in violation of applicable law
or the provisions of this Option Agreement.
(c) Certificates for Portsmouth Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend which 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 Portsmouth Bank Shares, Inc. and to resale restrictions arising under
the Securities Act of 1933, as amended, a copy of which agreement is on
file at the principal office of Portsmouth Bank Shares, Inc. A copy of such
agreement will be provided to the holder hereof without charge upon receipt
by Portsmouth Bank Shares, Inc. of a written request."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if CFX shall have
delivered to Portsmouth a copy of a letter from the staff of the SEC, or an
opinion of counsel, in form and substance satisfactory to Portsmouth, to the
effect that such legend is not required for purposes of the Securities Act and
any applicable state securities laws and this Option Agreement.
5. REPRESENTATIONS.
Portsmouth hereby represents, warrants and covenants to CFX as follows:
(a) Portsmouth shall at all times maintain sufficient authorized but
unissued shares of Portsmouth Common Stock so that the Option may be
exercised without authorization of additional shares of Portsmouth Common
Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of
the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
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6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
In the event of any change in Portsmouth Common Stock by reason of stock
dividends, split-ups, recapitalizations, combinations, exchanges of shares or
the like, the type and number of shares subject to the Option, and the purchase
price per share, as the case may be, shall be adjusted appropriately. In the
event that any additional shares of Portsmouth Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement (other than
pursuant to this Option Agreement), the number of shares of Portsmouth Common
Stock subject to the Option shall be adjusted so that, after such issuance, it
equals 19.99 percent of the number of shares of Portsmouth Common Stock then
issued and outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 6 shall be deemed to
authorize Portsmouth to breach any provision of the Transaction Documents.
7. REGISTRATION RIGHTS.
Portsmouth shall, if requested by CFX, as expeditiously as possible file a
registration statement on a form of general use and available for use by
Portsmouth under the Securities Act if necessary in order to permit or assist
the sale or other disposition of the shares of Portsmouth Common Stock that have
been acquired upon exercise of the Option in accordance with the intended method
of sale or other disposition requested by CFX. CFX shall provide all information
reasonably requested by Portsmouth for inclusion in any registration statement
to be filed hereunder. Portsmouth will use its best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 270 days from the day such registration
statement first becomes effective as may be reasonably necessary to effect such
sales or other dispositions. The obligations of Portsmouth hereunder to file a
registration statement and to maintain its effectiveness may be suspended for
one or more periods of time not exceeding 60 days in the aggregate if the Board
of Directors of Portsmouth shall have determined that the filing of such
registration statement or the maintenance of its effectiveness would require
disclosure of non-public information that would materially and adversely affect
Portsmouth. The first registration statement prepared under this Section 7 shall
be at Portsmouth's expense except for underwriting commissions and the fees and
disbursements of CFX's counsel attributable to the offering of Portsmouth Common
Stock by CFX. The preparation of a second registration statement may be
requested and effected hereunder at CFX's sole expense. In no event shall
Portsmouth be required to effect more than two registrations hereunder. The
filing of any registration statement hereunder may be delayed for such period of
time as may reasonably be required to facilitate any public distribution by
Portsmouth of Portsmouth Common Stock. If requested by CFX in connection with
any registration, Portsmouth will 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 such underwriting agreements for parties similarly
situated. In any such transaction Portsmouth and CFX will also agree to
indemnify each other on customary terms with respect to any information provided
by such party.
8. REPURCHASE.
(a) Subject to the giving of any notices and the receipt of any required
approvals, at the request of CFX at any time commencing upon the occurrence of a
Repurchase Event and ending nine months thereafter (the "Repurchase Period"),
Portsmouth shall repurchase the Option (but not later than the termination of
the Option pursuant to Section 3(a) hereof) from CFX together with any shares of
Portsmouth Common Stock purchased by CFX pursuant thereto with respect to which
CFX then has beneficial ownership, at a price (per share, the "Per Share
Repurchase Price") equal to the sum of:
(1) the exercise price paid by CFX for any shares of Portsmouth Common
Stock acquired pursuant to the Option;
(2) the difference between (A) the "market/tender offer" price for
shares of Portsmouth Common Stock (defined as the higher of (x) the highest
price per share at which a tender or exchange offer has been made or (y)
the highest reported sale price for shares of Portsmouth Common Stock
within that portion of the Repurchase Period preceding the date CFX gives
notice of the required repurchase under
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this Section 8) and (B) the exercise price as determined pursuant to
Section 2 hereof (subject to adjustment as provided in Section 6)
multiplied by the number of shares of Portsmouth Common Stock with respect
to which the Option has not been exercised, but only if the market/tender
offer price is greater than such exercise price;
(3) the difference between the market/tender offer price (as defined
in Section 8(a)(2) hereof) and the exercise price paid by CFX for any
shares of Portsmouth Common Stock purchased pursuant to the exercise of the
Option, multiplied by the number of shares so purchased, but only if the
market/tender offer price is greater than such exercise price; and
(4) CFX's out-of-pocket expenses incurred in connection with the
transactions contemplated by the Transaction Documents, including without
limitation legal, accounting and investment banking fees, in an amount not
to exceed $500,000.
(b) In the event CFX exercises its rights under this Section 8, Portsmouth
shall, within thirty business days thereafter, pay the required amount to CFX in
immediately available funds and CFX shall surrender to Portsmouth the Option and
the certificates evidencing the shares of Portsmouth Common Stock purchased
thereunder and CFX shall warrant that it owns such shares and that the same are
then free and clear of all liens, charges, claims, restrictions and
encumbrances; provided that, if prior notification to any federal or state
regulatory agency is required in connection with such purchase, Portsmouth shall
promptly file the required notice or application for approval 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 period has expired or been terminated or such approval has been
obtained and any requisite waiting period shall have passed.
9. SEVERABILITY.
If any term, provision, covenant or restriction contained in this Option
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 Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire or
Portsmouth to repurchase the full number of shares of Portsmouth Common Stock
provided in Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is
the express intention of Portsmouth to allow the holder to acquire or to require
Portsmouth to repurchase such lesser number of shares as may be permissible,
without any amendment or modification hereof.
10. MISCELLANEOUS.
(a) Expenses. Except as otherwise 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.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
Option Agreement and the Transaction Documents contain the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereto,
written or oral. [Notwithstanding anything to the contrary contained in this
Agreement, this Agreement and the Transaction Documents shall be deemed to amend
the Confidentiality Agreement so as to permit CFX to enter into this Agreement
and exercise all its rights hereunder, including its right to acquire Portsmouth
Common Stock upon exercise of the Option.] The terms and conditions of this
Option Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. Nothing in this Option
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this Option
Agreement, except as expressly provided herein.
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(c) Assignment. Other than as provided in Sections 7 and 8 hereof, neither
of the parties hereto may assign any of its rights or obligations under this
Option Agreement or the Option created hereunder to any other person, without
the express written consent of the other party.
(d) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by overnight express or by registered or certified mail, postage
prepaid, addressed as provided in the Reorganization Agreement. A party may
change its address for notice purposes by written notice to the other party
hereto.
(e) Counterparts. This Option 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.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of New Hampshire applicable to agreements
made and entirely to be performed within such state and such federal laws as may
be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
CFX CORPORATION
By:
------------------------------------
Peter J. Baxter
President and Chief Executive
Officer
PORTSMOUTH BANK SHARES, INC.
By:
------------------------------------
Harry R. Hart
President and Chief Executive
Officer
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APPENDIX C
OPINION OF TUCKER ANTHONY
June 18, 1997
Board of Directors
Portsmouth Bank Shares, Inc.
333 State Street
Portsmouth, NH 03802
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, of the consideration to be received by the holders of Portsmouth Bank
Shares, Inc. ("Portsmouth" or the "Company") common stock par value $0.10 per
share (the "Common Stock"), pursuant to the Agreement and Plan of Reorganization
(the "Agreement") by and between the Company and CFX Corporation ("CFX"). On the
Effective Date, as defined in the Agreement, Portsmouth will be merged with and
into CFX (the "Merger") and each share of Common Stock held by Portsmouth's
shareholders shall be converted into the number of CFX common shares equal to
one share multiplied by the Exchange Ratio, as determined below. Specifically,
the Exchange Ratio shall be: (a) 0.95 if the CFX Market Value is greater than
$17.375; (b) $16.500 divided by the CFX Market Value if the CFX Market Value is
less than $17.375 but greater than $15.700; or (c) 1.05 if the CFX Market Value
is less than $15.700. The "CFX Market Value" shall represent the average closing
price of CFX common stock as reported on ASE for the ten (10) consecutive
trading days ending on the day before the last required regulatory approval is
obtained.
Tucker Anthony Incorporated ("Tucker Anthony") as part of its investment
banking business is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. We are acting as financial advisor to the Company in connection with
the Merger and will receive a fee for our services, a significant portion of
which is payable upon the consummation of the Merger. In the ordinary course of
our business, we may actively trade the securities of both the Company and CFX
for our own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
In arriving at our opinion, we have among other things:
(i) Reviewed the Agreement;
(ii) Reviewed certain historical financial and other information
concerning the Company for the five fiscal years ended December 31, 1995,
and for the three quarters ended March 31, June 30, and September 30, 1996,
including the Company's reports on Forms 10-K and 10-Q;
(iii) Reviewed certain historical financial and other information
concerning CFX for the five fiscal years ended December 31, 1995, and for
the three quarters ended March 31, June 30, and September 30, 1996,
including CFX's reports on Forms 10-K and 10-Q;
(iv) Held discussions with the senior management of the Company and
CFX with respect to their past and current financial performance, financial
condition and future prospects;
(v) Reviewed certain internal financial data, projections and other
information of the Company and CFX including financial projections prepared
by their respective managements;
(vi) Analyzed certain publicly available information of other
financial institutions that we deemed comparable or otherwise relevant to
our inquiry, and compared the Company and CFX from a financial point of
view with certain of these institutions;
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(vii) Compared the consideration to be received by the stockholders of
the Company pursuant to the Agreement with the consideration received by
stockholders in other acquisitions of financial institutions that we deemed
comparable or otherwise relevant to our inquiry;
(viii) Reviewed publicly available earnings estimates, historical
trading activity and ownership data of the Common Stock and CFX common
stock and considered the prospects for dividends and price movement in
each; and
(ix) Conducted such other financial studies, analyses and
investigations and reviewed such other information as we deemed appropriate
to enable us to render our opinion. In our review, we have also taken into
account an assessment of general economic, market and financial conditions
and certain industry trends and related matters.
In our review and analysis and in arriving at our opinion we have assumed
and relied upon the accuracy and completeness of all the financial information
publicly available or provided to us by the Company and CFX and have not
attempted to verify any of such information. We have assumed (i) that the
financial projections of the Company provided to us with respect to the results
of operations likely to be achieved by the Company have been prepared on a basis
reflecting the best currently available estimates and judgments of the Company's
management and advisors as to future financial performance and results and (ii)
that such forecasts and estimates will be realized in the amounts and in the
time periods currently estimated by management. We have also assumed, without
independent verification, that the aggregate reserves for possible loan losses
for the Company and CFX are adequate to cover such losses. We did not make or
obtain any independent evaluations or appraisals of any assets or liabilities of
the Company, CFX or any of their respective subsidiaries nor did we verify any
of the Company's or CFX's books or records or review any individual loan credit
files. Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated as of the date of this letter.
This opinion is being furnished for the use and benefit of the Board of
Directors of the Company and is not a recommendation to shareholders. Tucker
Anthony has advised the Board that it does not believe any person other than the
Board has the legal right to rely on the opinion and, absent any controlling
precedent, would resist any assertion otherwise.
Based upon and subject to the foregoing, it is our opinion that as of the
date hereof the consideration to be received by the stockholders of the Company
pursuant to the Agreement is fair to such stockholders from a financial point of
view.
Very truly yours,
/s/ Tucker Anthony Incorporated
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APPENDIX D
SECTIONS 293-A:13.01 THROUGH 293-A:13.31 OF THE
NEW HAMPSHIRE REVISED STATUTES ANNOTATED
NEW HAMPSHIRE BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS
A. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
293-A:13.01 DEFINITIONS. -- In this subdivision:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under
RSA 293-A:13.02 and who exercises that right when and in the manner required by
RSA 293-A:13.20 through 293-A:13.28.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
293-A:13.02 RIGHT TO DISSENT. -- (a) A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any of
the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(i) If shareholder approval is required for the merger by RSA
293-A:11.03 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
(ii) If the corporation is a subsidiary that is merged with its parent
under RSA 293-A:11.04.
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale.
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares.
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(ii) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities.
(iv) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights.
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under RSA 293-A:6.04.
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this subdivision shall not challenge the corporate action creating his
entitlement, unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
293-A:13.03 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. -- (a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
B. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
293-A:13.20 NOTICE OF DISSENTERS' RIGHTS. -- (a) If proposed corporate
action creating dissenters' rights under RSA 293-A:13.02 is submitted to a vote
at a shareholders' meeting, the meeting notice shall state that shareholders are
or may be entitled to assert dissenters' rights under this subdivision and be
accompanied by a copy of this subdivision.
(b) If corporate action creating dissenters' rights under RSA 293-A:13.02
is taken without a vote of shareholders or by consent pursuant to RSA
293-A:7.04, the corporation shall notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenters' notice described in RSA 293-A:13.22.
293-A:13.21 NOTICE OF INTENT TO DEMAND PAYMENT. -- (a) If proposed
corporate action creating dissenters' rights under RSA 293-A:13.02 is submitted
to a vote at a shareholders' meeting, a shareholder who wishes to assert
dissenters' rights:
(1) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Shall not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this subdivision.
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293-A:13.22 DISSENTERS' NOTICE. -- (a) If proposed corporate action
creating dissenters' rights under RSA 293-A:13.02 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of RSA 293-A:13.21.
(b) The dissenters' notice shall be sent no later than 10 days after
corporate action was taken, and shall:
(1) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited.
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received.
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date.
(4) Set a date by which the corporation shall receive the payment
demand, which date shall not be fewer than 30 nor more than 60 days after
the date the notice is delivered.
(5) Be accompanied by a copy of this subdivision.
293-A:13.23 DUTY TO DEMAND PAYMENT. -- (a) A shareholder sent a dissenters'
notice described in RSA 293-A:13.22 shall demand payment, certify whether he
acquired beneficial ownership of the shares before the date required to be set
forth, in the dissenter's notice pursuant to RSA 293-A:13.22(b)(3), and deposit
his certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subdivision.
293-A:13.24 SHARE RESTRICTIONS. -- (a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under RSA 293-A:13.26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
293-A:13.25 PAYMENT. -- (a) Except as provided in RSA 293-A:13.27, as soon
as the proposed corporate action is taken, or upon receipt of a payment demand,
the corporation shall pay each dissenter who complied with RSA 293-A:13.23 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment shall be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under RSA
293-A:13.28; and
(5) A copy of this subdivision.
293-A:13.26 FAILURE TO TAKE ACTION. -- (a) If the corporation does not take
the proposed action within 60 days after the date set for demanding payment and
depositing share certificates, the
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corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under RSA 293-A:13.22 and repeat the payment demand
procedure.
293-A:13.27 AFTER-ACQUIRED SHARES. -- (a) A corporation may elect to
withhold payment required by RSA 293-A:13.25 from a dissenter, unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenter's right to demand payment under RSA 293-A:13.28.
293-A:13.28 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER. --
(a) A dissenter may notify the corporation in writing of his own estimate of the
fair value of his shares and amount of interest due, and demand payment of his
estimate, less any payment under RSA 293-A:13.25, or reject the corporation's
offer under RSA 293-A:13.27 and demand payment of the fair value of his shares
and interest due, if:
(1) The dissenter believes that the amount paid under RSA 293-A:13.25 or
offered under
RSA 293-A:13.27 is less than the fair value of his shares or that the interest
due is incorrectly calculated;
(2) The corporation fails to make payment under RSA 293-A:13.25 within 60
days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within 60 days after the date set for demanding
payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within 30 days after the corporation made or offered payment for his shares.
C. JUDICIAL APPRAISAL OF SHARES
293-A:13.30 COURT ACTION. -- (a) If a demand for payment under RSA
293-A:13.28 remains unsettled, the corporation shall commence a proceeding
within 60 days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the 60-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
D-4
<PAGE> 111
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decisions on the
question of their value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court funds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or,
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under RSA
293-A:13.27.
293-A:13.31 COURT COSTS AND COUNSEL FEES. -- (a) The court in an appraisal
proceeding commenced under RSA 293-A:13.30 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under RSA 293-A:13.28.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of RSA 293-A:13.20 through RSA 293-A:13.28.
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this subdivision.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
D-5
<PAGE> 112
PORTSMOUTH BANK SHARES, INC.
REVOCABLE PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Portsmouth Bank Shares, Inc. (the "Company")
hereby authorizes Mark E. Simpson and Harry R. Hart and each of them singly,
with full power of substitution, to vote and otherwise represent all of the
shares of stock of the Company at the Special Meeting of Stockholders (the
"Special Meeting") to be held at Yoken's Restaurant and Conference Center, Route
1, Portsmouth, New Hampshire 03801, on Thursday, July 31, 1997 at 10:00 a.m.
local time, and any adjournments thereof.
The undersigned may revoke this Proxy at any time before it is voted by
filing with the secretary of the Company a written notice of revocation, by
delivering to the Company a duly executed Proxy bearing a later date, or by
attending the Special Meeting and voting in person. The undersigned stockholder
hereby acknowledges receipt of the Notice of Special Meeting of Stockholders and
Proxy Statement-Prospectus and hereby revokes any Proxy or Proxies heretofore
given.
This Proxy, when properly completed, will be voted in the manner directed
herein by the undersigned stockholder. UNLESS CONTRARY DIRECTIONS ARE GIVEN,
THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE
DETERMINATION, IF ANY, OF THE MAJORITY OF THE BOARD OF DIRECTORS AS TO ALL OTHER
MATTERS OR OTHERWISE IN THE BEST JUDGMENT OF THE PERSON(S) NAMED ABOVE.
ABSTENTIONS WILL BE COUNTED AS VOTES AGAINST PROPOSAL 1.
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS IN
THE ACCOMPANYING ENVELOPE.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, this signature should
be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED?
- ------------------------------------------------------
- ------------------------------------------------------
DO YOU HAVE ANY COMMENTS?
- ------------------------------------------------------
- ------------------------------------------------------
1. To approve and adopt the Agreement and Plan of Reorganization (the
"Acquisition Agreement"), dated as of February 13, 1997, by and among the
Company, the Company's wholly owned subsidiary Portsmouth Savings Bank, CFX
Corporation ("CFX"), and CFX Bank, and each of the transactions contemplated
thereby, pursuant to which Acquisition Agreement (and the related Plan of Share
Exchange) all of the outstanding capital stock of the Company, par value $0.10
per share, would be acquired by CFX, and shareholders of the Company would
receive shares of common stock of CFX, par value $0.66 2/3 per share, all as
more fully described in the Proxy Statement-Prospectus of the Company and CFX.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. As determined by a majority of the Company's Board of Directors, the
Proxies are authorized to vote upon such other matters as may properly come
before the Special Meeting or any adjournments thereof.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
<TABLE>
<S> <C>
Signature of Shareholder: Date:
------------------------------------------------------ ------------------------------------
Signatures of Co-Owners: Date:
------------------------------------------------------- ------------------------------------
</TABLE>
<PAGE> 113
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 293-A:8.50-58 of the New Hampshire Business Corporation Act
provide that a business corporation may indemnify directors and officers against
liabilities they may incur in such capacities provided certain standards are
met, including good faith and the belief that the particular action is in the
best interests of the corporation. In general, this power to indemnify does not
exist in the case of actions against a director or officer by or in the right of
the corporation if the person entitled to indemnification shall have been
adjudged to be liable to the corporation or in connection with a proceeding
charging improper personal benefit. A corporation is required to indemnify
directors and officers against expenses they may incur in defending actions
against them in such capacities if they are successful on the merits or
otherwise in the defense of such actions.
The Bylaws of CFX provide for the mandatory indemnification of directors
and officers in accordance with and to the full extent permitted by the laws of
New Hampshire as in effect at the time of such indemnification. CFX has
purchased directors' and officers' liability insurance covering certain
liabilities which may be incurred by the officers and directors of CFX in
connection with the performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
An index of exhibits appears at page II-6, which is incorporated herein by
reference.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(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. Notwithstanding the foregoing,
any increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate
<PAGE> 114
offering price set forth in the "Calculation of Registration Fee"
table in the effective 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;
2. That, for the purpose of determining any liability under the
Securities Act, 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.
3. 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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this 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.
The undersigned Registrant hereby undertakes as follows: 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.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the paragraph 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, 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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise,
II-2
<PAGE> 115
the Registrant has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities 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 question 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.
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.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 116
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 Keene, State of New
Hampshire, on June 13, 1997.
CFX CORPORATION
By /s/ Peter J. Baxter
------------------------------
(Peter J. Baxter
President and Chief
Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
* Peter J. Baxter
- --------------------------
Peter J. Baxter President, Chief Executive June 13, 1997
Officer and Director,
CFX Corporation (Principal
Executive Officer)
* Mark A. Gavin
- --------------------------
Mark A. Gavin Executive Vice President and June 13, 1997
Chief Operating Officer, CFX
Corporation (Principal Operating
Officer)
* Gregg R. Tewksbury
- --------------------------
Gregg R. Tewksbury Chief Financial Officer, CFX June 13, 1997
Corporation (Principal Financial
and Accounting Officer)
* Christopher W. Bramley
- --------------------------
Christopher W. Bramley President and Chief Executive June 13, 1997
Officer, Safety Fund National
Bank; Director, CFX Corporation
* Richard F. Astrella
- --------------------------
Richard F. Astrella Director June 13, 1997
II-4
<PAGE> 117
* William E. Aubuchon, III
- --------------------------
William E. Aubuchon, III Director June 13, 1997
* Richard B. Baybutt
- --------------------------
Richard B. Baybutt Director June 13, 1997
* Christopher V. Bean
- --------------------------
Christopher V. Bean Director June 13, 1997
* P. Kevin Condron
- --------------------------
P. Kevin Condron Director June 13, 1997
* Calvin L. Frink
- --------------------------
Calvin L. Frink Director June 13, 1997
* Eugene E. Gaffey
- --------------------------
Eugene E. Gaffey Director June 13, 1997
* David R. Grenon
- --------------------------
David R. Grenon Director June 13, 1997
* Elizabeth Sears Hager
- --------------------------
Elizabeth Sears Hager Director June 13, 1997
* Douglas S. Hatfield, Jr.
- --------------------------
Douglas S. Hatfield, Jr. Director June 13, 1997
* Philip A. Mason
- --------------------------
Philip A. Mason Director June 13, 1997
* Walter R. Peterson
- --------------------------
Walter R. Peterson Director June 13, 1997
* L. William Slanetz
- --------------------------
L. William Slanetz Director June 13, 1997
*By /s/ Peter J. Baxter
-----------------------
(Attorney-in-Fact) June 13, 1997
II-5
<PAGE> 118
INDEX OF EXHIBITS
Exhibit 2 Agreement and Plan of Reorganization (including related
Plan of Share Exchange as Annex A), included as
Appendix A to the Proxy Statement and incorporated
herein by reference.
Exhibit 5 Opinion of Devine, Millimet & Branch, P.A., regarding
the validity of CFX Common Stock being registered,
filed herewith.
Exhibit 8 Tax opinion of Arnold & Porter, filed herewith.
Exhibit 23.1 Consent of Wolf & Company, P.C., independent
auditors for CFX Corporation, filed herewith.
Exhibit 23.2 Consent of KPMG Peat Marwick LLP, independent auditors
for Community Bankshares, Inc., filed herewith.
Exhibit 23.3 Consent of Shatswell, MacLeod & Co., independent
auditors for Portsmouth Bank Shares, Inc., filed
herewith.
Exhibit 23.4 Consent of Devine, Millimet & Branch, P.A.,
included in the opinion filed as Exhibit 5 hereto.
Exhibit 23.5 Consent of Arnold & Porter, included in the opinion
filed as Exhibit 8 hereto.
Exhibit 23.6 Consent of Tucker Anthony Incorporated, filed herewith.
Exhibit 23.7 Consent of Mark E. Simpson, as required by Rule 438
under the Securities Act of 1933, filed herewith.
Exhibit 23.8 Consent of Robert W. Simpson, as required by Rule 438
under the Securities Act of 1933, filed herewith.
Exhibit 23.9 Consent of Timothy J. Connors, as required by Rule 438
under the Securities Act of 1933, filed herewith.
Exhibit 23.10 Consent of Douglas Crichfield, as required by Rule 438
under the Securities Act of 1933, filed herewith.
Exhibit 23.11 Consent of John N. Buxton, as required by Rule 438
under the Securities Act of 1933, filed herewith.
Exhibit 23.12 Consent of Seth A. Resnicoff, M.D., as required by Rule
438 under the Securities Act of 1933, filed herewith.
Exhibit 24 Powers of Attorney of certain directors and officers
of CFX, filed herewith.
Exhibit 99.1 Form of Proxy relating to Portsmouth Bank Shares, Inc.,
filed herewith.
Exhibit 99.2 Stock Option Agreement, included as Appendix B to the
Proxy Statement and incorporated herein by reference.
II-6
<PAGE> 1
Exhibit 5
June 13, 1997
CFX Corporation
102 Main Street
Keene, NH 03431
Re: Agreement and Plan of Reorganization, and
Related Plan of Share Exchange with
Community Bankshares, Inc., and Agreement
and Plan of Reorganization, and Related Plan
of Share Exchange with Portsmouth Bank
Shares, Inc.
--------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to CFX Corporation (the "Company") in connection
with the Agreement and Plan of Reorganization, and Related Plan of Share
Exchange, dated as of March 24, 1997 (the "Community Agreement") pursuant to
which the Company will acquire all of the outstanding shares of common stock of
Community Bankshares, Inc. ("Community"), and in connection with the Agreement
and Plan of Reorganization, and Related Plan of Share Exchange, dated as of
February 13, 1997 (the "Portsmouth Agreement") pursuant to which the Company
will acquire all of the outstanding shares of common stock of Portsmouth Bank
Shares, Inc. ("Portsmouth"), all in exchange for the total issuance by the
Company of up to 12,800,000 shares of the Company's common stock, $0.66 2/3 par
value (the "CFX Common Stock").
Prior to rendering this opinion, we have reviewed such certificates,
documents and records as we have deemed necessary for the purposes hereof,
including the following:
a. Copies of the Articles of Agreement and the Bylaws of the Company as
now in effect;
b. The Registration Statement on Form S-4 relating to the CFX Common
Stock to be issued pursuant to the Community Agreement and to the
Portsmouth Agreement being filed with the Securities and Exchange
Commission contemporaneously herewith, including the exhibits thereto
(the "Registration Statement"); and
c. Resolutions adopted by the Board of Directors of the Company
authorizing the execution and delivery of the Community Agreement
and the Portsmouth Agreement and the performance of the
<PAGE> 1
Exhibit 8
June 13, 1997
CFX Corporation
102 Main Street
Keene, New Hampshire 03431
Ladies and Gentlemen:
Reference is made to the information set forth under the heading "THE
PROPOSED ACQUISITION - Certain Federal Income Tax Consequences" contained in the
Proxy Statement/Prospectus, which is included in the Registration Statement on
Form S-4 (the "Registration Statement"), filed by CFX Corporation ("CFX") with
the Securities and Exchange Commission (the "SEC") in connection with the
acquisition of the outstanding stock of Portsmouth Bank Shares, Inc.
("Portsmouth") by CFX pursuant to an exchange of such stock for CFX common stock
(the "Share Exchange"). Subject to the representations, assumptions and other
conditions described or referenced therein, the description of anticipated
material federal income tax consequences contained in the third through fifth
paragraphs of that heading accurately sets forth our opinion.
Our opinion is based on the case law, Internal Revenue Code, Treasury
Regulations and Internal Revenue Service rulings as they exist at the date
hereof. These authorities are all subject to change, and any such change may be
made with retroactive effect. We can give no assurance that, after such change,
our opinion would not be different. We undertake no responsibility to update or
supplement our opinion following the effective date of the Registration
Statement.
We hereby consent to the filing with the SEC of this opinion as an exhibit
to the Registration Statement and to the reference to our firm under the heading
"THE PROPOSED ACQUISITION -- Certain Federal Income Tax Consequences" contained
therein. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933.
Very truly yours,
/s/ Arnold & Porter
-----------------------------------
ARNOLD & PORTER
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement (No.
333- ) of CFX Corporation on Form S-4, of our report dated January 29,
1997, except for Note W as to which the date is March 24, 1997, included and
incorporated by reference in the Annual Report on Form 10-K of CFX Corporation
for the year ended December 31, 1996. We also consent to the reference to us
under the heading "Experts" in such Proxy Statement, which is part of such
Registration Statement.
/s/ Wolf & Company, P.C.
----------------------------------
Wolf & Company, P.C.
Boston, Massachusetts
June 13, 1997
<PAGE> 1
Exhibit 23.2
Consent of Independent Auditors
The Board of Directors
Community Bankshares, Inc.:
We consent to the use of our report, incorporated herein by reference, dated
January 22, 1997, relating to the consolidated balance sheets of Community
Bankshares, Inc. and subsidiaries as of December 31, 1996 and 1995 and June 30,
1995 and 1994, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the year ended December 31, 1996, the
six months ended December 31, 1995, and for each of the years in the two year
period ended June 30, 1995, which report appears in the December 31, 1996 annual
report on Form 10-K of Community Bankshares, Inc.
/s/ KPMG Peat Marwick LLP
---------------------------------------
KPMG Peat Marwick LLP
Boston, Massachusetts
June 13, 1997
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation in this Registration Statement of CFX
Corporation on Form S-4, of our report dated January 13, 1997, except for Note
20 as to which the date is February 13, 1997, included in the Annual Report of
Portsmouth Bank Shares, Inc. and Subsidiary for the year ended December 31,
1996. We also consent to the reference to us under the heading "Experts" in
such Proxy Statement, which is part of such Registration Statement.
/s/ Shatswell, MacLeod & Company, P.C.
--------------------------------------
SHATSWELL, MACLEOD & COMPANY, P.C.
West Peabody, Massachusetts
June 13, 1997
<PAGE> 1
Exhibit 23.6
June 13, 1997
Members of the Board of Directors
Portsmouth Bankshares, Inc.
333 State Street
Portsmouth, NH 03801
Members of the Board of Directors
CFX Corporation
102 Main Street
Keene, NH 03431
Members of the Board:
We hereby consent to the reference to the opinion of our Firm under the
heading "The Merger - Opinion of Financial Advisors" and to the inclusion of the
foregoing opinion in the Registration Statement of CFX Corporation on the S-4 to
be filed with the Securities and Exchange Commission in connection with the
proposed merger of Portsmouth Bankshares, Inc. with CFX Corporation.
In giving such consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
TUCKER ANTHONY INCORPORATED
by: /s/ Gregory W. Benning
-----------------------------------
Gregory W. Benning
Managing Director
<PAGE> 1
Exhibit 23.7
CONSENT
I hereby consent to being named as a person chosen to become a director
of CFX Corporation, and trustee of CFX Bank, in the Portsmouth Bank Shares,
Inc. and Community Bankshares, Inc. Registration Statements on Form S-4 filed
with the Securities and Exchange Commission on or about June 13, 1997.
/s/ Mark E. Simpson
-------------------
Mark E. Simpson
<PAGE> 1
Exhibit 23.8
CONSENT
I hereby consent to being named as a person chosen to become a director
of CFX Corporation in the Portsmouth Bank Shares, Inc. and Community
Bankshares, Inc. Registration Statements on Form S-4 filed with the Securities
and Exchange Commission on or about June 13, 1997.
/s/ Robert W. Simpson
---------------------
Robert W. Simpson
<PAGE> 1
Exhibit 23.9
CONSENT
I hereby consent to being named as a person chosen to become a director
of CFX Corporation in the Portsmouth Bank Shares, Inc. and Community
Bankshares, Inc. Registration Statements on Form S-4 filed with the Securities
and Exchange Commission on or about June 13, 1997.
/s/ Timothy J. Connors
----------------------
Timothy J. Connors
<PAGE> 1
Exhibit 23.10
CONSENT
I hereby consent to being named as a person chosen to become a director
of CFX Corporation in the Portsmouth Bank Shares, Inc. and Community
Bankshares, Inc. Registration Statements on Form S-4 filed with the Securities
and Exchange Commission on or about June 13, 1997.
/s/ Douglas Crichfield
-----------------------
Douglas Crichfield
<PAGE> 1
Exhibit 23.11
CONSENT
I hereby consent to being named as a person chosen to become a director
of CFX Corporation in the Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on June 13, 1997.
/s/ John N. Buxton
----------------------
John N. Buxton
<PAGE> 1
Exhibit 23.12
CONSENT
I hereby consent to being named as a person chosen to become a director
of CFX Corporation in the Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on June 13, 1997.
/s/ Seth A. Resnicoff, M.D.
---------------------------
Seth A. Resnicoff, M.D.
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of CFX Corporation, a corporation organized under the laws of the state
of New Hampshire (the "Corporation"), hereby constitutes and appoints Peter J.
Baxter, Mark A. Gavin, Gregg R. Tewksbury and Steven L. Kaplan, and each of them
(with full power to each of them to act alone), his or her true and lawful
attorneys-in-fact and agents for him or her and on his or her behalf and in his
or her name, place and stead, in all cases with full power of substitution and
resubstitution, in any hand and all capacities, to sign, execute and affix his
or her seal to and file with the Securities and Exchange Commission (or any
other governmental or regulatory authority) a Registration Statement on Form S-4
or any other appropriate form and all amendments or supplements (including
post-effective amendments) thereto with all exhibits and any and all documents
required to be filed with respect thereto, relating to the registration of
shares of common stock, par value $0.66 2/3 per share, of the Corporation, and
grants to each of them full power and authority to do and to perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully and to all intents and purposes as he
himself or she herself might or could do if personally present, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned director and or officer has hereunto
set his or her hand and seal, as of the date specified.
Name Title Date
---- ----- ----
/s/ Richard F. Astrella Director June 11, 1997
- ----------------------------
Richard F. Astrella
/s/ William E. Aubuchon, III Director June 11, 1997
- ----------------------------
William E. Aubuchon, III
/s/ Richard B. Baybutt Director June 11, 1997
- ----------------------------
Richard B. Baybutt
/s/ Peter J. Baxter President June 11, 1997
- ---------------------------- and Director
Peter J. Baxter
(Principal Executive
Officer)
<PAGE> 2
/s/ Christopher V. Bean Director June 12, 1997
- ----------------------------
Christopher V. Bean
/s/ Christopher W. Bramley Director June 11, 1997
- ----------------------------
Christopher W. Bramley
/s/ P. Kevin Condron Director June 11, 1997
- ----------------------------
P. Kevin Condron
/s/ Calvin L. Frink Director June 11, 1997
- ----------------------------
Calvin L. Frink
/s/ Eugene E. Gaffey Director June 12, 1997
- ----------------------------
Eugene E. Gaffey
/s/ David R. Grenon Director June 12, 1997
- ----------------------------
David R. Grenon
/s/ Elizabeth Sears Hager Director June 11, 1997
- ----------------------------
Elizabeth Sears Hager
/s/ Douglas S. Hatfield, Jr. Director June 11, 1997
- ----------------------------
Douglas S. Hatfield, Jr.
/s/ Philip A. Mason Director June 11, 1997
- ----------------------------
Philip A. Mason
/s/ Walter R. Peterson Director June 11, 1997
- ----------------------------
Walter R. Peterson
/s/ L. William Slanetz Director June 11, 1997
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L. William Slanetz
/s/ Gregg R. Tewksbury Chief Financial June 12, 1997
- ---------------------------- Officer
Gregg R. Tewksbury
(Principal Financial
and Accounting Officer)
<PAGE> 1
Exhibit 99.1
PORTSMOUTH BANK SHARES, INC.
REVOCABLE PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Portsmouth Bank Shares, Inc. (the "Company")
hereby authorizes Mark E. Simpson and Harry R. Hart and each of them singly,
with full power of substitution, to vote and otherwise represent all of the
shares of stock of the Company at the Special Meeting of Stockholders (the
"Special Meeting") to be held at Yoken's Restaurant and Conference Center, Route
1, Portsmouth, New Hampshire 03801, on Thursday, July 31, 1997 at 11:00 a.m.
Eastern Standard Time, and any adjournments thereof.
The undersigned may revoke this Proxy at any time before it is voted by filing
with the secretary of the Company a written notice of revocation, by delivering
to the Company a duly executed Proxy bearing a later date, or by attending the
Special Meeting and voting in person. The undersigned stockholder hereby
acknowledges receipt of the Notice of Special Meeting of Stockholders and Proxy
Statement-Prospectus and hereby revokes any Proxy or Proxies heretofore given.
This Proxy, when properly completed, will be voted in the manner directed herein
by the undersigned stockholder. UNLESS CONTRARY DIRECTIONS ARE GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE DETERMINATION, IF ANY,
OF THE MAJORITY OF THE BOARD OF DIRECTORS AS TO ALL OTHER MATTERS OR OTHERWISE
IN THE BEST JUDGMENT OF THE PERSON(S) NAMED ABOVE.
ABSTENTIONS WILL BE COUNTED AS VOTES AGAINST PROPOSAL 1.
If you receive more than one proxy card, please sign and return all cards in the
accompanying envelope.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
